Navajo Nation v. U.S.

• Decision Date: 13 September 2007
• Docket Number: No. 2006-5059.,2006-5059.
• Citation: 501 F.3d 1327
• Parties: The NAVAJO NATION, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

501 F.3d 1327

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

No. 2006-5059.

United States Court of Appeals, Federal Circuit.

September 13, 2007.

Paul E. Frye, Frye Law Firm, P.C., of Albuquerque, NM, argued for plaintiff-appellant. With him on the brief was Lisa M. Enfield. Of counsel on the brief was Daniel I.S.J. Rey-Bear, The Nordhaus Law Firm, of Albuquerque, NM, and Louis Denetsosie, Attorney General, The Navajo Nation, of Window Rock, AZ.

Todd S. Aagaard, Attorney, Environment & Natural Resources Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief was Sue Ellen Wooldridge, Assistant Attorney General.

Before GAJARSA, Circuit Judge, PLAGER, Senior Circuit Judge, and MOORE, Circuit Judge.

GAJARSA, Circuit Judge.

The threshold question in this case is whether the Navajo Nation ("Nation" or "Tribe") has a cognizable money-mandating claim under 28 U.S.C. § 1505, known as the Indian Tucker Act, against the United States for a breach of trust in a lease of the Nation's lands for coal mining to Peabody Coal Co. ("Peabody"). Only if there is such a claim, may we evaluate whether the United States breached its trust duties based on the parties' cross-motions for summary judgment.

In United States v. Navajo Nation ("Navajo III"), 537 U.S. 488, 123 S.Ct. 1079, 155 L.Ed.2d 60 (2003), the Supreme Court held that the Act of May 11, 1938 ("Indian Mineral Leasing Act of 1938" or "IMLA of 1938"), ch. 198, 52 Stat. 347, 25 U.S.C. § 396a-g, and its implementing regulations do not constitute the substantive source of law required to establish such a claim and remanded for further proceedings consistent with its opinion. Navajo III, 537 U.S. at 514, 123 S.Ct. 1079. Because Navajo III did not address whether the network of other statutes and regulations asserted by the Nation provides the required substantive source of law, we remanded to the Court of Federal Claims to consider the question. Navajo Nation v. United States ("Navajo IV"), 347 F.3d 1327, 1332 (Fed.Cir.2003). On remand, the Court of Federal Claims found that the Nation's asserted network of other statutes and regulations failed "to establish a money-mandating trust in the area of royalty rates." Navajo Nation v. United States ("Navajo V"), 68 Fed.Cl. 805, 815 (2005). The Nation appealed.

The Supreme Court stated in United States v. White Mountain Apache Tribe, 537 U.S. 465, 123 S.Ct. 1126, 155 L.Ed.2d 40 (2003), that "[i]t is enough . . . that a statute creating a[n Indian] Tucker Act right be reasonably amenable to the reading that it mandates a right of recovery in damages. While the premise to a[n Indian] Tucker Act claim will not be `lightly inferred,' a fair inference will do." Id. at 473, 123 S.Ct. 1126 (citation omitted). Because the governing law establishes such a fair inference in this case and because the undisputed facts as determined by the Court of Federal Claims demonstrate that the government breached its trust duties, we reverse the decision of the Court of Federal Claims and remand for further proceedings consistent with this opinion.

I.

A. Background Facts

The facts of this case are undisputed and have been detailed by the Court of Federal Claims in Navajo Nation v. United States ("Navajo I"), 46 Fed.Cl. 217, 221-24 (2000), this court in Navajo Nation v. United States ("Navajo II"), 263 F.3d 1325, 1327-28 (Fed.Cir.2001), and the Supreme Court in Navajo III, 537 U.S. at 495-500, 123 S.Ct. 1079. Because of the prior detail, we provide only a brief factual summary here.

The Navajo reservation is the largest Indian reservation in the United States and spans parts of Arizona, New Mexico, and Utah. The United States holds the Nation's reservation lands in trust for the Nation pursuant to a treaty, an executive order, and two Congressional acts. See infra Part III.D.1. Over the past century, large coal deposits have been discovered on these lands. Navajo III, 537 U.S. at 495, 123 S.Ct. 1079.

In 1964, the Nation and the predecessor of Peabody¹ executed Lease 14-20-0603-8580 ("Lease 8580"), which became effective when the Secretary of the Department of the Interior approved it that year. Navajo I, 46 Fed.Cl. at 221. Lease 8580 granted Peabody the "exclusive right and license to prospect, mine, and strip" 24,858 acres of the Nation's reservation in Arizona for coal. In return, the lease established royalties of not more than 37.5 cents per ton. The lease also provided, however, that "the royalty provisions of this lease are subject to reasonable adjustment by the Secretary of the Interior . . . at the end of twenty years from the effective date of this lease."

