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TUESDAY, AUGUST 14, 2001

The United States owes the Navajo Nation money for approving a coal mining lease with Peabody Coal at below market value, a federal appeals court ruled on Monday.

The Department of Interior breached its trust responsibility to the tribe when then-Secretary Donald Hodel approved an extension to the tribe's lease with the coal giant, said the court in a 2-1 ruling. As a result, the tribe could be owed as much as $600 million, a number a lower court must now determine.

The decision marks a victory for the nation's largest tribe, whose officials have allowed Peabody to operate a coal mine on its reservation for more than 50 years. It supports claims made by both the Navajo Nation and the Hopi Tribe of Arizona that the government has been less the scrupulous in exploiting the tribes' natural resources.

The central issue in the case is a 1985 meeting Hodel secretly held with a friend who had just been hired by Peabody. The company specifically hired Stanley Hulett because of his close relationship with Hodel, court documents and affidavits show.

As a result of the meeting, the government held off on pushing for a lease that would give better returns to the tribe. The Bureau of Indian Affairs had initially approved a 20 percent royalty rate, a vast improvement over the prior 12.5 percent one.

But when Peabody protested, Hodel withdrew the rate, which had also been upheld by the Interior Board of Indian Appeals. However, the tribe was never told about the approval of the better lease terms.

Instead, the tribe was told no decision had been reached and that negotiations should continue with Peabody. The was eventually forced -- "facing economic pressure," said the appeals court -- to accept the 12.5 rate again.

Yet while details of the private meeting did not surface until 11 years later and only after the tribe pursued the case, the Court of Federal Claims in February 2000 ruled the tribe could not be compensated. Although the court found Hodel violated his responsibility to the Navajo Nation, there was no mandate for a financial judgment, said a federal judge.

"We conclude that the defendant, acting through former Secretary Hodel, violated the most basic common law fiduciary duties owed the Navajo Nation," wrote US District Judge Lawrence M. Baskir. "Regrettably, we also conclude that the trust relationship necessary for our jurisdiction does not exist, and these violations do not mandate monetary relief."

But that holding was dramatically overturned yesterday. When the government withheld knowledge of the higher rate and secretly withdrew it, Interior officials violated "most basic common law fiduciary duties owned to the Navajo Nation," said the court.

The court also ruled the Interior "acted in direct contravention" to its duties under the Indian Mineral Leasing Act. The law obligates the government to obtain "the maximum return for [Indian-owned] minerals," said the court.

The three judges of the court agreed the Interior has a trust relationship with the the tribe. But one judge disagreed on which specific duties, under law, were violated and said he would only support a limited analysis of the damages the tribe might be awarded.

The Navajo Nation case marks the third in recent months in which the appeals court has overturned or set aside a lower decision affecting trust responsibilities. In May, the court ruled the federal government must restore crumbling buildings before turning them over to the White Mountain Apache Tribe of Arizona.

The court in May also ruled the Warm Springs Tribes of Oregon are due money for an improper timber sale.

Although not a party to the tribe's case, Peabody had attempted to suppress knowledge of the Hodel meeting, asking a federal court to hold the Navajo Nation in contempt. Peabody's request was denied in March 2000.

Get the Case:
NAVAJO NATION v. US, No 00-5086 (Fed Cir. August 10, 2001)

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

Related Stories:
Apache Tribe wins trust case appeal (5/17)
Tribe wins trust case appeal (5/14)
Peabody mining protested (4/3)
Peabody defends water usage (3/26)
Peabody Coal fought Bush's promise (3/26)
Peabody denies Navajo 'conspiracy' (3/20)