Navajos Win Key Victory in Coal Royalty Fight

by HOWARD FISCHER 
Arizona Daily Sun
01 May 2004

A federal judge has handed a key victory to the Navajo Nation in its fight over lost coal royalties.

Judge Emmet G. Sullivan rejected efforts by Peabody Energy to throw out legal claims by the tribe over the question of whether the company engaged in illegal acts in its apparently successful efforts to get a top federal official to approve a favorable royalty deal.

Sullivan acknowledged that the underlying incidents in this case are the same as ones brought by the tribe in its $600 million lawsuit against the federal government.

The U.S. Supreme Court last year threw out a suit by the tribe against the U.S. Department of Interior seeking damages. The high court said former Interior Secretary Donald Hodel had no duty to act in the tribe's best interests.

But Sullivan said that did not make this case illegally duplicative of that failed effort.

"The issue before this court is whether a private company–not the U.S. government–violated RICO (racketeering laws) and committed various common law torts when it hired a lobbyist to procure favorable government action at the expense of the tribe," Sullivan wrote. "In other words, although the underlying facts are the same as those presented before the Supreme Court, the legal issue and concomitant question of liability are different.''

Beyond that, he noted that the original Navajo case against the federal government still survives based on theories other than Hodel's duty.

The Navajo's original 1964 lease with Peabody's predecessor provided for a royalty of not more than 37.5 cents per ton. It also authorized the Interior Secretary to adjust that to a "reasonable'' rate on the 20th anniversary of the lease.

As that approached, that 37.5 cent figure was equivalent to about 2 percent of gross proceeds.

When the tribe and Peabody could not resolve the matter the case went to the Bureau of Indian Affairs which set the royalty rate to 20 percent, a figure affirmed on appeal. But in 1985 Hodel sent a memo to John Fritz, his deputy assistant secretary for Indian Affairs, directing him not to divulge that ruling.

Court records also show that memo had been drafted by Peabody lawyers. And the Supreme Court, in its ruling last year, acknowledged Hodel met privately with Peabody officials.

The Navajos, however, not told that the 20 percent figure was upheld, eventually agreed to a 12.5 percent royalty rate. That decision, according to the tribe, cost it $600 million.

Attorneys for Peabody argued to Sullivan that they are entitled to protection now under the concept of "collateral estoppel.'' That generally precludes litigants from bringing suit on matters that they have had a full and fair opportunity to litigate.

But Sullivan said the basis of the Supreme Court ruling was the absence of any duty imposed by law on the Secretary of Interior.

In fact, Sullivan noted, a federal appellate court, ruling on issues after the Supreme Court decision, concluded that the high court decision was based solely on the Indian Mineral Leasing Act. He said that decision did not conclusively uphold the validity of Hodel's actions -- and, by implication, those of Peabody.

Copyright © 2004 Arizona Daily Sun

   

    


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