Navajo Nation v. U.S., 00-5086

• Decision Date: 10 August 2001
• Docket Number: No. 00-5086,00-5086
• Citation: 263 F.3d 1325
• Parties: (Fed. Cir. 2001) NAVAJO NATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee
• Court: U.S. Court of Appeals — Federal Circuit

Page 1325

263 F.3d 1325 (Fed. Cir. 2001)

NAVAJO NATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 00-5086

United States Court of Appeals for the Federal Circuit

August 10, 2001

Amended September 6, 2001

Appealed from: United States Court of Federal Claims Chief Judge Lawrence M. Baskir

[Copyrighted Material Omitted]

Paul E. Frye, Rothstein, Donatelli, Hughes, Dahlstrom, Schoenburg & Enfield, LLP, of Albuquerque, New Mexico, argued for plaintiff-appellant. Of counsel on the brief was Daniel I.S.J. Rey-Bear, Nordhaus, Haltom, Taylor, Taradash & Bladh, L.L.P., of Albuquerque, New Mexico.

Todd S. Aagaard, Attorney, Environment & Natural Resources Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were R. Anthony Rogers, of Washington, DC, and Kristine S. Tardiff, of Concord, New Hampshire, Attorneys. Of counsel was Elizabeth Ann Peterson, Attorney, of Washington, DC,.

Peter Buscemi, Morgan, Lewis & Bockius LLP, of Washington, DC, for amici curiae Peabody Holding Company, Inc., et al . With him on the brief was Brad Fagg.

Before NEWMAN, SCHALL, and LINN, Circuit Judges.

Opinion for the court filed by Circuit Judge NEWMAN. Concurring in part and dissenting in part opinion filed by Circuit Judge SCHALL.

NEWMAN, Circuit Judge.

The Navajo Nation appeals the decision of the United States Court of Federal Claims, dismissing its complaint against the United States for breach of trust and breach of contract.¹ The court ruled that although the United States had breached its fiduciary obligations to the Navajo Nation, this breach was not actionable because the United States did not have a trust relationship with the Navajo Nation and monetary relief was not available. However, a trust relationship indeed existed and exists with the Navajo Nation, and monetary damages are an available remedy for breach of this trust.

BACKGROUND

The United States, through the Secretary of the Interior and the Interior Department's Bureau of Indian Affairs (BIA), supervises and regulates the development and sale of mineral resources on Indian reservation lands, pursuant to the Indian Mineral Leasing Act of 1938, 25 U.S.C. §396 et seq., the Indian Mineral Development Act of 1982, 25 U.S.C. §§2101-2108, and implementing regulations.

In 1964 the Navajo Nation entered into a lease agreement with the Sentry Royalty Company (predecessor in interest to the Peabody Coal Company) for the mining of coal deposits on Navajo lands. The agreement provided for payment of a royalty not to exceed 37.5 cents per ton, and authorized the Secretary of the Interior or his delegate to readjust the royalty rate to a "reasonable" level on the twentieth anniversary of the lease. As that anniversary approached, due to increases in the market price of coal the rate of 37.5 cents per ton was equivalent to about 2% of gross proceeds. It is not disputed that this was well below then-prevailing royalty rates.

Negotiations proceeded between the Navajo and Peabody. No agreement was reached, and the Navajo asked the Department of the Interior to resolve the issue, in accordance with statute, and to set the royalty at a fair market rate. The BIA Area Real Property Management Officer issued an Initial Decision to increase the royalty rate to 20%, based on an analysis by the Bureau of Mines. The BIA's Navajo Area Director adopted this decision, and so notified Peabody. Peabody appealed to the Deputy Assistant Secretary for Indian Affairs John Fritz, acting as both the Commissioner of Indian Affairs and the Assistant Secretary for Indian Affairs, an appellate path provided by the regulations. See 25 C.F.R. §§2, 3. The Deputy Assistant Secretary for Indian Affairsconsidered the matter and reached a decision affirming the 20% rate. However, this decision was withdrawn at the instruction of the Secretary of the Interior. The Appendix to the decision of the Court of Federal Claims contains a memorandum from Secretary Hodel to John Fritz, Deputy Assistant Secretary for Indian Affairs, stating "I suggest that you inform the involved parties that a decision on this appeal is not imminent and urge them to continue with efforts to resolve this matter in a mutually agreeable fashion." 46 Fed. Cl. at 237. Mr. Fritz complied with this instruction.