As the twenty-year anniversary approached in 1984, it became apparent that the 37.5 cents per ton maximum royalty was "by any measure, an inequitable deal" for the Nation and was "substantially lower" than the 12.5% minimum royalty set by Congress in 1977 for coal mined on federal lands. Navajo I, 46 Fed.Cl. at 222; Navajo III, 537 U.S. at 496, 123 S.Ct. 1079. In March 1984, the Nation wrote the Secretary of the Interior, William Clark, asking him to make a reasonable adjustment of the royalty rate as provided by Lease 8580. In June 1984, after considering the "reports and recommendations from the Bureau's Navajo Area and Energy and Mineral Resources Offices, the Bureau of Mines and others," the Area Director of the Bureau of Indian Affairs for the Navajo Area, pursuant to authority delegated by the Secretary, issued a final decision adjusting the royalty rate of Lease 8580 to 20% of gross proceeds. Navajo III, 537 U.S. at 496, 123 S.Ct. 1079.

In July 1984, Peabody filed an administrative appeal, which was

referred to the Deputy Assistant Secretary for Indian Affairs, John Fritz, then acting as both Commissioner of Indian Affairs and Assistant Secretary of Indian Affairs. In March 1985, Fritz permitted Peabody to supplement its brief and requested additional cost, revenue, and investment data. He thereafter appeared ready to reject Peabody's appeal. By June 1985, both Peabody and the Tribe anticipated that an announcement favorable to the Tribe was imminent.

Navajo III, 537 U.S. at 496, 123 S.Ct. 1079 (citations omitted).

In July 1985, Peabody wrote a letter to the new Secretary of the Interior, Donald Hodel, seeking either to postpone the decision reviewing the royalty adjustment or to issue a ruling in Peabody's favor. The Nation received a copy of the letter and submitted its own to Secretary Hodel, "urging the Secretary to reject Peabody's request and to secure the Department's prompt release of a decision in the Tribe's favor." Id. at 497, 123 S.Ct. 1079 (citations omitted).

Later that month, Peabody retained Stanley Hulett, who was described in a Peabody company memorandum as "a former upper level Department of Interior employee" believed to have "influence with the current Secretary of Interior (Don Hodel)." The government conceded in this case that Hulett was "a former aide and friend of Secretary Hodel." See Navajo III U.S. Br., 2002 WL 1968199, at *8. Hulett met with the Secretary without a representative of the Nation being present, and the Nation never received notification of the meeting. Navajo III, 537 U.S. at 497, 123 S.Ct. 1079. "On or shortly after the date of the ex parte meeting, Secretary Hodel signed a memorandum prepared by Peabody, making only one insignificant change in the company's draft." Navajo I, 46 Fed.Cl. at 222-23. Secretary Hodel addressed to Fritz the memorandum, which stated in part:

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.

. . . .

I wish to assure you, however, that this memorandum is not intended as a determination of the merits of the arguments of the parties with respect to the issues which are subject to the appeal. If it becomes inevitable that such a determination must be made by the Department, then we can discuss it at that time.

The Nation was not advised of this memorandum but "learned that someone from Washington had urged a return to the bargaining table. Facing severe economic pressure, the Tribe resumed negotiations with Peabody in August 1985." Navajo III, 537 U.S. at 498, 123 S.Ct. 1079 (quotation marks and citations omitted).

In September 1985, Peabody and the Nation reached a tentative settlement agreement on a package of amendments. The amendments were approved by the Navajo Tribal Council in August 1987, signed by the parties in a final agreement in November 1987, and approved by Secretary Hodel in December 1987. Id. at 500, 123 S.Ct. 1079. The amended lease raised the royalty rate to 12.5% for Lease 8580. In addition, the amendments raised the royalty rate for two other existing leases, which did not contain Lease 8580's reasonable adjustment provision, resolved a broad range of issues between Peabody and the Nation, and added 90 million tons of coal to the 200 million tons originally leased from the Nation's reservation lands in Arizona. The amendments acknowledged that the parties could have executed a separate lease or leases to mine the additional coal, but instead, decided to amend the lease "in consideration for various additional undertakings of Peabody." Without its exhibits, the amendments numbered more pages than the original Lease 8580.

B. Procedural History

In 1993, the Nation brought suit seeking $600 million in damages against the United States in the Court of Federal Claims. Navajo I, 46 Fed.Cl. at 225. The first amended complaint asserted that the "leasing of coal of the Navajo Nation is subject to a comprehensive statutory and regulatory scheme of the United States"; that the government "claimed and exercised broad authority and control over the leasing of coal it holds in trust for the Navajo Nation"; and that the government violated its statutory and...