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Judge won't dismiss Navajo Nation suit against Peabody
Tuesday, April 27, 2004

A federal judge has again refused to let the world's largest coal company off the hook for its role in the Navajo Nation's billion-dollar trust asset mismanagement claim.

The tribe is suing Peabody Energy and the federal government over a coal lease approved during the Reagan administration. The suits allege that Peabody conspired with top Department of Interior officials to deny the tribe a high royalty rate on the coal deposit.

The issue was at the center of a U.S. Supreme Court case decided in March 2003. By a 6-3 vote, the justices said the government wasn't liable for damages under the Indian Minerals Leasing Act (IMLA).

Peabody used the negative decision to seek dismissal of a separate lawsuit the tribe filed under the Racketeer Influenced and Corrupt Organizations (RICO) Act. The high court freed the company from liability, Peabody lawyers argued in a motion.

But on April 13, U.S. District Judge Emmet G. Sullivan said the two cases involve distinct questions even though they arise from the same situation. "In other words, although the underlying facts are the same as those presented before the Supreme Court, the legal issue and ... liability are different," he wrote in a seven-page order.

In refusing to dismiss the RICO action, Sullivan noted that despite the Supreme Court's ruling, the tribe's case against the federal government is still alive. Last October, the Federal Circuit Court of Appeals gave the tribe another chance to prove liability under a "network" of laws besides the IMLA.

The dispute reaches back to the mid-1980s, when the tribe's original lease with Peabody was up for renewal. Based on an internal study, the Bureau of Indian Affairs concluded the tribe was justified in seeking a 20 percent royalty rate on what was termed one of the most valuable coal deposits in the U.S.

Peabody appealed the decision through the administrative process. But in an action that befuddled the tribe, then-Interior Secretary Don Hodel in July 1985 told the tribe to continue negotiations with Peabody.

Forced back to the table, tribal leaders ended up settling for a 12.5 percent rate that was much higher than payments in the original lease. But they said they lost out on $600 million.

Only through litigation did the tribe discover that Hodel's directive came days after he met secretly with a Peabody lobbyist who happened to be a close friend. The tribe was never informed of the meeting.

Also, the tribe was never told that, at the time of the meeting, the BIA had drafted a decision affirming the 20 percent rate. The decision surfaced through the litigation.

Depending on how the courts rule, the tribe could be entitled to $600 million, plus damages, for its suit against the federal government. Under the RICO suit, the tribe could be awarded up to three times that amount, or $1.8 billion.

Bush administration officials currently in charge of the Indian trust have been involved in the dispute. Deputy Secretary J. Steven Griles oversaw the now-defunct mining division that supported the high royalty rate, based on science, before it was rejected by the political appointees. Special Trustee Ross Swimmer, as former head of the BIA, approved the 1987 lease without conducting an economic analysis of the impact.

Both officials were deposed, under oath, for the tribe's suit although Swimmer could not recall his participation. Griles had no trouble remembering and attended the Supreme Court's oral arguments in the case.

As the second-in-command at Interior, Griles has continued to meet with Peabody to discuss issues surrounding its coal mining activities on the Navajo and Hopi reservations in northeastern Arizona. According to an investigation by Interior's inspector general, Griles met at least a dozen times with representatives of the company.

Before joining the Bush administration, Griles represented the mining industry. His firm was paid more than $140,000 in lobbying fees from 1997 to 2000 by the National Mining Association. Although Peabody belongs to the organization, Griles never represented the company directly.

Griles continues to receive $284,000 a year for work he had performed for the industry before joining the Bush administration in July 2001. He agreed to recuse himself from any dealings with former clients but the inspector general's report documented questionable contacts with old clients.

Get the Decision:
Navajo Nation v. Peabody Holding Company (April 13, 2004)

Relevant Links:
Navajo Nation - http://www.navajo.org
Peabody Energy - http://www.peabodyenergy.com