Petition for Writ of Certiorari — United States v. Navajo Nation

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Supreme Court, (5.8.

—

ö FILED

01137 5 Wag 152002

No.

CNC

In the Supreme Court of the United States

UNITED STATES OF AMERICA, PETITIONER

NAVAJO NATION

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

THEODORE B. OLSON

Solicitor General

Counsel of Record

THOMAS L. SANSONETTI

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

GREGORY G. GARRE

Assistant to the Solicitor

General

TODD S. AAGAARD

Attorney

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

QUESTION PRESENTED

The Indian Mineral Leasing Act of 1938 (IMLA), 25

U.S.C. 396a et seqg., and regulations thereunder, authorize an

Indian Tribe, with the approval of the Secretary of the In-

terior (Secretary), to lease tribal lands for mining purposes.

The question presented is:

Whether the court of appeals properly held that the

United States is liable to the Navajo Nation for up to $600

million in damages for breach of fiduciary duty in connection

with the Secretary’s actions concerning an Indian mineral

lease, without finding that the Secretary had violated any

specific statutory or regulatory duty established pursuant to

the IMLA.

(I)

TABLE OF CONTENTS

Opinions below

Jurisdiction

Statutory provisions involved

Statement

Reasons for granting the petition

A. This case presents a threshold immunity ques-

tion of fundamental importance

B. The court of appeals’ decision conflicts with

this Court’s precedents

C. The court of appeals’ decision could have

serious adverse consequences for the govern-

TABLE OF AUTHORITIES

Cases:

Assiniboine & Sioux Tribes of the Fort Peck Indian

Reservation v. Board of Oil & Gas Conservation,

792 F. 2d 782 (9th Cir. 1986)

Blackfeather v. United States, 190 US. 368

(1903)

Brown v. United States, 86 F 3d 1554 (Fed. Cir.

1996)

Cherokee Nation v. Georgia, 30 US. (5 Pet.) 1

(1831)

Cases—Continued: Page

Cotton Petroleum Corp. v. New Mexico, 490 U.S.

163 (1989) 18, 19

Crow Tribe of Indians v. Montana, 650 F 2d 1104

(1981), amended, 665 F 2d 1390 (9th Cir.), cert.

denied, 459 U.S. 916 (1982) 17

Duquesne Light Co. v. Barasch, 488 U.S. 299

(1989) 25

FPC v. Hope Natural Gas Co., 320 U.S. 591

(1944) 25

Kerr-McGee Corp. v. Navajo Tribe, 471 U.S. 195

(1985) 8

Klamath & Moadoc Tribes of Indians v.

United States, 296 U.S. 244 (1985) 26

Office of Pers. Mgmt. v. Richmond, 496 U.S. 414

(1990) 15

Pawnee v. United States, 830 F 2d 187 (Fed. Cir.

1987), cert. denied, 486 U.S. 1082 (1988) 27

Shoshone Indian Tribe of the Wind River Reservation

v. United States, 51 Fed. Cl. 60 (2001) 27

United States v. Hopkins, 427 U.S. 123 (1976) 25

United States v. Kagama, 118 U.S. 375 (1886)

United States v. King, 395 U.S. 1 (1969)

United States v. Mitchell:

445 U.S. 535 (1980) 10, 14, 15, 16, 17, 19, 26

463 U.S. 206 (1983) 10, 12, 14, 15, 16, 20, 21, 23, 26

United States v. Mottaz, 476 U.S. 834 (1986) 26

United States v. Sherwood, 312 U.S. 584 (1941) ............... 14

United States v. Testan, 424 U.S. 392 (19786) . . 15, 16, 25

Vermont Yankee Nuclear Power Corp. v. Natural

Res. Def. Council, Inc., 485 U.S. 519 (1978) 24

White Mountain Apache Tribe v. United States,

249 F.3d 1364 (Fed. Cir. 2001), petition for cert.

pending, No. 01-1067 11, 14, 27

Statutes and regulations: Page

Act of Mar. 18, 1960, Pub. L. No. 86-392, 74 Stat. 8 27,28

General Allotment Act, 25 U.S.C. 348 15

Indian Mineral Leasing Act of 1988, 25 U.S.C. 396a

et geg.

USC. 396a (§ 1) 2,17

25 U S.C. 396a-396g 2

25 U.S.C. 396d 3

25 U S.C. 396e 3

Tucker Act:

28 U.S.C. 1491(a) 2, 15, 86a

28 U.S.C. 1505 (Indian Tucker Act) 2, 15, 86a

25 U.S.C. 399 11,19

30 U.S.C. 207(a) 5

25 C.F.R.:

Pt. 2 (1985) *

Section 2.3

Section 2.3(a) 5

Section 2.11 ... 5

Section 2.12 5

Section 2.19 7

Pt. 2 (2001) 24

Pt. 211:

Section 211.2 (1985) 3,5

Section 211.15(c) (1985) 3, 21,22

Section 211.15(c) (1987) 21, -

Section 211.26 (1985) ........

Section 211.43(a)(2) (2001) 3,22

Section 211.43(b) (2001) 1

43 C.F.R. 4.5(aX2) (1985) .

Miscellaneous:

56 Fed. Reg. (1991): =

p. 58,734 —

p. 58,736 —

In the Supreme Court of the United States

No.

UNITED STATES OF AMERICA, PETITIONER

NAVAJO NATION

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

The Solicitor General, on behalf of the United States of

America, respectfully petitions for a writ of certiorari to

review the judgment of the United States Court of Appeals

for the Federal Circuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App., infra, 1a-30a) is

reported at 263 F.3d 1325. The opinion of the Court of

lederal Claims (App., infra, 31a-79a) is reported at 46 Fed.

Cl. 217.

JURISDICTION

The judgment of the court of appeals (App., infra, 80a)

was entered on August 24, 2001. A timely petition for re-

hearing was denied on November 16, 2001 (App., infra, 80a-

8la). On February 4, 2002, the Chief Justice extended the

time within which to file a petition for a writ of certiorari to

(1)

and including March 15, 2002. The jurisdiction of this Court

is invoked under 28 U.S.C. 1254(1).

STATUTORY PROVISIONS INVOLVED

1. Section 1 of the Indian Mineral Leasing Act of 1938

(IMLA), 25 U.S.C. 396a, states: a

On and after May 11, 1988, unallotted lands within any

Indian reservation or lands owned by any tribe, —

or band of Indians under Federal jurisdiction, excep

those specifically excepted from the provisions of sec-

tions 396a to 396g of this title, may, with the approval of

the Secretary of the Interior, be leased for mining pur-

poses, by authority of the tribal council or other author

ized spokesmen for such Indians, for terms not to ex

ten years and as long therea*ter as minerals are pro-

duced in paying quantities.

i isions—the Tucker Act,

2. Other pertinent statutory provisi

28 U.S.C. 1491(a), and Indian Tucker ~~ U.S.C. 1505—

are set forth in the appendix. App., infra,

STATEMENT nal

iabili the Uni

i concerns the potential liability of

damages for breach of trust when the =r

tary of the Interior has approved a mineral lease agreed

b Indian Tribe and a private lessee.

“% The United States, 7 L ~

ior (Secretary), regulates easing 0

dane, om Indian tribal lands under the Indian Mineral

Leasing Act of 1988 (IMLA), 25 U.S.C. — —

lations thereunder. The IMLA authorizes an Indian Tribe;

“with the approval of the Secretary,” to lease unallot

not to exceed 10

tribal lands for mining purposes for a term

years and as long thereafter as minerals are produced in

paying quantity. 25 U.S.C. 396a. The IMLA also delegates

Pay Te Secretary the authority to promulgate rules and

regulations governing mineral “operations,” 25 U.S.C. 396d,

and permits the Secretary to authorize other officials in the

Indian Service to approve Indian mineral leases, 25 U.S.C.

396e.

The Secretary has promulgated regulations implementing

the IMLA. The regulations in effect during the events at

issue in this case provided that “Indian tribes * * * may,

with the approval of the Secretary * * * or his authorized

representative, lease their land for mining purposes.” 25

C. F. R. 211.2 (1985). The regulations established minimum

royalty rates for minerals subject to leasing, including, for

coal, “a royalty of not less than 10 cents per ton of 2,000

pounds of [coal].” 25 C.F.R. 211.15(c) (1985).' The regula-

tions also provided that lessees could not assign or transfer a

lease without the Secretary's approval, 25 C.F.R. 211.26

(1985), and established various other requirements con-

cerning mineral leases and parties to such leases.

2. The Navajo Nation (Tribe), a federally recognized

Indian Tribe, occupies the largest Indian reservation in the

United States. The Tribe’s Reservation comprises more

than 25,000 square miles, and spans parts of northeast

Arizona, northwest New Mexico, and southeast Utah. Over

the past century, large deposits of minerals— including coal,

oil, and gas—have been discovered on the Tribe's re-

servation lands, which are held for the Tribe in trust by the

United States. Each year, the Tribe receives tens of millions

of dollars in royalty payments pursuant to Indian mineral

leases that it has entered into with private companies in

accordance with the IMLA. See C. A. App. A2255-A2262.

* In 1996, the minimum royalty rate on new leases for coal was

increased to “12 1/2 percent of the value of production produced and sold

from the lease.” 25 C. F. R. 211.48(aX2) (2001). The regulations further

state, however, that la] lower rate shall be allowed if it is determined to

be in the best interest of the Indian mineral owner.” 25 C. F. R. 211.40

a. Peabody Coal Company (Peabody) mines coal on the

Tribe’s lands pursuant to leases covered by the IMLA.

