Court appears ready to toss Peabody appeal

TUESDAY, APRIL 15, 2003

A skeptical federal appeals court on Monday accused a lawyer for the world's largest coal company of "double-talk" for seeking to delay the Navajo Nation's billion-dollar racketeering lawsuit.

During a 30-minute hearing, a three-judge panel of the D.C. Circuit Court of Appeals appeared at times exhausted and frustrated with legal arguments advanced by Peabody Energy. The company wants to force the Navajo Nation and the Hopi Tribe into settlement talks for a 1987 mineral development lease the tribes contend is unfair.

"This is a lawsuit about royalty rates," said Peabody attorney Terrance G. Reed. "It is a matter that should be settled under arbitration."

But the judges questioned whether the agreement, which was approved by the Department of Interior during the Reagan administration, allowed the route Peabody is seeking. "It just doesn't get you there," observed Judge Harry T. Edwards. "It's a very limited arbitration clause."

Judge A. Raymond Randolph, who participated via telephone, said negotiation would conveniently kick the tribes out of court for a few more years. "The arbitration clause can't be invoked until 2007," he noted.

Judge David S. Tatel pointed out that arbitration won't allow the tribes to collect damages for money already lost. "This is a RICO case," he said, referring to the federal racketeering statute the Navajo Nation has invoked. "That's pretty different from arguing a royalty rate."

Reed was unwilling to concede that the arbitration clause was as limited as the judges characterized it. He also refused to concede that the clause only applies when the parties can't agree on a new royalty rate -- it wouldn't have an impact on the old rate, the judges noted.

The evasiveness prompted Edwards to bark: "Answer the question!" after Randolph asked whether an arbitration proceeding can award RICO damages.

When Reed answered that it would "depend" on the circumstances, Edwards responded: "Oh, come on counsel. It doesn't depend. Don't double-talk us."

Officially, Peabody came to court to seek a stay of the case, which seeks $600 million -- and possibly up to three times the amount -- under federal racketeering laws. A federal judge denied the company's request last June.

The Navajo Nation accuses Peabody of conspiring with government officials to deny the tribe a 20 percent royalty rate on a highly-valuable coal deposit in northeastern Arizona. After a Peabody lobbyist met with then-Interior secretary Donald P. Hodel in June 1985, an internal 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 -- under financial pressure, another federal circuit court said in August 2001 -- accepted a royalty rate of 12.5 percent.

During the hearing yesterday, Samuel Buffone, an attorney for the Navajo Nation, had little to argue, given the court's treatment of Peabody. "None of our claims are subject to arbitration," he said.

Tim McDonald, an attorney for the Hopi Tribe, which has intervened in the case, didn't have much to say either. A lease the Hopi Tribe signed with Peabody doesn't even have an arbitration clause, he told the court.

The case is Navajo Nation v. Peabody, No. 02-7083.

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