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Peabody loses another round in Navajo coal lease fight
Wednesday, June 16, 2004

The world's largest coal company lost another round to the Navajo Nation on Tuesday when a federal appeals court tossed its lawsuit against the tribe.

Peabody Coal has battled the tribe for more than a decade over a controversial coal mining lease approved during the Reagan administration. The agreement, whose royalty rate is in dispute, has spawned several lawsuits, including one that went all the way to the U.S. Supreme Court.

In the latest suit, Peabody sought to enforce a settlement reached through an arbitration clause in the lease. The settlement left intact the lower-paying royalty rate that tribal leaders say is unfair.

But the 9th Circuit Court of Appeals said Peabody lacked standing to bring the case. In a unanimous decision, a three-judge panel said the company has not raised a "federal question" requiring resolution in the federal courts.

The problem, Judge Richard C. Tallman observed in the 14-page ruling, was that the settlement was not approved by the federal government. In contrast, both parties agreed that any arbitration award would not require involvement by the Interior Department.

The clause came back to bite the company more than 10 years later. "Peabody seeks enforcement of the arbitration royalty award, not the lease," Tallman wrote, "[y]et the final arbitration award for which Peabody seeks enforcement was not federally approved."

The decision is the latest in a series of setbacks Peabody has suffered in the courts. More than once, the company has been criticized for legal tactics seen as attempts to avoid liability for its role in the controversy.

Last year, the D.C. Circuit Court of Appeals dismissed another lawsuit Peabody filed to force the Navajo Nation and the Hopi Tribe into arbitration. During oral arguments, the judges chastised the company's lawyer for trying to "double-talk" them.

The Navajo Nation accuses Peabody of conspiring with government officials to deny the tribe a 20 percent royalty rate on its coal deposit in northeastern Arizona. After a Peabody lobbyist met with then-Interior secretary Donald P. Hodel in June 1985, a Bureau of Indian Affairs decision in favor of the high rate was suppressed and the tribe was led back into negotiations.

The lobbyist, Stanley Hulett, happened to be a personal friend of Hodel. Unaware of the meeting, the tribe -- facing severe economic distress financial pressure -- accepted a royalty rate of 12.5 percent.

The tribe responded with a breach of trust claim against the federal government. Through the course of this litigation, the secret meeting come to light -- only because Peabody made public its internal memos outlining the lobbying.

The case went to the Supreme Court, which ruled last year that the laws the tribe cited were not enough to hold the U.S. liable. But a federal appeals court has kept the suit alive. The tribe claims damages of $600 million, the amount it would have received under the 20 percent royalty rate.

Separately, the tribe filed a case against Peabody under the Racketeer Influenced and Corrupt Organizations Act. Under the law, the tribe could be awarded up to three times the amount lost in the coal lease.

The RICO case is moving forward in a federal court in Washington, D.C. The judge handling the case once threatened to hold the company in contempt for filing "frivolous" motions seen as mere delay tactics.

Get the Decision:
Peabody v. Navajo Nation (June 15, 2004)

Relevant Links:
Navajo Nation - http://www.navajo.org
Hopi Tribe - http://www.hopi.nsn.us
Peabody Energy - http://www.peabodyenergy.com