Lease 8580 was executed by the Tribe and the Sentry Roy-

alty Company (Peabody’s predecessor in interest), and —

approved by the Secretary in 1964. The lease ——

royalty rate of 37.5 cents per ton of coal, but provid —

“the royalty provisions of this lease are subject to reaso e

adjustment by the Secretary * * * or his authorized repre-

sentative” on the 20-year anniversary of the lease, and every

ten years thereafter. App., infra, at 82a. In 1966, —

(through Sentry Royalty Company) entered into two other

coal leases, Lease 9910 and Lease 5743. Those leases

contained somewhat higher royalty rates than Lease 8580,

see C. A. App. A2678, but did not contain 4 *

subjecting those rates to reasonable adjustment by the

* 19708, the Tribe sought to renegotiate its exist -

ing mineral leases with its private lessees, including Pea-

body, to increase the royalty payments generated by those

leases. As the 20-year anniversary of Lease 8580 ap-

proached, the royalty rate established by that lease of $7.5

cents per ton was “equivalent to about 2% of gross proceeds

on the lease. App., infra, 2a. That royalty rate was con-

siderably above the minimum royalty rate (10 cents per ton)

established by the IMLA regulations for coal leases subject

to approval by the Secretary, 25 C. F. R. 211.15(c) (1985), but

at the same time was below the minimum rate (12 12 percent

of gross proceeds) set by Congress in 1976 for coal mined on

2 Leases 9910 and 5743 cover coal resources located within » former

joint use area shared by the Navajo Nation and the Hopi Tribe.

Navajo and Hopi split the revenues from those leases. ee.

A1988, A2678. Leases 9910 and 5743 paid combined royalties — per-

cent for coal sold off the leases and 5.33 percent for coal sold on leases.

Id. at A2678.

federal lands not subject to the IMLA. See 30 U.S.C. 207 (a);

App., infra, 38a.

In March 1984, the Chairman of the Navajo Tribal Council

wrote to the Secretary and asked him to adjust the royalty

rate under Lease 8580, in accordance with the term of that

lease allowing a “reasonable adjustment” by the Secretary

after 20 years. C.A. App. A375-A376. The Chairman as-

serted that an increase substantially in excess of 12 1/2 per-

cent was warranted in light of the quality of the coal, but

that “simple equity” indicated that the minimum royalty rate

should not be less than the 12 1/2 percent provided for under

federal coal leases. Jd. at A375. The Chairman also sought

the Secretary’s “assistance and support in securing volun-

tary adjustment” in the royalty rates with respect to leases

that did not contain an adjustment clause like Lease 8580's

and that, in the Chairman’s view, contained rates that were

“unfair and inequitable.” Jd. at A375-A376.

In June 1984, the Area Director of the Bureau of Indian

Affairs for the Navajo Area Office, acting pursuant to the

Tribe’s request, adjusted the royalty from 37.5 cents per ton

to 20 percent of gross proceeds. He then notified Peabody of

the adjustment. App., infra, 2a-3a; C. A. App. A438.

e. Peabody apvealed the Area Director's decision pur-

suant to 25 C.F.R. 211.2 (1985), challenging, inter alia, the

Area Director’s failure to consult Peabody before reaching

his decision. See C. A. App. A2288-A2315.° The appeal was

The Department of the Interior’s regulations allowed “any in-

terested party adversely affected by a decision * * * of an Area Director

of the Bureau of Indian Affairs not approved by the Secretary before the

decision was made” to file an administrative appeal. 25 C.F.R. 2.3(a)

(1985). The appellant was required to serve the notice of appeal on any

other known interested parties, 25 C.F.R. 2.11 (1985), who had the right to

file a response, 25 C.F.R. 2.12 (1985). In this case, Peabody (and the utility

companies that used coal produced under the lease) appealed the Area

Director's royalty adjustment decision to the Commissioner of Indian

taken under consideration by Acting Assistant Secretary of

the Interior for Indian Affairs, John Fritz. Shortly there-

after, the Tribe broke off — tag Peabody on the

amendments. App., i

1 its appeal was pending. Peabody wrote to Depart-

ment of the Interior (DOI) officials, asking them to postpone

a decision on its appeal in order to permit the parties to at-

tempt to reach a negotiated settlement with respect to a full

range of issues, including the royalty rate adjustment to

Lease 8580. C.A. App. A2686. In July 1985, following a

meeting with the Tribe, Peabody wrote to Secretary of the

Interior Donald Hodel, stating that the Tribe apparently had

received word of an imminent decision in the Tribe J favor on

the appeal of the Area Director's decision, and had informed

Peabody that it was breaking off negotiations until DOI had

ruled on the appeal. Peabody asked the Secretary to assume

jurisdiction of its appeal and either to postpone a decision to

allow for a negotiated settlement or to rule in Peabody’s

favor. Id. at A2688. A copy of that letter was sent to the

Tribe. In response, the Tribe wrote to the Secretary, urging

him to reject Peabody’s request and to decide the appeal in

i id.; App., infra, 40a.

1 — — Hulett, a former aide and

friend of Secretary Hodel, and sought a meeting with the

Secretary. The record indicates that Hulett and Peabody

representatives met with Secretary Hodel in July —

App., infra, 40a. On July 17, 1985, Secretary Hodel sen ;

memorandum to Acting Assistant Secretary Fritz, a draft o

which had been provided to the Secretary by Peabody,

“suggest[ing]” that he inform the parties “that a —

thle] appeal is not imminent and urge them to continue wi

efforts to resolve this matter in a mutually agreeable fash-

Affairs. The Tribe filed an answer brief in opposition to those appeals.

C.A. App. A477-A483.

ion.” Jd. at 76a. The Secretary’s memorandum explained

that “[aJny royalty adjustment which is imposed on the

parties without their concurrence will almost certainly be

the subject of protracted and costly appeals,” and “could well

impair the future of the contractual relationship” between

the parties. Jbid. The Secretary assured the Assistant

Secretary, 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.” Id. at 77a.‘

d. The Tribe “has denied contemporaneous knowledge of

the Hodel-Hulett meeting or its results,” and at most “ad-

mit{s] that ‘someone from Washington’ had urged a return to

the bargaining table.” App., infra, 48a; see C.A. App. A2370,

A2689, A2690-A2691. In late August 1985, the Tribe and

Peabody renewed their negotiations. On September 23,

1985, they reached a tentative agreement over a package of

amendments not only to Lease 8580, but also to Leases 9910

and 5743. App., infra, 42a. The negotiated agreement re-

solved a broad range of issues concerning the existing lease

agreements between the parties.

In particular, “{iJn consideration of the benefits associated

with [these lease] amendments,” the parties agreed to jointly

move to vacate the Area Director’s July 1985 decision and,

instead, adjust the royalty rate under Lease 8580 from 37.5

cents per ton to 12 12 percent of the monthly gross proceeds.

‘ The court of appeals appears to have believed that Acting Assistant

Secretary Fritz had decided Peabody’s appeal in favor of the Tribe, but

then withdrew that decision in response to the Secretary’: July 1985

memorandum. App., infra, 3a. Although a draft decision in favor of the

Tribe had been prepared, a final decision (which would have required the

signature of the Commissioner of Indian Affairs, 25 C. F. R. 2.8, 2.19 (1985))

had not been issued. See id. at 40a; C.A. App. A2686-A2687. In any event,

the DOI regulations authorized the Secretary “to direct any (Department

employee) to reconsider a decision.” 43 C. F. R. 4.5(a)(2) (1985).

App., infra, 84a-85a. Peabody further agreed to pay royal-

ties at the new 12 12 percent rate on all coal mined under

the lease since February 1, 1984. Ibid. As part of the deal,

Peabody also agreed to increase the royalty rates with

respect to Leases 9910 and 5743, even though those leases,

unlike Lease 8580, did not contain any provision for the

adjustment of the royalty rate during the term of the lease.

A. . A2678, A2692.

“ yor = same time, Lease 8580 was amended to acknowl-

edge the validity of tribal taxation of coal production, and to

recognize the Tribe’s agreement to waive certain back tribal

taxes. C.A. App. A805-A810. The tax rate was to be capped

at 8 percent, which “would thus permit the tribe to realize *

much as 20.5 percent yield in royalties and taxes combined.

App., infra, 44a. Peabody further agreed to pay the Tribe

$1.5 million when the amendments became effective, and $7.5

million when it began mining additional coal agreed to by the

parties. C.A. App. A804-A805; see App., infra, 48a (The

agreement not only adjusted existing royalty rates on the

leases, but “also addressed ancillary matters such as

provisions for future royalty adjustments, arbitration pro-

cedures, rights of way, the establishment of a tribal scholar-

ship fund, and the payment by Peabody of back royalties,

bonuses, and water payments.”). é

e. In August 1987, the Navajo Tribal Couneil approved

the lease amendments. A final agreement was signed by the

parties in November 1987. The parties then asked Secretary

Hodel to approve their agreement. The Secretary formally

approved the lease amendments on December 14, 1987 .

Shortly thereafter, the Area Direetor's June 1984 decision

6 This Court had just upheld the right of the Navajo Nation to impose

taxes on lessees under tribal leases. Kerr-McGee Corp. v. Navajo Tribe,

471 U.S. 195 (1985).

adjusting the royalty rate to 20 percent was vacated. App.,

infra, 45a.

3. In 1993, the Tribe brought suit against the United

States in the Court of Federal Claims, alleging that the

Secretary’s approval of the lease amendments agreed to by

the Tribe and Peabody and adjusting the royalty rate on

Lease 8580 to 12 1/2 percent of gross proceeds constituted a

breach of trust and a breach of contract. The Tribe did not

seek to invalidate the lease amendments, but instead sought

$600 million in damages. On cross-motions for summary

judgment, the Court of Federal Claims rejected both the

Tribe’s breach of trust and breach of contract claims, and

granted judgment for the United States. App., infra, 31a-

79a.

