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Court: Navajo Nation owed money for bungled lease
Friday, September 14, 2007
Filed Under: Law | Trust

The Interior Department breached its trust to the Navajo Nation and must pay damages for mishandling a coal mining lease, a federal appeals court ruled on Thursday.

In a unanimous decision, the Federal Circuit Court of Appeals said the "undisputed facts" prove Interior breached its fiduciary duties to the largest tribe in the country. Swayed by a lobbyist, the Reagan administration approved a coal mining lease for a less than a "reasonable" royalty rate, the three-judge panel concluded.

That action violated common trust law, as well as a "network" of federal laws and regulations aimed at protecting the tribe's coal resources and keeping the tribe informed about its assets, the court said.

"Accordingly, this court holds that the nation has a cognizable money-mandating claim against the United States for the alleged breaches of trust and that the government breached its trust duties," Judge Arthur J. Gajarsa, a Reagan nominee, wrote in the 39-page ruling.

Barring further appeals, the Court of Federal Claims will now determine the damages the government must pay for mishandling the lease. The tribe claims it lost out on at least $600 million in royalties for one of the most valuable coal deposits in the U.S.

But a trip to the Supreme Court is possible, a move that would delay resolution of one of the longest-running breach of trust cases in history. The Bush administration already took the Navajo case to the justices and won a ruling in 2003 that limited the tribe's legal maneuvers.

In that 6-3 ruling, the high court said the two laws the tribe cited to make its case weren't enough to create a damages-enforceable trust relationship. The justices noted that the Indian Mineral Leasing Act and the Indian Mineral Development Act, in fact, give more power to tribes to exercise self-determination over their trust assets.

The Navajo Nation, however, was able to revive its claim by citing other federal laws and regulations that put the government in control. This "network" included the Navajo-Hopi Rehabilitation Act, which the Federal Circuit said imposes a duty on the government to keep the tribe informed about its coal resources and the Surface Mining Control and Reclamation Act, which deals with coal mining and contains an Indian lands section.

The Federal Circuit also said the government violated its "common law trust duties of care, candor, and loyalty" by approving a lease with a royalty rate that was more favorable to Peabody Coal than to the Navajo Nation. Peabody is the world's largest coal company and has been mining the reservation for decades.

When the Bureau of Indian Affairs recommended the tribe receive a 20 percent royalty rate on its coal, Peabody hired a lobbyist who was a "a former aide and friend" to then-Interior Secretary Don Hodel, the court said. After a meeting that was kept secret from the tribe, Hodel told the BIA to stand down from the higher rate and to urge the tribe to negotiate with Peabody.

"Facing severe economic pressure," the court said, the tribe was forced to agree to a lease with a 12.5 percent royalty rate. The difference cost the tribe at least $600 million in royalties, according to the lawsuit.

Although the actions at issue took place more than 20 years ago, they remain fresh in the minds of many Navajo leaders, who feel betrayed by their trustee. Their feelings worsened when Hodel's previously unknown dealings with the lobbyist came to light through the course of the lawsuit.

"I feel like they┬╣ve been doing an injustice to us all along, and right now we're beginning to call their hand," said President Joe Shirley Jr.

Navajo leaders were further dismayed when two of the officials who were involved in the debacle secured top positions in the Bush administration. One was former deputy secretary J. Steven Griles, who oversaw the mining division that supported the higher royalty rate, and who was deposed under oath for the case.

Griles, a former lobbyist for the coal industry, eventually pleaded guilty for lying to Congress about his dealings with another lobbyist. He will be serving 10 months in federal prison.

The second official was Ross Swimmer, who currently serves as Special Trustee for American Indians and is responsible for ensuring the government meets its trust obligations. He approved the lease with the lower royalty rate without studying the effect it would have on the tribe.

Swimmer was also deposed for the case but failed to recall doing so when asked about it during his confirmation hearing before the Senate Indian Affairs Committee and during a federal court trial for the Cobell trust fund case. He also told Native reporter Jodi Rave that he couldn't remember whether he was deposed.

Separate from the suit against the government, the Navajo Nation is suing Peabody Coal, alleging a violation of federal racketeering laws over the collusion between the lobbyist and Interior. The case remains alive despite Peabody's numerous attempts to have it dismissed or delayed indefinitely. If the tribe wins the suit, it could be entitled to up to three times the damages for the lease.

"It's very good to hear that the nation got what it had coming all this time, being neglected and not getting what it's supposed to get," said former President Kelsey Begaye, whose administration filed the Peabody suit.

Federal Circuit Decision:
Navajo Nation v. US (September 13, 2007)

Supreme Court Decision:
Syllabus | Opinion [Ginsburg] | Dissent [Souter]

Related Supreme Court Decision:
Syllabus | Opinion [Souter] | Concurrence [Ginsburg] | Dissent [Thomas]

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

Related Stories:
Navajo Nation weighs trust lawsuit before deadline (11/3)
Former Navajo chair issues challenge on Peabody (5/4)
DOI office concludes field hearings on Peabody permit (01/20)
Top Interior official resigns from Bush administration (12/08)
Peabody takes coal lease dispute to high court (12/01)
Peabody loses another round in Navajo coal lease fight (6/16)
Tribes seek conditional permit for generation station (6/15)
Grassroots battle against Peabody sees success (06/07)
Judge won't dismiss Navajo Nation suit against Peabody (04/27)
Peabody continues top-level access at Interior (3/17)
Court opens window for Navajo Nation trust suit (10/27)
Peabody seeks to dismiss Navajo Nation claim (06/18)
Court appears ready to toss Peabody appeal (04/15)
Supreme Court's trust rulings criticized (4/14)
Navajo Nation back in court over Peabody lease (4/8)
Effects of Supreme Court decision debated (03/07)
High court ruling makes 'passive' trustee of U.S. (3/5)
A mixed bag for Indian trust (3/5)
Supreme Court issues trust decisions (3/4)
Swimmer can't recall Navajo involvement (02/13)
Panel predicts Apache victory (12/4)
Navajo 'deception' gets Supreme Court hearing (12/03)
Peabody sides with Bush administration on trust (09/04)
Legal tactics land Peabody in hot seat (7/22)
Navajo royalty case accepted (6/4)
Don Hodel's Navajo Folly (6/4)
Supreme Court accepts Navajo trust case (6/3)
Navajo royalty case up for review (5/30)
Supreme Court considers 'deception' of trust (5/22)
Action due on Navajo trust case (5/20)
Bush wants Navajo ruling reversed (3/27)
Court rules Navajo Nation owed money (8/14)

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