Supreme Court justices appear unconvinced in Navajo trust case
by Jim Snyder/Staff writer

Sunday, December 29, 2002

WASHINGTON U.S. Supreme Court justices did not appear totally convinced by Navajo Nation attorney Paul Frye's Dec. 2 oral arguments in the United States vs. the Navajo Nation case. The issue is whether or not a breach of trust had occurred between the federal government's trust responsibility over the Navajo people.

"I don't understand what the breach of trust consists of," one justice said to Frye during those arguments.

In transcripts posted on the Supreme Court Web site, the justices also said they would expect the Secretary of the Interior to be fair to both Peabody and the Navajo Nation, and not solely to the Navajo Nation just because they are a trustee of the government.

"One would expect that the Secretary would act fairly," one justice said. "Sure, take into account what's fair for the tribe, but also what's fair for the coal company that entered into a lease at a much lower rate earlier at arm's length. You think he you think (speaking to Frye) the Secretary couldn't take into account what's fair for the coal company at all."

Even if a breach had occurred, one justice questioned whether monetary damages should be awarded.

"I cannot even think, though there may be some, I cannot think of an instance where a private person who really has been badly hurt can recover money damages from the government where what the government did was not follow the right procedure," a justice said.

The courts ruling is expected in June.

The recently released transcripts of the case reveal justices trying to determine to what degree and who is ultimately responsible for tribes in their business dealings the Secretary of the Interior or the tribes themselves, and if any violation of this trust agreement occurred.

The case revolves around a Navajo Nation allegation of a mid-1980s conspiracy between Peabody Coal and the Interior Department to block a proposed 20-percent coal royalty considered a fair-market rate to the tribe. The tribe said they did not know Peabody lobbied the Secretary of the Interior to obtain a lower rate. The tribe ultimately settled for a 12.5-percent royalty rate.

From 1964 to the mid-1980s, the Navajo Nation had been paid just 2 percent annually for its coal.

The Navajo Nation brought a $600 million lawsuit against the United States and a separate lawsuit against Peabody Coal which is not yet in court after they had learned of the meeting. The tribe claimed breach of trust and breach of contract on the part of the government.

The Navajo Nation lost its case against the government in the United States Court of Federal Claims. That ruling, however, was reversed by the United States Court of Appeals for the Federal Circuit.

The United States appealed the case to the U.S. Supreme Court.

Frye presents the Navajo case before the justices (subhead please)

The following is a brief excerpt from the 56-page transcript of the oral arguments between the justices and Frye:

The justices asking questions are not individually identified.

Frye: What we are complaining is is about the Secretary colluding with Peabody Coal Company to swindle the Navajo Nation. That's what this case is all about.

Supreme Court: That's tell me a little bit less pejoratively and

Frye: I will tell you.

Supreme Court: More specifically. Yes.

Frye: The memorandum that Secretary Hodel hand-delivered to Fritz, every word of that was penned by Peabody's lawyers in the administrative appeal, and that's shown in the joint appendix

Supreme Court: Again, that's you know, in a particular context, that might be terrible, but when you're talking about administration, it's a very common thing for parties to submit proposed findings, et cetera. So I don't know about this circumstance, but that in and of itself is not obviously it.

Frye: That wasn't my entire answer. Following that, the Secretary of the Interior basically instructed his subordinate to lie to the Navajo Nation so it would not know what went on. And that subordinate was the last person that the Navajo Nation would have expected to deceive it. That person had worked with Navajo Chairman Peterson Zah on the reservation and had named his son Peterson Zah Vollmann.

After that, the negotiations were skewed, as Justice Souter mentioned. The Navajo Nation thought, because of these odd communications coming from Washington, that its trustee thought that the 20 percent figure was vulnerable on the merits. We're talking about a breach of trust. And the question is whether the

Supreme Court: Maybe he did think it was vulnerable on the merits. I mean, couldn't the Secretary think that?

Frye: The record shows absolutely no consideration by the Secretary. The standard that was at play here.

Supreme Court: Well, isn't that the representation that Peabody made to the Secretary, that was just an enormous increase in the fee?

Frye: Peabody actually the letter that Peabody wrote to Secretary Hodel that was mentioned by my brother Kneedler actually didn't get to Hodel's office. The record shows that that letter was routed directly to Fritz, code 200 on the document, and that Fritz gave it to his solicitors who were working on his opinion, and those

Supreme Court: No. I understand that. But don't you think in the ex parte the oral ex parte contact, the same point was made? What

Frye: We have no idea what was made.

Supreme Court: Well, what do you guess they made? I mean, why wouldn't they have made the same point that was in their letter? My goodness, all of a sudden, you're you're upping our our cost 20 times? I mean, you know, that's incredible.

Frye: That's not the context of this discussion. The royalty rate was upped to 20 percent a year before. We had extensive briefing, studies done by the Department of the Interior, all of which said that 20 percent was the right number. The Secretary of the Interior had no basis for saying it was the wrong number.

Another excerpt states:

Supreme Court: And as I read the statute and regulations, the Secretary's only obligation was to assure that a very low minimum was complied with. And after that, the negotiation was up to the tribe. Is that a fair representation of what the statute and regs require?

Frye: The statutes and regulations did require minimum royalty rates, and as this Court held

Supreme Court: Which are very low.

Frye: Very low. Absurdly low. I mean, the Government would say to this Court if we had approved if we had misled the Navajo Nation so badly that it would have taken 11 cents a ton, we could approve the 11 cents a ton because the minimum royalty rate was 10 cents a ton even though we knew it was worth $4 a ton in royalty.

Supreme Court: Yes, but I'm actually having exactly the same problem.

On the Net: http://supreme.courttv.findlaw.com/supreme_court/docket/2002/december.html