With respect to the claim for breach of trust, the Court of

Federal Claims found that the United States had entered

into a general fiduciary relationship with the Navajo Nation

by virtue of the nature of its relationship with Indian Tribes,

and the fact that the United States holds tribal lands in

trust. App., infra, 48a. Although the court noted that the

relationship between Indians and the United States “is not

necessarily described by the common law of trusts,” the

court nevertheless decided to consider at the outset the

government’s actions against the duties governing a common

law trustee. Ibid. Applying common law standards, the

court concluded that the Secretary had contravened the

common law fiduciary duties of care, loyalty, and candor by

meeting with Peabody while the company’s administrative

appeal was pending and not disclosing that meeting to the

Tribe. Id. at 48a, 52a. The court further observed that,

“{w]ere this a court of equitable jurisdiction considering a

private trust, [the Tribe] might easily qualify for [damages].”

Id. at 52a (emphasis added).

The court continued, however, that “to succeed in litiga-

tion in this Court, [the Tribe] must show that the IMLA

imposes specific fiduciary duties on the government, as

opposed to general duties, and that the United States vio-

lated a specific fiduciary duty which Congress intended to

compensate with money damages.” App., infra, 53a. In

determining whether the Tribe had made such a showing,

the court reviewed the IMLA and its implementing regula-

tions in the light of this Court’s decisions in United States v.

Mitchell, 445 U.S. 585 (1980) (Mitchell D, and United States

v. Mitchell, 468 U.S. 206 (1983) (Mitchell II). See App.,

infra, 54a, 59a-61la.

The court recognized “that in enacting IMLA, the United

States assumed the responsibility to manage minerals such

as coal in a fiduciary capacity.” App., infra, 55a. But after

reviewing the IMLA and implementing regulations, the

court concluded that the United States’ “responsibility as it

relates to coal royalties does not rise above a generalized

trust obligation,” which under the Mitchell decisions, it ex-

plained, is not sufficient to create a money-mandating duty

on the government’s part. Id. at 66a; see also id. at 67a

(“(NJeither the IMLA nor its implementing regulations, 25

C.F.R. Part 211, impose specific duties regarding the

Secretary s adjustment of royalty rates for coal.”). The court

further concluded that, although the Tribe’s complaint

“{aJlleg{ed) breaches of general fiduciary duties, [it] failed to

link any breach to a specific money-mandating statutory or

regulatory provision.” Id. at 66a.

The court emphasized that “(the Tribe] cites no provision

with respect to royalty-setting that demonstrates federal

control over that process.” App., infra, 67a. Indeed, the

court noted that in this case “the Secretary’s role with re-

spect to royalty adjustment, in particular, derives solely

from the terms of the lease” between the Tribe and Peabody

—i.e., the provision of Lease 8580 allowing the Secretary to

adjust the royalty rate after 20 years, ibid.—rather than

from a statute or regulation. “Even then,” the court con-

tinued, “the Secretary's only guidance was to be ‘reasonable’

in revising rates.” Jd. at 67a-68a. The court acknowledged

that, although it is not required to do so by statute or regula-

tion, as a matter of policy, DOI would not approve coal

leases with royalties less than those the [United States]

would receive for its own coal— * * * 12.5 percent.” Id. at

68a. But the court noted that “there is no claim by the

Tribe] that the 1987 approval of Lease 8580, with royalties

of 12.5 percent, ran afoul of that policy.” Ibid.

4. a. A divided panel of the Federal Circuit reversed on

the breach of trust claim. App., infra, la-30a. The court be-

gan by discussing this Court’s Mitchell decisions, see id. at

5a-Ga, and then its own precedents involving breach of trust

claims by Indians, including its recent decision in White

Mountain Apache Tribe v. United States, 249 F.3d 1364

(2001), petition for cert. pending, No. 01-1067 (filed Jan. 22,

2002). In White Mountain Apache, the court noted, “{a]l-

though the statute was silent on how the United States was

to administer the property,” the court had applied the com-

mon law of trusts to find a duty on the part of the United

States enforceable in a suit for damages, “despite the ab-

sence of a specific statute and regulations.” App., infra, 6a.

The court of appeals then analogized the degree of federal

involvement with respect to mineral leasing on Indian lands

under the IMLA and its implementing regulations to the de-

gree of federal involvement with respect to forest manage-

ment on Indian lands, which this Court held in Mitchell II

gave rise to a fiduciary duty that, if breached, would support

a claim for money di nages. App., infra, 8a; see id. at 8a-10a.

Pointing to 25 U.S.C. 399 (which, as explained below, is not

* The Court of Federal Claims also rejected the Tribe’

8 breach of

— . — ast 0 party to the inane, and

the Secretary's authority under the lease to adjust the royalty rate

was not a binding contractual obligation to do so. App., infra, 69a-75a.

part of the IMLA), the court also concluded that “the statute

explicitly requires that the Secretary must act in the best

interests of the Indian tribes.” App., infra, Sa- Ha; id. at lla.

With that understanding, the court concluded that the Court

of Federal Claims had erred in finding that there was no

sufficient trust relationship between the United States and

the Tribe with respect to coal resources that could give rise

to a suit for damages in this case. Id. at:

After finding the existence of suen » crust relationship,

the court of appeals held that the Secretary’s actions with

respect to Peabody’s administrative appeal concerning the

adjustment of the royalty rate under Lease 8580—which the

court characterized as “suppressing and concealing” the de-

cision of the Assistant Secretary and “thereby favoring

Peabody interests to the detriment of Navajo interests,”

App., infra, 1la—violated both the common law duties on

which the Court of Federal Claims had relied, as well as

what the court of appeals described as a statutory duty “to

obtain for the Indians the maximum return for their

minerals.” Jd. at 12a. The court did not, however, identify

what specific provision of the IMLA or its implementing

regulations had imposed such a duty, or had been violated by

the Secretary. Then, citing Mitchell II, the court concluded

that the Tribe was entitled to money damages for breach of

(“Breach by the federal government of its fiduciary duty is

subject to remedy by the assessment of ‘damages resulting

from a breach of the trust. (quoting Mitchell II. 468 U.S.

at 226). The court remanded for a “determination of dam-

ages.” Ibid.

b. Judge Schall concurred in part and dissented in part.

App., infra., 1a-30a. Drawing on this Court’s Mitchell de-

cisions and circuit precedent, he reasoned that it is not

enough to show a violation of a general fiduciary relationship

stemming from federal involvement in a particular area.

Rather, “to state a claim upon which relief can be y

Judge Schall reasoned, a Tribe “must show the breach of

specific fiduciary obligation that falls within the contours of

relationship at issue.” Id. at 29a-30a; see id. at 16a (“[UJnder

Mitchell II, the focus is on the statute and regulations that

“hia

Schall agreed that the IMLA and implementi

regulations create a “general fiduciary relationship” betwee

the United States and the Tribe with respect to mineral

leases on Indian lands, but at “this point Ihe] partled] com-

pany with the majority.” App., infra, 25a. In his view, “the

only government action in this case that implicated a specific

fiduciary responsibility to the ¶ Tribe] was DOI’s approval of

the Agreement” in 1987. Id. at 26a. He explained that,

although other government actions “may demonstrate

disloyalty to the [Tribe] in a vacuum,” the Tribe was re-

REASONS FOR GRANTING THE PETITION

The divided court of appeals’ decision in this case

that the United States fr Hable for up —

damages for breach of trust by the Secretary’s actions in

1985 in requesting the Acting Assistant Secretary to defer a

decision on Peabody’s administrative appeal concerning a

royalty rate adjustment under Lease 8580, without finding

any statutory or regulatory duty in 1987 by approving the

— negetiated lease emendmente, which superseded

the royalty-adjustment provision in Lease 8580.

The decision of the court of appeals directly contravenes

this Court’s precedents establishing the predicate necessary

to show that the United States may be liable in damages

for breach of a trust responsibility owed to an Indian Tribe.

United States v. Mitchell, 445 U.S. 585 (1980) (Mitchell I),

United States v. Mitchell, 463 U.S. 206 (1983) (Mitchell II).

of appeals’ recent decision in White Mountain Apache Tribe

v. United States, 249 F.3d 1364 (2001), in which the United

States also has filed a petition for a writ of certiorari (No. 01-

1067), demonstrate the need for review by this Court with

respect to the proper application of its Mitchell decisions,

and with respect to the important sovereign immunity

principles on which the Mitchell decisions rest.

A. This Case Presents A Threshold Immunity Question Of

Fundamental Importance

1 — ee

for damages except when it has undertaken, by statute or

implementing regulation, to subject itself and the public’s

Treasury to claims for violations of specific duties that such

provisions of law have imposed. The central question in this

case is whether the United States has waived its sovereign

immunity with respect to the breach of fiduciary duty claim

that the court of appeals sustained below.

1. “(The Court of Claims’ jurisdiction to grant relief de-

pends wholly upon the extent to which the United States has

waived its sovereign immunity to suit and * * * sucha

waiver cannot be implied but must be unequivocally ex-

pressed.” United States v. King, 395 U.S. 1, 4 (1969) (citing

United States v. Sherwood, 312 U.S. 584, 586 (1941)). Con-

gress has consented to be sued on certain claims for money

damages under the Tucker Act and the Indian Tucker Act.

28 U.S.C. 1491(a), 1505. Those statutes, however, are merely

jurisdictional. See Mitchell II, 463 U.S. at 212-217. They do

“not create any substantive right enforceable against the

United States for money damages.” Id. at 216; see United

States v. Testan, 424 U.S. 392, 398 (1976). As a result, in

order to state a claim for money damages against the United

States that is cognizable under the Tucker Acts, a plaintiff

must point to a “substantive right” stemming from some

other provision of law—such as an Act of Congress or

implementing regulation—that “can fairly be interpreted as

mandating compensation by the Federal Government for the

damage sustained.” Mitchell II, 463 U.S. at 217. The requi-

site waiver of sovereign immunity exists only Hilf a claim

falls within this category.” Id. at 218; see Office of Pers.

