Navajo Nation: Peabody wants damage claim dropped

Navajo Nation: Peabody wants damage claim dropped

The Gallup Independent - Larry Di Giovanni Staff Writer

17th June 2003

Window Rock - The Navajo Nation did not take advantage of a formal appeals process from 1985 through 1987 that could have ended ex parte communications between then-Interior Secretary Donald Hodel and Peabody Western Coal Co., the company's lawyers are arguing in U.S. District Court for the District of Columbia.

At issue is whether the company acted improperly concerning negotiations over a fair royalty rate for Navajo-owned coal, from which a 12.5 percent royalty rate was approved in 1987. Peabody's Alexandria, Va., legal team of V. Thomas Lankford and William Coffield filed a motion to dismiss the Navajos' civil case for damages earlier this month. Each side has had a chance to respond and the court has yet to rule on the motion.

Peabody is arguing that in a 6-3 ruling March 4 dismissing the tribe's $600 million breach of trust case, the U.S. Supreme Court made it clear that the Interior Secretary had no "specific rights-creating duty" to help the Navajos get the highest royalty rate possible. At the time, the BIA had recommended a 20 percent royalty rate. The "best interest" trust standard helping tribes would not be adopted until 1996.

"They (tribal lawyers) did not exhaust their administrative remedies," Lankford said during a recent phone interview. He was referring to the tribe's right under law to transfer its appeal of the royalty rate determination to the Board of Indian Appeals, which handles administrative appeals.

Since "informal" contacts between the Interior Secretary and both parties were thus allowed, the Navajos cannot argue that Hodel was involved in an illegal conspiracy to low-ball the tribe on a fair royalty rate, Lankford said.

"Having failed to invoke the formal procedures of an appeal to the Board of Indian Appeals, the Navajo Nation has failed to exhaust the administrative process, and cannot now complain about the informal procedures governing the administrative appeal that permitted such contacts by interested parties," Lankford and Coffield argue in their June 3 motion-to-dismiss.

Further, they argue, the 12.5 percent coal royalty rate "was the rate the United States itself customarily received from leases to mine coal on federal land."

A Fieldston Report examining royalty rates for all 471 Western federal, state and tribal coal leases "executed or adjusted" from 1985 to 1996 found "that none exceeded 12.5 percent."

Navajo Nation Attorney General Louis Denetsosie said despite the U.S. Supreme Court ruling in March, the tribe still has a solid case against Peabody for several reasons. One is that Peabody was involved in a blatant effort to defraud the Navajos of a fair royalty rate that the BIA said could have been much higher than 12.5 percent, having recommended 20 percent.

And just as important, Denetsosie said, Peabody does not have sovereign immunity against suit as the United States does.

"They're not a government," he said of Peabody Holding Company Inc. and Peabody Coal Co. "They have a duty of good faith dealing."

The Navajo Nation is asking for a jury trial in the case pending its argument for ruling against the motion to dismiss the case. A settlement is also still possible, he said.

"The motion to dismiss is basically like a pre-emptive strike attempt," Denetsosie said. The motion gets the issues on the table but in such a complex case with so many issues involving federal law applicability, the case should continue based on the merits, he added.

Regarding the issue of the tribe not invoking a more formal appeals process before the Indian Appeals Board, Denetsosie said: "First of all, I don't think anybody expected that Peabody and the Interior Secretary would go behind our back. We thought that they would continue negotiating in good faith."

In any case, Hodel could have stepped in anyway given his far-ranging powers and taken away a decision by the Indian Appeals Board, according to Denetsosie.

"We wanted the administrative decision to be a final decision," he said.

The Supreme Court did state in its ruling in the Navajo-U.S. case that there's still a "general fiduciary trust" that exists when the government is involved in lease negotiations between a tribe and a company, and protecting the tribe's interests are at stake. The government has a duty of "loyalty, care and candor" to the tribes it is sworn to protect, and any effort by a company to taint that duty is a breach of trust on all counts, Denetsosie said.

The tribe is seeking civil damages under a racketeering provision that involves possible triple damages. In this case, the tribe is pursuing up to $1.8 billion in damages. Peabody is arguing that such damages are limited to a four-year period prior to the filing of the complaint.

The Navajo Nation filed its unsuccessful case against the United States in 1993, followed by its suit against Peabody in 1999. Lankford said the legal costs on both sides have been high. The tribe is represented by its own Washington-area firm.

"Who's making all the money in this thing here? Yeah, it's the lawyers," Lankford said. He added that the tribe has contracted with "a team" of economists and accountants over the years to stake its damage claim.