U.S. Supreme Court's intervention places damage claim in limbo - again

High court grabs Peabody royalty case


By Bill Donovan
Special to the Times
http://www.navajotimes.com/news/index.php

WINDOW ROCK, Oct. 9, 2008

For more than 15 years, Navajo Nation attorneys have been pursuing legal action to hold the U.S. government and Peabody Coal Co. accountable for a conspiracy that cost the Navajos hundreds of millions of dollars in lost coal royalties.

Last year the Navajos seemed poised at long last to achieve that goal when the U.S. Court of Appeals ruled in their favor, setting the stage for a trial to determine how much of the $600 million being sought would be awarded to the tribe.

Now, however, the U.S. Supreme Court has declared it will review the appeals court ruling - an indication that it may be getting ready to reverse the case and prevent the Navajos from collecting any money.

The appeals court ruling said the Interior Department failed to uphold its trust responsibilities to the Navajo Nation and that the tribe is entitled to damages based on that.

Tribal attorneys said if the Supreme Court affirms that finding, the case would go back to the Court of Federal Claims - where it was headed before the Supreme Court decided to intervene - for a decision on how much the Navajo Nation was damaged.

The tribe has been seeking $600 million - the amount in coal royalties that were lost because then Interior Secretary Donald Hodel wrongly advised the tribe that it was seeking unreasonably high increases, when in fact his staff had performed and review and concluded just the opposite.

This occurred in 1987 when the tribe was negotiating with Peabody to renew the lease for Black Mesa coal.

A provision in the original 1964 contract between the tribe and Peabody allowed the federal government to adjust the royalty rate after 20 years.

Although tribal officials were happy about the lease agreement in the 1960s, saying that it would provide millions of dollars to meet tribal needs, the royalty rate was widely viewed as outdated.

When Peter MacDonald became chairman in 1971, he compared the Peabody deal to selling Manhattan Island for $20 worth of beads.

When Peterson Zah became chairman in 1982, he initiated action to increase the royalty rate using the 20-year provision of the lease. MacDonald continued the fight after defeating Zah in the 1986 election.


Secret meetings

What tribal leaders didn't know at the time was Hodel, after secret meetings between Interior and Peabody officials, concealed his staff's report that said the Navajo request was reasonable compared with rates being paid elsewhere at the time.

Instead the Navajos were persuaded to settle for half the rate they were seeking.

In a 1999 article in the New York Times, John Fritz, who worked for the Interior Department under Ronald Reagan, was preparing to make a ruling that would have sharply increased the fees Peabody paid to the Navajos.

But he said he was ordered by Hodel not to do so.

"All of a sudden, I got this thing flat out of the blue," Fritz was quoted as saying in the Times, adding that it wasn't until the Navajos filed their lawsuit that he became aware of what was going on behind the scenes.

What was going on, according to the Navajo lawsuit, was that Peabody hired Stanley W. Hulett, a former Interior Department official and a personal friend of Hodel, to lobby on their behalf.

And although Hodel and the Interior Department were supposed to be looking out after the welfare of the Navajos because of the government's trust responsibility, what happened, according to Navajo attorneys, was that Hodel helped Peabody get a good deal.

Over the years, Peabody has claimed time after time that the Navajos got a fair deal that was based on the standard royalty rate at the time.

In fact, one of Peabody's spokesmen on the issue, Vic Svec, when asked about whether the company used its influence on Hodel and the Interior Department, said, "We believed it is the fundamental right of every person and organization to petition their government and this is what we were doing."

Navajo attorneys said that if the Navajo Nation had been aware of the documents that Fritz had prepared, the negotiations would have gone a lot differently and the tribe would have received millions of dollars more annually in coal royalties.

Years in court

It hasn't been easy for the Navajo Nation to get its day in court.

For years the federal courts issued one adverse decision after another.

In 2000, for example, the Court of Federal Claims ruled that Hodel did indeed breach his most fundamental trust responsibilities to the Navajo Nation - duties of care, candor and loyalty.

However, it held that "regrettably" it did not have the jurisdiction to award damages for the misconduct because the 1938 Indian Mineral Leasing Act did not confer sufficient control or supervision over lease negotiations to impose a penalty on Interior for failing to carry through with its responsibilities.

The Court of Appeals said while this was true, there were other federal statutes that may allow the Navajo Nation to pursue a claim and the court sent the case back to the Court of Federal Claims for more analysis.

The lower court stuck by its earlier decision and dismissed the case again in 2005. So the Navajos went back to the Court of Appeals and on Sept. 13, 2007, the appeals court ruled in favor of the Navajos and directed the Court of Federal Claims to determine how much in damages should be awarded to the tribe.

The Bush administration then appealed to the Supreme Court, claiming that its intervention was needed to determine if the appeals court's interpretation of law was correct.

The high court could have chosen to let the appeals court ruling stand, and the hearing on damages then would proceed.

Instead, the Supreme Court has chosen the Navajo case as one of only two involving Native American rights that it will examine in this session, raising the possibility that it may reverse the appeals court and rule against the Navajo Nation.