Mgmt. v. Richmond, 496 U.S. 414, 431 (1990).

2. This Court’s Mitchell decisions rest on that founda-

tion. In the underlying Mitchell litigation, the Quinault

Tribe and numerous individual Indians sought damages from

the United States for alleged breach of fiduciary duties with

respect to timberlands on the Quinault Indian Reservation

that had been allotted in trust to individual Indians. In

Mitchell I, the Court held that the General Allotment Act—

which provides for the United States to hold allotted lands

“in trust for the sole use and benefit of [Indian allotees],” 445

U.S. at 541 (quoting 25 U.S.C. 348)—did not support a

money-damages action against the United States for alleged

mismanagement of timber resources on allotted lands. As

the Court explained, the General Allotment Act created

“only a limited trust relationship between the United States

and the Tribe]. Id. at 542. “The Act does not unambigu-

ously provide that the United States has undertaken full

fiduciary responsibilities as to the management of allotted

lands.” Ibid.

In Mitchell II, the Court considered a different set of

statutes and implementing regulations, under which the

government itself managed virtually every aspect of Indian

timber operations, and held that those provisions could

“fairly be interpreted as mandating compensation by the

Federal Government” for mismanagement of such resources.

463 U.S. at 228. In so holding, the Court emphasized that

those provisions established “comprehensive responsibilities

of the Federal Government in managing the harvesting of

Indian timber.” Id. at 222. Distinguishing the situation in

Mitchell I, the Court stated: “In contrast to the bare trust

created by the General Allotment Act, the statutes and

regulations now before us clearly give the Federal Govern-

ment full responsibility to manage Indian resources and land

for the benefit of the Indians. They thereby establish 4

fiduciary relationship and define the contours of the United

States’ fiduciary responsibilities.” Id. at 224. aes

Together, the Mitchell decisions establish important

limitations on the liability of the United States in damages

for breach of a fiduciary duty owed to an Indian Tribe or

Indians.

B. The Court Of Appeals’ Decision Conflicts With This

Court's Precedents

In ing that the United States is liable in damages in

ean en tb, toads eh ih, —

7 Justice Powell, joined by then-Justice Rehnquist and Justice

O'Connor, dissented in Mitchell II. 463 U.S. at 228-238. In their view,

even the type of comprehensive statutory and regulatory scheme involved

in that case—requiring the government to manage trust property for

benefit of the Indians—failed to confer “the necessary legislative suthori-

zation of » damages remedy” against the United States, because “InJone of

[those provisions) contains any ‘provision . . . that expressly makes

United States liable’ for its alleged mismanagement of Indian forest re-

sources and their proceeds or grants a right of action ‘with specificity.

Id. at 230 (quoting Testan, 424 U.S. at 399, 400).

vened the central teachings of this Court’s Mitchell de-

cisions.

1. In Mitchell I, the Court held that the fact that a

statute creates a trust relationship between the United

States and an Indian Tribe with respect to property is not in

itself sufficient to give rise to a money-mandating obligation

on the part of the United States. 445 U.S. at 542. The Court

reached that conclusion even though the statute in Mitchell

I, the General Allotment Act, explicitly requires the United

States to hold land “in trust for the sole use and benefit of the

Indian to whom such allotment shall have been made.” Id. at

541 (emphasis added). The Court explained that “(t]he Act

does not unambiguously provide that the United States has

undertaken full fiduciary responsibilities as to the

management of allotted lands.” Id. at 542 (emphasis added);

see id. at 543.

In the IMLA, the United States has assumed certain

fiduciary responsibilities with respect to the leasing of min-

erals on Indian lands, but that Act “does not unambiguously

provide that the United States has undertaken full fiduciary

responsibilities as to the management of [leased] lands.”

Mitchell I, 445 U.S. at 542 (emphasis added). To the

contrary, the key provision of that Act transferred leasing

authority from the Secretary to the Tribes. It provides that

tribal lands “may, with the approval of the Secretary * * *,

be leased for mining purposes, by authority of the tribal

council or other authorized spokesmen.” 25 U.S.C. 396a

(emphasis added). Moreover, as the Court of Federal Claims

explained, that provision squares with an important purpose

of the IMLA—“to foster Indian self-determination,” an

“ideal” that is “directly at odds” with the notion that the

Secretary has full “control over leasing.” App., infra, 58a-

59a; see Crow Tribe of Indians v. Montana, 650 F.2d 1104,

1112 (1981), amended, 665 F.2d 1390 (9th Cir.), cert. denied,

459 U.S. 916 (1982) (The IMLA gave “tribal governments

control over decisions to lease their lands and over lease

conditions, subject to approval of the Secretary of Interior,

where before the responsibility for such decisions was

lodged in large part only with the Secretary”).

To be sure, another purpose of the IMLA is to see that

Indian Tribes receive “a profitable source of revenue” from

the leasing of mineral resources on their lands. Cotton

Petroleum Corp. v. New Mexico, 490 U.S. 163, 179 (1989).

That conclusion is supported by the legislative history of the

IMLA, which states in part: “It is not believed that the

present law is adequate to give the Indians the greatest

return from their property.” S. Rep. No. 985, 75th Cong., Ist

Sess. 2 (1938). But as this Court admonished in Cotton

Petroleum, 490 U.S. at 179, that statement cannot be given

“talismanic effect.” Even when “[(rjead in the broadest

terms possible,” the reference in the committee report to

“greatest return from their property” “suggests that

Congress sought to remove ‘disadvantages in [leasing min-

eral rights] on Indian lands that are not present in applying

for a claim on the public domain. Ibid.

The reference in the legislative history thus does not

entitle a Tribe to renegotiate a lease—or to sue the United

States—any time that it believes in retrospect that it did not

receive the greatest possible return for its resources. Nor

does it obligate the Secretary to second guess or disapprove

leases that already have been negotiated and agreed to by a

ad See also Assiniboine & Sioux Tribes of the Fort Peck Indian Reser-

vation v. Board of Oil & Gas Conservation, 792 F.2d 782, 796 (9th Cir.

1986) (noting that one of the purposes of the IMLA was “to increase

Indian authority in granting leases”). That purpose is promoted by the

IMLA. As this Court recognized in Cotton Petroleum Corp. v. New

Mexico, 490 U.S. 177, 179 (1989), the legislative history of the IMLA

makes clear that the statute was intended to make it easier for Tribes to

engage in—and profit from—mineral leasing by eliminating obstacles

placed on such leasing that did not apply to non-Indians.

Tribe and a lessee on the ground that, in the Secretary’s

view, the royalty rate and other conditions agreed to by the

parties would not maximize the Tribe’s profits, or that an

alternative set of lease terms would be more in the best

interests of the Tribe. The IMLA authorizes the Tribes to

negotiate mineral leases with others. The Act’s requirement

of approval by the Secretary furnishes a general backstop

protection, not a duty on the part of the Secretary inde-

pendently to determine and impose on the parties the terms

that she believes will maximize the return for one side of the

negotiated transaction.

Moreover, as discussed above, in Mitchell I, the statute

explicitly obligated the United States to act for the “sole

* * * benefit” of the Indians, but the Court nonetheless

concluded that it did not give rise to a money-mandating

obligation on the part of the United States. 445 U.S. at 541

(emphasis added). In the same vein, to the extent that the

IMLA generally obligates the Secretary to act for the bene-

fit of Indian Tribes, or in the interests of Tribes, the exis-

tence of such a general fiduciary duty does not in itself

authorize a damages action against the United States with

respect to every claim that the Secretary erred in some

particular way in implementing the IMLA”

® The court of appeals relied on “the interests of the Indians” language

in 25 USC. 899 as evidence thatthe IMLA creates —

ity to manage the mineral resources for the benefit of the Indians. App.

infra, lla. But Section 399 is not a part of the IMLA. Section 399 was

enacted almost 20 years before the IMLA, and authorized the Secretary to

lease certain unallotted Indian lands for mining purposes under terms set

by the Secretary, without approval by the Tribes. The legislative history

to the IMLA specifically notes that the Act was intended to correct

Section 399’ deficiencies, including with respect to the lack of control by

Indian Tribes over the leasing of their mineral resources. S. Rep. No. 985

supra, at 2; H.R. Rep. No. 1872, supra, at 2. In any event, even if Section

399 were a part of the IMLA, its reference to the interests of the Indians

would not compel the conclusion here, any more than in Mitchell J, that

2. Trying to take this case out of the realm of Mitchell I,

the court of appeals reasoned that here, as in Mitchell II, the

statutory and regulatory scheme gives the Secretary con-

trol” over the management of the Indian resources at issue,

and that the existence of such control gave rise to a money-

mandating duty on the part of the United States in man-

aging those resources, including with respect to "all eppur-

tenant trustee duties, obligations, and liabilities.” App.,

infra, 5a (emphasis added), see id. at 8a (“The (IMLA] and

its regulations are similar to those governing timber —

sources that were subject of Mitchell II, insofar — fede

authority is concerned.”). That — of Mitchell II

i on several different levels.

N 2 the degree of control exercised by the Secretary

with respect to timber management on Indian lands is much

greater than the degree of any control exercised by the

Secretary with respect to Indian mineral leases. In Mitchell

II, this Court went to great lengths to describe the “per-

vasive” control that the United States has expressly as-

sumed with respect to Indian timber sales. 463 U.S. at 219;

see id. at 220 (“regulations address(] virtually every aspect

of forest management”); id. at 222 (statutes establish

“‘eomprehensive’ responsibilities of the Federal Govern-

ment in managing the harvesting of Indian timber”); id. o

225 (government has “assume(d) * * * elaborate contro

over forests and property belonging to Indians.”); id. at 225

n.29 (discussing “pervasive federal control” in this area). As

the Court of Federal Claims explained, “the level of manage-

ment and control that the government has assumed over coal

leases under IMLA” does not come close to the level of

federal control on which this Court grounded Mitchell II.