The record before the Court of Federal Claims reports numerous contacts during this period, on behalf of Peabody, with Interior officials including the Secretary. The Navajo were not told that a decision on Peabody's appeal had been made in their favor. Facing severe economic pressures, the Navajo eventually agreed to a royalty rate of 12.5%.

It can not be reasonably disputed that the Secretary's actions were in Peabody's interest and contrary to the Navajo's interest. The Court of Federal Claims found that the government's actions "violated the most fundamental fiduciary duties of care, loyalty and candor." 46 Fed. Cl. at 227. However, the court also held that there was no trust relationship between the agency and the Navajo with respect to these events, and thus that no monetary relief was available.

DISCUSSION

The Fiduciary Relationship

The legal relationship between the United States and the Indian tribes takes a variety of forms, and in part is that of a fiduciary and its charge. See, e.g., United States v. Mason, 412 U.S. 391, 398 (1973) ("There is no doubt that the United States serves in a fiduciary capacity with respect to these Indians and that, as such, it is duty bound to exercise great care in administering its trust."); Seminole Nation v. United States, 316 U.S. 286, 296 (1942) ("this Court has recognized the distinctive obligation of trust incumbent upon the Government in its dealings with these dependent and sometimes exploited people"); United States v. Shoshone Tribe, 304 U.S. 111, 117-118 (1938) ("As transactions between a guardian and his wards are to be construed favorably to the latter, doubts, if there were any, as to ownership of lands, minerals, or timber would be resolved in favor of the tribe.")

The fiduciary relationship between the United States and the Indian tribes is manifested in various ways. For example, with respect to Indian reservation lands, precedent recognizes a distinction between the laws whereby the United States has only a limited trust relationship with the Indian tribes who occupy the land, and the laws giving rise to a full fiduciary duty toward the Indians. The difference lies in the level of control the United States exercises in its management of the land and its resources for the benefit of the Indians. When the United States controls the Indian resources, the duty is that of a fiduciary; when the Indians control their own resources, the duty of the United States is lessened appropriately.

These relationships and duties were discussed in United States v. Mitchell, 445 U.S. 535 (1980) (Mitchell I) and 463 U.S. 206 (1983) (Mitchell II). The Court explained that when the United States is assigned control of the management of Indian resources and the duty to manage those resources, there is created a full fiduciary relationship with respect to that management, including all appurtenant trustee duties, obligations, and liabilities. In Mitchell I the Court explained that the United States' role of trustee holding title to reservation land under the General Allotment Act is simply an expedient to avoid state and local burdens, whereas the role of the United States in management of the resources of the land is as a full fiduciary, see Mitchell II, implementing the government's statutory obligation to manage these resources entirely for the benefit of the Indians. Thus the Court distinguished the government's holding of "bare trust" title to an Indian land allotment without responsibility to manage the resources thereof, from the government's control and management responsibility of these resources as a fiduciary:

In contrast to the bare trust created by the General Allotment Act, the statutes and regulations now before us clearly give the Federal Government full responsibility to manage Indian resources and land for the benefit of the Indians. They thereby establish a fiduciary relationship and define the contours of the United States' fiduciary responsibilities.

Mitchell II, 463 U.S. at 224.

This guidance has frequently been applied. In Brown v. United States, 86 F.3d 1554 (Fed. Cir. 1996) the issue concerned the commercial leasing of land that had been allotted to Indians. The court explained that the test of the government's fiduciary responsibility is whether "the Secretary, rather than the allottees, has control or supervision over the leasing program." Id. at 1561. The court observed that a full fiduciary duty exists even when the government has less than total control of management of the resources, and that participation by the Indians in resource management does not absolve the United States of its responsibility to act in the sole and best interests of the Indians.

In White Mountain Apache Tribe v. United States, 249 F.3d 1364 (Fed. Cir. 2001), the statute establishing "an enforceable fiduciary relationship between the United States and the Tribe," id. at 1383, provided that Fort Apache, which had been a military facility within what later became the Tribe's reservation in Arizona, be "held by the United States in trust for the White Mountain Apache Tribe, subject to the right of the Secretary of the Interior to use any part of the land and improvements for administrative or school purposes for as long as they are needed for that purpose." This court held that the statute established a full fiduciary relationship. Although the statute was silent on how the United States was to administer the property, the court applied the common law of trusts to hold that the United States had a trustee's duty to preserve the trust corpus, despite the absence of a specific statute and regulations. This court st...