- The Washington Times - Tuesday, March 4, 2003

WASHINGTON, March 4 (UPI) — The Supreme Court ruled 6-3 Tuesday against a bid by the Navajo Nation to win $600 million in damages from the federal government for its mineral rights.

The ruling came despite a secret 1985 meeting between Department of Interior officials and a coal company to discuss the issue — a meeting which the Navajo said was a "breach of trust" on the part of the Reagan administration.

The Navajo Reservation is the largest tribal territory in the United States, occupying more than 25,000 square miles and including parts of northeast Arizona, southwest New Mexico and southeast Utah. Huge deposits of minerals — including coal, oil and gas — have been found on Navajo land.

The land is held in trust by the United States, and each year the Navajo tribe receives tens of millions of dollars in royalty payments. Under the Indian Mineral Leasing Act of 1938, the Interior Department regulates the leasing rights on tribal land.

The act allows a tribe — with the approval of the Interior secretary — to lease the land's mineral rights to private companies.

The Navajo Nation tried to renegotiate its leases with those private companies in the 1970s.

The Peabody Coal Co. had a lease which set a royalty rate of 37.5 cents per ton of coal — considerably more than the 10 cents per ton minimum set by the 1938 IMLA but considerably less than the minimum rate set by Congress in 1976, 12.5 percent of gross proceeds.

The chairman of the tribal council wrote to the Interior secretary in March 1984 asking him to adjust the Peabody royalty well beyond the 12.5 percent of gross proceeds, considering the quality of the coal.

Subsequently, the area director of the Bureau of Indian Affairs for the Navajo Area adjusted the royalty in June 1984 to 20 percent of gross proceeds for the coal.

However, Peabody appealed the area director's decision within the administrative structure of the Interior Department, and the tribe broke off negotiations with the company.

In July 1985, Peabody officials wrote a letter to Interior Secretary Donald Hodel saying that the tribe had apparently received word that it would win the administrative appeal, and that was the main reason it broke off negotiations.

The company asked Hodel to assume jurisdiction in the case, sending the tribe a copy of the request.

At that point, Peabody also retained Stanley Hulett, a former Hodel aide and friend of the secretary, and asked for a meeting with Hodel.

The meeting occurred in July 1985, without the knowledge of tribal officials, according to court records. Hodel subsequently sent a letter to subordinates saying an appeal decision was not imminent.

Hodel also suggested that subordinates urge both sides to resolve the matter, saying any imposed royalty "will almost certainly be the subject of protracted and costly appeals."

Eventually both sides agreed to 12.5 percent of proceeds, not the 20 percent fixed by the area director. The tribal council then approved the agreement.

However, in 1993 the tribe filed suit in the U.S. Court of Federal Claims, saying the Interior Department's actions constituted a "breach of trust and a breach of contract."

The tribe was contending that the government should have been looking out for its financial interests, but instead was doing the opposite.

The tribe did not ask that the lease be invalidated. Instead it asked for $600 million in damages from the government.

A trial court ruled for the government, but eventually a divided appeals court panel in Washington reversed on the breach of trust claim.

The appeals court determined that the tribe was entitled to damages, and sent the case back to the trial level to determine how much.

The Bush administration then asked the Supreme Court for review, and the justices heard argument in December. Tuesday, they reversed the lower court.

Speaking for the majority from the bench Tuesday, Justice Ruth Bader Ginsburg said the IMLA gives the Interior secretary "only a modest part in coal leasing. It gives him no comprehensive managerial role. Furthermore … neither the IMLA nor its implementing regulations expressly directed the secretary to pursue the best interests of the tribe over those of (Peabody)."

Nothing in the federal act "describes a duty to ensure a particular rate of return, above the bare minimum," Ginsburg said, and the rate Peabody paid "was on a par with the rate the United States receives from its own leases to mine coal on federal lands."

Moreover, nothing in the law prohibited the secretary from having a secret meeting with Peabody, "however one might appraise the secretary's actions."

Justice David Souter, joined by Justices John Paul Stephens and Sandra Day O'Connor, dissented.

The Interior Department had a specific fiduciary duty under Supreme Court precedent "whose breach is compensable in damages," Souter said. "The tribe has pleaded such duty, the record shows that the tribe has a case to try and I respectfully dissent."

The majority opinion, besides reversing the lower court, sent the case back down for a new hearing based on Tuesday's decision.

(No. 01-1375, USA vs. Navajo Nation.)

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