See App., infra, 54a; see id. at 55a-59a.

the United States has breached a money-mandating duty owed to the

plaintiff Tribe.

b. Second, in Mitchell II this Court did not focus on the

existence of federal control with respect to Indian resources

vel non. Instead, in addition to pointing to the existence of a

“pervasive” regulatory scheme, the Court emphasized that

the government had specifically assumed “fiduciary manage-

ment duties” with respect to Indian resources. 463 U.S. at

218 (emphasis added); see id. at 222 (“emphasizing the

Secretary of the Interior’s management duties”). For

example, the statute in Mitchell II expressly provided that

Aslales of timber shall be based upon a consideration of the

needs and best interests of the Indian owner and his heirs.”

Id. at 209 (citations omitted); see id. at 222. In addition,

Congress mandated that, Iiln performing this duty, the

Secretary was specifically required to take into account”

several different factors, including “the highest and best use

of the land” and the “‘present and future financial needs of

the owner and his heirs.” Ibid.; see also id. at 220-221

(Congress has imposed “strict{] duties upon the Government

with respect to Indian timber management,” including by

“expressly direct[ing] that the Interior Department manage

Indian forest resources ‘on the principle of sustained-yield

management.“) (emphasis added).

Congress has not imposed any comparable “fiduciary

management duties” on the Secretary with respect to Indian

mineral leases. When the Secretary approves a lease (or an

amendment to an existing lease), the IMLA neither man-

dates that she establish a particular royalty rate or other

terms, nor imposes specific standards that the Secretary

must assure are satisfied. The regulations that applied when

Peabody filed its appeal in 1985 and the Secretary approved

the lease amendments in 1987, for example, provided only

that the Secretary could not approve a lease with a minimum

royalty rate of less than “10 cents per ton.” 25 C.F.R.

211.15(c) (1985 and 1987). As noted above, the current

regulations have increased the minimum royalty rate to 12

roceeds—the rate that applies to coal

nae 8 state that Ja] lower royalty

rate shall be allowed if it is determined to be in the best

interest of the Indian mineral owner.“ 25 C. F. R. 211.43(b)

(2001). The regulations do not separately refer to the Secre-

tary’s approval of a rate that is at least equal to the mini

mum 12 12 percent rate, much less require the Secretary

insist that the parties agree to a higher rate under particular

circumstances. That structure of even the current

regulations underscores that the United States has —

assumed any specific fiduciary management duties wit

respect to the approval of a lease that contains a royalty =

at least equal to the minimum rate. See 56 Fed. Reg. owe .

58,736 (1991) (minimum royalty oe regulation provides

“reasonable ro rates for lessors. ).

If — Secretary, acting pursuant to statute,

determines that it is appropriate to adopt additional, or more

innovative, management duties with respect to coal leases,

the statutes and regulations discussed in Mitchell IT with

respect to timber management underscore that they are

80.

8 II establishes that, even when the

United States has entered into a money-mandating trust —

lationship with an Indian Tribe, to recover damages for

10 In this case, there is no question that the leases at issue complied

with the IMLA’s minimum royalty rate. .

rate for coal leases under the IMLA was 10 cents per ton. —

211.15(c) (1987). The original royalty rate on Lease 8580 was 37.5 cen

per ton—considerably higher than that standard. — —

ment in 1987, the three leases—each of which has a total royalty rate

lease).

breach of trust an Indian plaintiff must establish a violation

of one of the specific statutes or regulations giving rise to

that relationship. See 463 U.S. at 224 (The statutes and

regulations governing Indian timber management “establish

a fiduciary relationship and define the contours of the United

States’ fiduciary responsibilities.”) (emphasis added); id. at

219 (To determine whether an Indian Tribe has a damages

claim, the Court examines whether the statutes and regu-

lations at issue “can be fairly interpreted as mandating com-

pensation for damages sustained as a result of a breach of

the duties they impose.”) (emphasis added). That causal link

was present in Mitchell II. where the Indian plaintiffs

claimed that the government had breached specific fiduciary

duties that it owed to them under the statutes and regula-

tions discussed above in managing the timber resources at

issue. See id. at 210.

The requisite causal link, however, is missing here. Even

assuming (contrary to the considerations discussed above)

that the IMLA and its implementing regulations establish

the kind of trust relationship that the Court found in

Mitchell II, the court of appeals did not find, and indeed the

Tribe has not even alleged, the breach of any specific duties

imposed by the statutes or regulations giving rise to that re-

lationship. See App., infra, 66a (In “[aJlleging breaches of

general fiduciary duties, the Navajo have failed to link any

breach to a specific money-mandating statutory or regula-

tory provision.”). The Tribe’s money damages claim for

breach of trust fails for that reason alone.

In finding that the United States had breached money-

mandating duties owed to the Tribe, the court of appeals did

not object to the Secretary’s approval of the lease amend-

ments, or to the fairness of the lease package that the Tribe

negotiated and asked the Secretary to approve in 1987.

Instead, the court pointed to the “[t]he action of the Secre-

tary in suppressing and concealing the decision of the

Assistant Secretary” on Peabody’s administrative appeal

concerning a provision in Lease 8580 that was superseded by

those amendments. App., infra, lla; see id. at 1la-12a.

Nothing in the IMLA itself or in the regulations imple-

menting the IMLA imposes any specific duties on the Secre-

tary with respect to his supervision of his subordinates on

such appeals. Rather, DOI regulations of general appli-

cability establish a process for appeals from administrative

actions by various DO] officials, see 25 C.F.R. Pt. 2 (1985 and

2001), and the procedural standards governing that process

are defined by the Administrative Procedure Act (APA) and

the DOI regulations, not by the IMLA. The court of appeals

did not find that the Secretary’s actions violated any

provision of the DOI’s procedural rules or the APA and, in

fact, the DOI rules in place at the time the Secretary acted

explicitly reserved to the Secretary all powers conferred

upon him by law and authorized him “to direct any [Depart-

ment employee] to reconsider a decision.” 43 C. F. R. 4.5(a)(2)

(1985); see note 4, supra.”

Even if there were a procedural rule or principle that the

Secretary violated with respect to Peabody’s administrative

appeal, that would not justify an action for money damages

under the Tucker Act. Procedural duties are in the nature of

due process protections, and even constitutional procedural

due process violations do not give rise to a damages claim

11 The court of appeals was not free to override or supplement the

procedural rules adopted by the Secretary with its own view of the proper

relationship between the Secretary and a subordinate official concerning

an internal agency appeal. Vermont Yankee Nuclear Power Corp. v.

Natural Res. Def. Council, Inc., 485 U.S. 519 (1978). Indeed, the court of

appeals seriously misapprehended the constitutional structure of our

government in characterizing the decision by a Head of an Executive

Department not to allow a draft of a decision of a subordinate officer to go

into effect as the improper “suppressing and concealing” (App., infra, 11a)

of the subordinate’s action.

under the Tucker Act. See, e.g, Testan, 424 U.S. at 403;

United States v. Hopkins, 427 U.S. 123, 130 (1976). Instead,

the proper recourse would be an APA action to set aside the

_ Secretary's 1987 decision approving the lease amendments,

or to timely seek to challenge or reinstate the administrative

proceedings concerning the Area Director’s decision to in-

crease the royalty rate under the adjustment clause in Lease

8580, not a claim for money damages against the United

States for breach of any trust relationship established pur-

suant to the IMLA.”

3. The court of appeals also erred to the extent that it

treated the United States as if it were a private trustee that.

may be liable in money damages to an Indian Tribe for any

breach of the common law duties cited by the court. See

App., infra, 1la-12a, 12a-13a. As the Court of Federal

Claims explained, the violations of the common law duties

To the extent that the court of appeals believed that the Secretary’

actions with respect to Peabody's administrative appeal rendered his

subsequent approval of the lease amendments a breach of the United

States’ fiduciary obligations, the court was mistaken. As the Court of

Federal Claims noted (App., infra, 67a), the Secretary's authority to ad-

just the royalty rate at issue in this case was “derive/d) solely from the

terms of the lease” that the Tribe had executed in 1964, not from the

IMLA. Moreover, even assuming (contrary to the considerations dis-

cussed above) that the IMLA imposed a fiduciary obligation on the

Secretary not to approve lease amendments unless they were in the best

interest of the Indian mineral owner, the Tribe at a minimum would be

required to establish that the Secretary could not reasonably have

believed that the overall outcome of the approval decision—the lease

amendments themselves—was in the Indian mineral owner's best interest.

The Tribe has made no such claim. Cf. Duquesne Light Co. v. Barasch,

488 U.S. 299, 312-813 (1989); FPC v. Hope Natural Gas Co., 320 U.S. 591

602 (1944) (“If the total efffect of the rate order cannot be said to be unjust

— — is at an end. The fact that the

method employed result contain

N may infirmities is not then

that it found “do not themselves confer jurisdiction on this

Court, nor entitle [the Tribe] to money damages.” Id. at 52a.

The United States occupies a unique relationship with the

Indian Tribes that has long been characterized as one of

“guardianship” or “trust.” See United States v. Kagama,

118 U.S. 375, 382-884 (1886); Cherokee Nation v. Georgua, 30

U.S. (5 Pet.) 1, 17 (1831). The United States fully accepts the

implications of that relationship and the undertakings that

go with it. Not all those undertakings, however, give rise to

legally enforceable duties on the part of the United States,

much less duties that are enforceable in a suit for money

damages. In determining when an alleged breach of those

duties may give rise to a suit for money damages, this Court

has invoked the same principles that govern the deter-

mination whether the United States is immune from money-

damages actions in other contexts. See Mitchell II. 463 U.S.

at 218-219; Mitchell I, 445 U.S. at 538; see also United States

v. Mottaz, 476 U.S. 834, 851 (1986); Klamath & Moadoc

Tribes of Indians v. United States, 296 U.S. 244, 250, 255

(1935); Blackfeather v. United States, 190 US. 368, 376

(1903). To the extent that the court of appeals’ decision puts

the United States in the shoes of a private, common law

trustee for purposes of determining whether the govern-

ment has assumed money-mandating obligations to an Indian

Tribe, the decision departs significantly from this Court’s

precedents.”

