Case closed

F or the second time in six years, the U.S. Supreme Court has ruled that the Navajo Nation cannot go after the federal government for failing to uphold its trust responsibilities in the renegotiation of coal royalties with the Peabody Coal Co.

The Navajo Nation claims it lost as much as $600 million because Donald Hodel, Interior secretary under Ronald Reagan, derailed a Zah administration effort to increase the royalty rate for Navajo coal by more than 10 times the existing rate.

When Hodel's role became known years later, the tribe sued both Peabody Coal Co., which had hired a personal friend of Hodel to lobby on its behalf, and the Interior Department.

The tribe argued that the Hodel had a legal obligation to help ensure that the Navajo Nation got the best deal possible for its coal reserves.

The tribe claimed that Hodel, after a secret meeting with John Hulett, his friend the Peabody lobbyist, suppressed research his own staff had developed and instead used his influence to get the tribe to accept a lower royalty rate.

During the first 20 years of the lease, Peabody paid the tribe 37.5 cents for each ton of coal it mined on Black Mesa, about 2 percent of its sales price. It was a sum that by the 1970s tribal officials ridiculed as a rip off.

In 1976 Congress raised royalty rates on federally owned coal to 12 percent. By law, the rates on tribal coal could not be less than the federal rate, so the BIA notified Peabody it was at risk of losing its leases on Black Mesa.

Peabody promised to renegotiate the rate but by 1984, nothing was settled so the Navajos asked the Interior Department to set a new rate. Then Chairman Zah proposed a rate to match the going rate private owners were then receiving, about 25 percent.

When Interior officials researched mineral royalty rates, they determined that the tribe's position was basically reasonable.

The department, according to internal memos that were only made public years later, was looking at setting a royalty rate of 20 percent.

Unseen hand

Peabody, unbeknownst to the tribe, sent its representative to meet privately with Hodel, where he voiced the company's objections.

Hodel had been warned by the department solicitor against taking sides in the issue, but on July 17, 1985, he signed a memo - drafted by Peabody - directing the suppression of the department's decision in favor of a 20 percent royalty rate, and the technical studies supporting it.

Hodel also assumed personal jurisdiction over the matter and directed the Navajos, who were unaware of how close Interior had been to approving a 20 percent royalty rate, to negotiate with Peabody. The result was a royalty rate of 12.5 percent and a large number of concessions by the tribe.

The revised lease allowed a review of royalty rates every 10 years, and the tribe began the process in 1997, asking the Interior Department for background information. Buried within the case file were the documents revealing Hodel's role as saboteur.

In 1999 the Navajo Nation filed suit alleging that Peabody had schemed to cheat the tribe, and the federal government had breached its trust responsibility.

Peabody was later dismissed from the suit, basically because the court agreed that the company's only obligation was to get the best deal possible for itself.

What followed was a series of court hearings that ended in a 2003 decision by the U.S. Supreme Court overturning a favorable appellate ruling and throwing out the tribe's suit on grounds that the Interior secretary was not obligated to do anything more than to make sure the tribe got no less than the going royalty rate on federal mineral leases.

Justices David Souter, Sandra Day O'Connor and John Paul Stevens dissented in that decision.

Writing for the dissenters, Souter said the facts supported the tribe's claim that Hodel had defaulted on his fiduciary responsibility to withhold approval of an inadequate lease, which had been accepted by the tribe "while it was under a disadvantage the secretary himself had intentionally imposed."

But the tribe then went back to court, asserting that the secretary had a particular responsibility to the Navajos that went beyond the Indian Minerals Leasing Act.

This time around, the tribe said there was a "network" of other statutes including the Navajo-Hopi Relocation Act, treaties and regulations that required Interior to make sure the Navajos got the best deal possible.

The U.S. Court of Claims said no, but the U.S. Court of Appeals for the Federal Circuit agreed with the tribe.

Had the Supreme Court let it stand, the decisions would have allowed the tribe to press its case and seek damages from the federal government, but the high court instead agreed to review it.

That decision immediately provoked concern in Indian Country, and by the time the case came up for oral arguments last month, the Navajo position was bolstered by amicus briefs from three state attorneys general, four former Interior secretaries, eight professors specializing in Native American law, and the National Congress of American Indians.

Hostile reception

But when lawyers for both sides came before the court to make their oral arguments, the justices made it clear they were not happy about having someone second-guess their first decision.

Most damning was the tribe's agreement, made during the first case, that the governing law was the Indian Minerals Leasing Act of 1938.

In its decision, written by Justice Antonin Scalia, the Supreme Court said the Navajos were trying to change their tune and say the relocation act took precedence.

In a ruling released Monday, just a month after oral arguments, the justices said the Navajo argument had a "fatal defect" because the language of the Peabody lease mirrored language in the Indian minerals law and not the later relocation act.

That "strongly suggests," said the Supreme Court, that the lease was authorized under the mineral leasing act and thus governed by it.

And IMLA gives the tribes primary responsibility to negotiate their own mineral leases. All Interior is required to do is to make sure the royalty rate is not less than required on federal lands.

The tribe was not allowed to "mix and match" sections of various laws to come up with a scenario that fit its logic, Scalia wrote.

The court also rejected the tribe's position that Hodel had failed to follow provisions of the Navajo-Hopi Rehabilitation Act when he allowed the tribe to accept an lease agreement that was less than they should have been getting under then-current market conditions.

Though the ruling was unanimous, Souter wrote a brief concurring opinion that Stevens also signed. (O'Connor is no longer on the court.)

"I am not through regretting that my position in (the 2003 ruling) did not carry the day," Souter wrote. "But it did not, and I agree that the precedent of that case calls for the result reached here."

The new ruling, which emphatically declares the Navajo's quest for justice in this case is at an end, doesn't touch upon one underlying fact - Hodel's relationship with Peabody.

This was brought up in the closing arguments by attorneys for the Navajo Nation, but it was not mentioned in the decision.

The ruling also only mentioned in passing the arguments raised by people and groups who filed briefs on the tribe's behalf, all of whom argued that this is a case where the trustee took advantage of a beneficiary.

Briefs filed by attorneys general in Arizona, New Mexico and Utah said if the federal government does not live up to these responsibilities, "the burden of the states is increased.

"The states therefore have a significant stake in ensuring that mineral leases on the Navajo Reservation are fair to the tribe."

There was some criticism after the oral hearings on Internet blogs and from some tribal council members, who argued that the case was lost because of ineffective counsel.

Navajo leaders who were present at the oral arguments, however, say the case was lost on the issues and they pointed out that these were the same attorneys who had won in the lower courts.

President Joe Shirley Jr. had no immediate response to the decision, although he was planning to release a statement Wednesday afternoon.