13 To the extent that the Federal Circuit based its decision on finding a

regulatory duties assumed by the United States, its decision also parts

“where no specific statutory requirement or regulation is alleged to have

been breached by the Secretary, the money dn. against the government

‘

C. The Court Of Appeals’ Decision Could Have Serious

Adverse Consequences For The Government

The practical implications of the court of appeals’ decision

are significant. The Tribe’s damages claim in this case alone

totals $600 million. The decision below will encourage the

filing of damages claims against the United States for breach

of trust with respect to the Secretary’s approval of Indian

mineral leases with private entities. Indeed, any Indian

Tribe that believes, with the benefit of hindsight or due to

market corrections, that it could have negotiated a better

mineral lease deal may seek to obtain damages from the

Secretary for breach of trust in approving such an agree-

ment under the IMLA or, as in this case, even under a

separate lease term. At a minimum, such a development will

subject the United States to costly litigation over such

matters as the market value of lease terms negotiated

several—or, as here, many—years ago. The Court of

Federal Claims already has applied the decision in this case

in holding that the United States may be liable in money

damages for alleged mismanagement of resources. See

Shoshone Indian Tribe of the Wind River Reservation v.

United States, 51 Fed. Cl. 60, 68 (2001).

In addition, the important and recurring nature of the

basic question presented by this case is underscored by the

Federal Circuit’s recent decision in White Mountain Apache

Tribe v. United States, 249 F.3d 1364 (2001), petition for cert.

pending, No. 01-1067. There, the Federal Circuit held that

the United States is accountable in money damages for an

alleged breach of trust in connection with the property

placed in trust by the Act of March 18, 1960 (1960 Act), Pub.

L. No. 86-392, 74 Stat. 8, even though the Tribe did not

must fail.” Jd. at 1563; see also Pawnee v. United States, 880 F. 2d 187,

191-192 (Fed. Cir. 1987), cert. deneid, 486 U.S. 1082 (1988).

allege that the United States had breached a specific statu-

tory or regulatory duty to manage the property for the bene-

fit of the Tribe and, indeed, the 1960 Act explicitly reserved

to the government the right to use the property for its own

purposes “for as long as” (74 Stat. 8) it deems necessary. In

this case, the Federal Circuit specifically relied upon the

fundamentally flawed reasoning of White Mountain Apache

in finding the breach of a money-mandating obligation, with-

out identifying the violation of any specific statutory or

regulatory duty. See App., infra, 6a (“Although the statute

[in White Mountain Apache] 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.”).

Under the Tucker Acts, the Federal Circuit is the only

circuit that has jurisdiction to consider claims against the

United States for money damages for violation of a statute

or implementing regulation. It is therefore critica] for this

Court to review the Federal Circuit’s recent, and marked,

departure from the teaching of the Mitchell decisions with

respect to the necessary predicate that a Tribe must show to

bring a damages claim against the United States for breach

of fiduciary duty. In addition, because this case and White

Mountain Apache arise under different statutory schemes,

they each present that question in a different light. As a

result, granting plenary review in both cases would materi-

ally assist the Court in addressing the proper application of

the Mitchell decisions in a comprehensive manner.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.

EDWIN S. KNEEDLER

Deputy Solicitor General

GREGORY G. GARRE

Assistant to the Solicitor

General

TODD S. AAGAARD

Attorney

MARCH 2002

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

No. 00-5086

NAVAJO NATION, PLAINTIFF-APPELLANT

UNITED STATES, DEFENDANT-APPELLEE

Aug. 10, 2001

Before: NEWMAN, SCHALL, and LINN, Circuit

Judges. |

Opinion for the court filed by Circuit Judge PAULINE

NEWMAN. Concurring in part and dissenting in part

opinion filed by Circuit Judge SCHALL.

DECISION

PAULINE NEWMAN, Circuit Judge.

The Navajo Nation appeals the decision of the United

States Court of Federal Claims, dismissing its com-

plaint against the United States for breach of trust and

breach of contract.' 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 relation-

1 Navajo Nation v. United States, 46 Fed. Cl. 217 (2000).

(la)

ship 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 In-

dian Affairs (BIA), supervises and regulates the devel-

opment and sale of mineral resources on Indian reser-

vation 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 agree-

ment with the Sentry Royalty Company (predecessor

in interest to the Peabody Coal Company) for the

mining of coal deposits on Navajo lands. The agree-

ment 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 in-

creases 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 Commis-

sioner of Indian Affairs and the Assistant Secretary of

Indian Affairs, an appellate path provided by the

regulations. See 25 C. F. R. 58 211.2, 211.3. The Deputy

Assistant Secretary for Indian Affairs considered the

matter and reached a decision affirming the 20% rate.

However, this decision was withdrawn at the instruc-

tion 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 re-

ports 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

—— had been = 2 their favor. Facing severe

omic pressures, the Navajo eventually agreed

royalty rate of 12.5%. 1 : a

It can not be reasonably disputed that the Secre-

tary’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, 93 S. Ct. 2202, 37 L.

Ed. 2d 22 (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.”); Semi-

nole Nation v. United States, 316 U.S. 286, 296, 62 S.

Ct. 1049, 86 L. Ed. 1480 (1942) (“this Court has recog-

nized 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, 58 S. Ct. 794, 82

L. Ed. 1213 (1938) (“As transactions between a guard-

ian 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 trib. 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,

— is that of a fiduciary; when the Indians control

eilr Own resources, the duty of the Uni

lessened appropriately. 1 *

These relationships and duties were dis j

United States v. Mitchell, 445 U.S. 535, 100 8. 2

63 L. Ed. 2d 607 (1980) (Mitchell I) and 468 U.S. 206

108 8. Ct. 2961, 77 L. Ed. 2d 580 (1983) (Mitchell ID,

The Court explained that when the United States is as-

signed 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 hold-

ing title to reservation land under the General Allot-

ment 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 govern-

ment'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 govern-

ment's control and management responsibility of these

resources as a fiduciary:

In contrast to the bare trust created b

Allotment Act, the statutes and — a

fore us clearly give the Federal Government full re-

sponsibility 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, 103 S. Ct. 2961.

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 stated:

Although neither the 1960 Act nor any pertinent

regulation sets forth clear guidelines as to how the

government must manage the trust property, we

think it is reasonable to infer that the —

use of any part of the property requires the gov-

ernment to act in accordance with the duties of a

common law trustee.

White Mountain, 249 F.3d at 1377.

In Confederated Tribes of the Warm Springs Reser-

vation v. United States, 248 F.3d 1365, 1371 (Fed. Cir.

2001), the fiduciary breach arose from the government’s

mismanagement of Indian timber resources. Since the

United States exercised “comprehensive control over

the management and harvesting of timber on Indian

reservations,” the statutes and regulations established

a fiduciary duty in the government to manage the

resources in the interest of the Tribes. The court

looked to the common law of trusts to determine the

measure of damages for the government’

duty, stating: g ent's breach of this

Under trust law generally, a beneficiary is enti

to recover damages for the —— des

of the trust’s investment assets. In determining the

amount of damages for a breach of the trustee’s

fiduciary duty with regard to investments of the

ong Tae , — attempt to place the benefici-

e ition i ich i

A. 1 in which it would have been

248 F.3d at 1371. The court recognized its obligation

upon breach of trust, to resolve any uncertainty in the

measurement of damages against the trustee. See id.

(At is a principle of long standing in trust .aw that once

the beneficiary has shown a breach of the trustee’s duty

and a resulting loss, the risk of uncertainty as to the

amount of the loss falls on the trustee.”)

In Pawnee v. United States, 830 F.2d 187, 190 (Fed.

Cir. 1987) this court held that statutes giving the

Department of the Interior power and authority with

respect to oil and gas leases on Native American lands

imposed fiduciary obligations upon the government and

provided a remedy of money damages in the Claims

Court for their breach.

The Indian Mineral Leasing Act and its regulations

are similar to those governing timber resources that

were the subject of Mitchell II, insofar as federal

authority is retained. The Mineral Leasing Act starts

with the provision that no mining lease may be entered

unless approved by the Secretary of the Interior:

25 U.S.C. § 396a. On and after May 11, 1938,

unallotted lands within any Indian reservation or

lands owned by any tribe, group, or band of Indians

under Federal jurisdiction, except those specifically

excepted from the provisions of sections 396a to

396g of this title, may, with the approval of the

Secretary of the Interior, be leased for mining pur-

poses, by authority of the tribal council or other

authorized spokesmen for such Indians, for terms

not to exceed ten years and as long thereafter as

minerals are produced in paying quantities.

Emphasis added.) The statute and its implementing

- — give the Seeretary the final authority on all

matters of any significance in the leasing of Indian

lands for mineral development. The statute assigns to

the Secretary the broad and unqualified obligation to

“protect[ ] the interests of the Indians,” and includes

the power to “perform any and all acts and to make

such rules and regulations not inconsistent with this

section as may be necessary and proper for the pro-

tection of the interests of the Indians and for the

purpose of carrying the provisions of this section into

full force and effect.” 25 U.S.C. § 399. Thus the statute

explicitly requires that the Secretary must act in the

best interests of the Indian tribes.

Throughout the statute and its implementing regula-

tions is seen the pervasive control by the United States

of the manner in which mineral leases are sought,

negotiated, conditioned, and paid, and the pervasive

obligation to protect the interests of the Indian tribes.

For example, the regulations require the written

permission of the Commissioner of Indian Affairs

before a Tribe can enter into negotiations for a lease

rather than offer the lease in an advertised sale.

25 C.F.R. § 211.2. The regulations state the amount of

bond to be secured, 25 C.F.R. § 211.6, and authorize a

reduced bond if “the circumstances warrant and the

interests of the Indian landowners are fully protected,”

25 C.F.R. § 211.6(a). The regulations set forth the

corporate information to be furnished to the appropri-

ate officer of the Bureau of Indian Affairs, and state the

officer’s power to require other information. 25 C.F.R.

§ 211.7. The regulations control the size of coal leases by

limiting them, with certain exceptions, to 2,560 acres,

25 C.F.R. § 211.9; and permit the Secretary to approve

leases in excess of the acreage limitations if such

approval “is in the interest of the lessor.” § 211.9(b)(1).

The regulations state that the shape of the leased area

must be reasonably compact and conform to the system

of public land surveys. 25 C.F.R. § 211.8. The regula-

tions prescribe the term of mineral leases and the

conditions of their extension. 25 C. F. R. § 211.10.

The regulations provide that royalties earned under

such leases must be deposited in the Treasury “to the

credit of the Indians belonging and having tribal rights

10a

on the reservation where the leased land is located.”

25 U.S.C. § 399. Royalties are paid to the superinten-

dent “for the benefit of the lessors.” 25 C. F. R.

§ 211.12(a). The regulations set the minimum royalties

for various minerals. 25 C. F. R. § 211.15. The regula-

tions require that no mining operations shall begin until

the lease is approved by the Secretary of the Interior,

and must be conducted in accordance with the op-

erating regulations promulgated by the Secretary of

the Interior.” 25 C.F.R. § 211.20. The Secretary may

cancel a lease for any violation of the lease terms or

regulations, and may do so without the consent of the

Indian lessors. 25 C.F.R. § 211.27.

It is quite clear that the statute and regulations

assign to the Secretary of the Interior and other gov-

ernment officials the authorization, supervision, and

control of Indian mineral leasing activities. The statute

and regulations leave no significant authority in the

hands of the Indian tribes whose reservation land

contains the minerals, and all procedures, responsibili-

ties, and even details are prescribed by Act of Congress

and in the regulations promulgated by the Secretary of

the Interior. The statutory purpose is to protect the

natural resources of the Indians and manage them in a

manner that maximizes their benefit to the Indians.

The Court has consistently resolved ambiguity in favor

of the Indian tribes. For example, in Montana v.

Blackfeet Tribe, 471 U.S. 759, 767 n.5, 105 S. Ct. 2399, 85

L. Ed. 2d 753 (1985) the Court noted that state taxation

of royalty interests would frustrate the IMLA’s

purpose of “ensur{ing] that Indians receive ‘the great-

est return from their property, quoting the legislative

history of the IMLA.

lla

The Indian Mineral Leasing Act’s histo

upon the fiduciary relationship. When the ——

— — Seeretary of the Interior urged that the

— n enacted because it is not believed that

e present law is adequate to give the Indians the

8 return from their property.“ Senate Report

— at 2 (1937); House Report No. 1872 at 2 (1938)

7 responded to the need to ensure that the

— ans’ welfare is protected and their natural re-

— managed to the tribes’ maximum benefit by

phasizing the Secretary’s fiduciary obligations. For

example, the legislative reports explained that now the

Secretary would approve mineral leases only when the

are “in the interest of the Indians.” Jd. Statute —

— and wh wey re place on the federal official a clear

= — ed fidueiary responsibility to manage the

resources for the benefit of the Indians. The

Court of Federal Claims erred in holding that there was

828 for a trust relationship between the

tes and the Navajo Nation as to the coal

_ Breach of the Fiduciary Relationship

The action of the Secretary in su

— — decisio ion of the Deputy — —

or Indian Affairs, thereby favoring Peabody interests

to the detriment of Navajo interests, was characterized

a Court of Federal Claims as “violat[ing] the most

— e common law fiduciary duties owned to the Navajo

ation.” 46 Fed. Cl. at 219. As that court explained:

— — Notwithstanding the for-

outeome of this decision, we find that the

Secretary has indeed breached these basic fiduciary

—— There is no plausible defense for a fiduciary

meet secretly with parties having interests

12a

adverse to those of the trust beneficiary, adopt the

third parties’ desired course of action in lieu of

action favorable to the beneficiary, and then mis-

lead the beneficiary concerning these events. Even

under the most generous interpretation of the series

of events leading up to the approval in December

1987 of the renegotiated lease package, the Secre-

tary of Interior violated his common law fiduciary

responsibilities.

46 Fed. Cl. at 226. In addition to violation of common

law fiduciary duties, the Secretary also violated statu-

tory fiduciary duties, in acting to benefit Peabody to

the detriment of the Navajo. By suppressing the

royalty decision of Interior’s Deputy Assistant Secre-

tary for Indian Affairs, the Secretary acted in direct

contravention of the Act’s charge to the Secretary to

obtain for the Indians the maximum return for their

minerals. In failing to act in the best interests of the

Navajo, the government violated its fiduciary respon-

sibilities. Although the government argued, at the

hearing of this appeal, that the Secretary’s actions were

justified in that they reflected a balance of national

interests, it is hornbook law that a trustee’s competing

interests do not excuse a breach of fiduciary duty.

Breach by the federal government of its fiduciary

duty is subject to remedy by the assessment of “dam-

ages resulting from a breach of the trust,” as confirmed

in Mitchell II:

This Court and several other federal courts have

consistently recognized that the existence of a trust

relationship between the United States and an

Indian or Indian tribe includes as a fundamental

incident the right of an injured beneficiary to sue

the trustee for

—— damages resulting from a breach of

over respondents’ claims for alle breach | 2

Id. at 228, 108 S. Ct. 2961. The — Federal 1 —

— — — a it was without jurisdiction to

gran ne relief and i ismi

— boy improperly dismissed the

CONCLUSION

REVERSED AND REMANDED.

SCHALL, Circuit Jud ing-i

4 ge, coneurring- in- part and dis-

the jurisdietion of the United States Co

a the a urt of Federal

Claims over certain claims against the government and

108 S. Ot. 2961, 77 L. Ed. 2d 580 (1983) (“Ayit

2 9 : . ule

(citing United States v. Mitchell, 445 U.S. 535, — 2

8. Ct. 1849, 68 L. Ed 2d 607 (1980) (“Mitchell T) (dis-

14a

granted, a substantive right for money damages be

be found in some other source of law, such as a e

Constitution, or any Act of Congress, or any 1 =

of an executive department“ Mitchell II, 463 at 216,

100 S. Ct. 1349 (quoting 28 U.S.C. § 1491). In this case,

the Navajo Nation (“Nation”) asserts a claim for —

damages against the government based upon ~~ d

breaches of the government’s trust obligations to the

Nation.

1 the

e Supreme Court, in Mitchell I, addressed

4 of — what circumstances fiduciary 7

are created and breached so as to establish a elaim —

money damages contemplated by the Tucker 8

Indian Tucker Act. In Mitchell I, the Quinault

alleged, under a breach of trust theory, that 2 —

entitled to recover money damages in the — —

Court of Claims, one of our predecessor courts, for

vernment's mismanagement of its timber =

445 U.S. at 537, 100 S. Ct. 1349. The Tribe alleged ;

a trust was established by the General Allotment Act —

1887 (codified at 25 U.S.C. § 331 et geg.). However, :

Court held that the Act “created only a * ——

relationship between the United States and the allo

that does not impose any duty upon the yn

to manage timber resources.” Id. at 542, 100 8.

1349. The Court determined that the Act did —

unambiguously provide that the United States —

taken full fiduciary responsibility as to management o

allotted lands,” in particular, the management of timber

did not establish that the government had a fiduci-

— —— manage the Tribe's forest lands; therefore,

15a

the Tribe's ability to recover money damages for the

government’s actions had to be found “in some other

source than the Act.” Id. at 546, 100 S. Ct. 1349.

The Supreme Court revisited the Quinault Tribe’s

claim for money damages in Mitchell II, 463 U.S. at 224,

103 S. Ct. 2961, where the Court held that there was a

fiduciary relationship between the government and the

Tribe. The Court found statutes and regulations that

“establish{ed] the ‘comprehensive’ responsibility of the

[government] in managing the harvesting of Indian

timber,” with “[v]irtually every stage of the process

. . under federal control.” Id. at 222, 103 S. Ct. 2961

(citations omitted). From these statutes and regu-

lations, the Court determined that “a fiduciary relation-

ship necessarily arises when the Iglovernment assumes

such elaborate control over forests and property

belonging to Indians.” Id. at 225, 103 S. Ct. 2961. The

Court stated that the very statutes and regulations

that create the fiduciary relationship also “define the

contours of the United States’ fiduciary responsibili-

ties. Id. at 224, 103 S. Ct. 2961. The Court concluded

that the Court of Claims had jurisdiction over the

Tribe’s claims that the government had violated its

fiduciary obligations in management of the Tribe’s

timber land. Id. at 228, 103 S. Ct. 2961.

This court applied the Court’s teachings in Mitchell I

and Mitchell II in Pawnee v. United States, 880 F.2d

187 (Fed. Cir. 1987). In Pawnee, the Cheyenne-Arap-

aho Tribe claimed that the government had breached

its fiduciary obligation to receive gas royalties com-

puted at the highest market value for two of the Tribe’s

oil and gas leases. Id. at 188-89. In addressing this

claim, we first considered whether there was “any gen-

eral fiduciary relationship” between the Tribe and the

16a

government. Id. at 189. We found such a relationship,

— that the Indian Long-Term Leasing Act, codified

at 25 U.S.C. § 396, placed the Secretary of the 15

“at the center of the leasing of Indian mineral lands.

Id. We also pointed to certain accompenying ——

tions as evidence of the government’s involvement 9

aspects of the leasing arrangement. Id. at 190. We

concluded, based on these statutes and regulations,

“that the United States has a general fiduciary obliga-

tion toward the Indians with respect to the manage-

ment of [the] oil and gas leases.” Id.

, however, that the existence of a general

T does not mean that any and

every claim by the Indian lessor necessarily states :

proper claim for breach of the trusta claim which 1

be fully tried in the Claims Court. Id. at 191. : —

looked to the statutes and regulations that yee

the fiduciary relationship and noted that the Tri e’s

claim ran counter to the requirements of the governing

regulations, which expressly restricted the ye

price for a majority of the oil and gas produced on the

leased land. Id. We also noted that “the fiduciary

relationship springs from the statutes and 14

that define the relationship, and that the Tribe

failed to allege the violation of any specific — 41

regulation. Id. We coneluded that, under Mitchell I,

the focus is on the statute and regulations that —_

the fiduciary relationship, and that the Tribe could no

create a “viable fiduciary claim purely by insisting that

this court (or the Claims Court) establish different or

igher standards” than those established by law. Id. at

192. We therefore found that the Tribe had failed to

state a proper claim for breach of trust, and affirmed

the dismissal of its claim. Id.

17a

We revisited Mitchell I, Mitchell II, and Pawnee in

Brown v. United States, 86 F.3d 1554 (Fed. Cir. 1996).

Brown, and other Indians, alleged that the government

had breached a fiduciary duty imposed by 25 U.S.C.

§ 415 and 25 C. F. R. part 162° by failing either to compel

the Indians’ lessees to fulfill their reporting and pay-

ment responsibilities or to cancel the leases. Brown, 86

F. 3d at 1557. As we did in Pawnee, we first looked to

see if a fiduciary relationship existed between the

Indians and the government with respect to the leased

properties. Id. at 1559-61. We noted that, under

Mitchell II, the test for determining whether there was

such a relationship was whether the government “takes

on or has control or supervision over the tribal monies

or properties” that are at issue. Jd. at 1560 (quoting

- Mitchell II. 463 U.S. at 225, 103 S. Ct. 2961). We

termed this the “control or supervision test” and noted

that nearly complete government management was not

necessary to create a fiduciary relationship. Jd. at 1560-

61. Applying these standards, we found that the gov-

ernment did control the Indians’ leasing program

enough to created an enforceable fiduciary duty. Jd. at

1561-62. This established a general fiduciary duty, but

we noted that the Indians still needed to allege a breach

of a specific statutory requirement or regulation to

sustain a money claim against the government. Id. at

1563.

2 Section 415 provides that Indian lands may be leased by those

tribes or individuals who own them with the approval of the Secre-

tary of the Interior. 25 U.S.C. § 415. Section 415 also indicates

that such leases are made under the terms and regulations estab-

lished by the Secretary, which include those regulations found in

25 C. F. R. part 162. 25 U.S.C. § 415.

18a

We reiterated that the statutes and regulations that

create the general fiduciary relationship define the

scope and extent of the fiduciary relationship. Jd. We

concluded that, on the record before us, it was not clear

that the Indians had “alleged the breach of a specific

duty that the regulations squarely place on the [gov-

ernment).” Id. Accordingly, we remanded the case for

the trial court to determine whether the Indians “al-

leyed the breach of a specific duty that the regulations

scuarely placeſd] on the [government].” Id.

Recently, in White Mountain Apache Tribe v. United

States, 249 F.3d 1364 (Fed. Cir. 2001), we found an

enforceable fiduciary relationship between the White

Mountain Apache Tribe and the government whose

breach could give rise to a claim for money damages.

First, we determined whether there was a fiduciary

relationship between the Tribe and the government

regarding buildings and land at Fort Apache, which is

within the borders of the Tribe’s reservation in Ari-

zona. Id. at 1376-77. We found such a relationship

existed, based on a 1960 Act of Congress, Pub. L. No.

86-392, 74 Stat. 8 (1960), to the extent that the govern-

ment controlled and used the buildings and land at Fort

Apache. Id. at 1373-77. Then, we determined the gov-

ernment’s obligations under this fiduciary relationship,

first looking te the common law of trusts to define the

nature of the grovernment’s obligations. Id. at 1377-80.

We found tha‘ general principles of trust law required

the government to use “reasonable care and skill” to

preserve the buildings and lands at the fort with

respect to which the government had a fiduciary duty

to the Tribe. Jd. at 1379 (citations omitted). We stated:

AIIm each case, we must . . . examine the particular

statute, treaty, ‘or other fundamental document,’ that

19a

creates the trust relationship in order to determine the

nature of the relationship and whether the general law

of trust has been altered in any particular way, either

by the imposition of additional obligations or by the

modification of existing obligations.” Jd. at 1380 (cita-

tions omitted). We concluded that the Tribe had stated

a proper claim for money damages, but pointed out that

just because there was a general fiduciary relationship

did not mean that every claim by the Tribe was meri-

torious. Id. at 1383 (citing Pawnee, 830 F. 2d at 191).

With ne legal framework established

the facts of this case. *

II.

In 1964, the Nation entered into Lease 8580 (th

“1964 Lease”) with Sentry Royalty Company, the —

decessor in interest of Peabody Coal Company (“Pea-

body”), for the mining of coal on the Nation’s land at a

royalty rate of not more than 37.5 cents/ton. Article VI

of the 1964 Lease provides as follows:

During the period that the land so leased is un

— 3 the royalty provisions of —

ease are subject to reasonable adjustment b

Secretary of the Interior or te ee -

sentative at the end of twenty years from the

effective date of this lease, and at the end of each

successive ten-year period thereafter. In the event

of termination of Federal jurisdiction, the royalty

provisions shall, in lieu of Secretarial adjustment, be

subject to renegotiation between Lessor and Lessee

at the times aforesaid, provided that if the parties

are unable to agree, such royalty shall i

— an yalty be submitted

20a

In 1984, after negotiations between the Nation and

Peabody proved unproductive, the Nation requested,

under Article VI, that the Bureau of Indian Affairs

(“BIA”) raise the royalty rate. BIA, which is part of

the Department of the Interior (“DOI”), initially deter-

mined that the rate should be raised to 20% of the gross

value of the coal mined. Peabody appealed that deci-

sion to the Commissioner of Indian Affairs in the DOI,

pursuant to the procedures outlined in 25 C.F.R. part 2.

Although the official handling the appeal was prepared

to issue a decision affirming the 20% royalty rate, then-

Secretary of the Interior Donald Hodel requested that

release of the decision be delayed. Consequently, both

Peabody and the Nation were informed by DOI that a

decision on the appeal was not imminent and that they

should try to negotiate. Unbeknownst to the Nation,

prior to acting on the matter, Secretary Hodel had met

with representatives of Peabody who had asked the

Secretary to delay the release of DOI’s decision.

Peabody and the Nation resumed negotiations, and in

1987, an agreement was reached with respect to re-

negotiation of the 1964 Lease (the “Agreement ). In

addition to amending the lease by raising the royalty

rate to 12.5%, the Agreement also addressed other

matters, including confirming the Nation’s ability to tax

Peabody, amending two other leases by raising their

royalty rates to 12.5%, adding provisions for future

royalty adjustments, establishing a tribal scholarship

fund, and requiring the payment by Peabody of certain

back royalties, bonuses, and water payments. The

Agreement was submitted to DOI for review, and DOI

formally approved the Agreement on December 14,

1987.

21a

The Nation filed suit against the government in the

Court of Federal Claims on December 14, 1993. The

Nation charged that the government had breached its

fiduciary duties to the Nation, based on Secretary

Hodel’s ex parte communications with Peabody, DOI’s

alleged failure to properly oversee negotiations be-

tween Peabody and the Nation, and DOI’s final ap-

proval of the Agreement, which only raised the 1964

Lease’s royalty rate to 12.5%, instead of 20%. The

Nation also alleged that the government had breached

contractual obligations under Article VI of the 1964

Lease by approving the Agreement. Both the govern-

ment and the Nation moved for summary judgment on

these claims.*

The Court of Federal Claims first rejected the gov-

ernment’s contention that the Nation’s claims were

time-barred. Navajo Nation v. United States, 46 Fed.

Cl. 217, 224-25 (2000). The court then discussed the

Nation’s breach of trust claim, first looking at the claim

under general trust principles. Id. at 226-27. The court

concluded that the government’s ex parte communica-

tions with Peabody and its following actions during the

royalty adjustment proceedings violated the “most

fundamental fiduciary duties of care, loyalty and

candor.” Jd. at 227. The court noted, however, that in

order for the Nation to succeed on its money claim

against the government, it had to show that some sta-

tute, treaty, regulation, or other source of law imposed

specific fiduciary obligations on the government and

The government acknowledges that the Court of Federal

Claims had jurisdiction over the Nation’s claims, and that it thus

was proper for the court to reach the merits of those claims and

entertain motions for summary judgment.

22a

that the government had violated those fiduciary obli-

gations. Id. at 227-28.

The court first addressed whether the government

had a general fiduciary obligation with regard to coal

leases on Indian land, focusing on the amount of

management and control the government assumed over

such leases. Jd. at 228. In that regard, the court

considered the Indian Mineral Leasing Act of 1938, 52

Stat. 347 (1938) (codified at 25 U.S.C. §§ 396a-396g)

(“IMLA”), and the accompanying regulations, 25 C. F. R.

part 211 (1985). Navajo Nation, 46 Fed. Cl. at 228-30.

The court determined that, while the level of manage-

ment and control exercised by the government over oil

and gas leases may be enough to establish a fiduciary

obligation, the government’s level of control over coal

leases, and in particular coal royalties, is not enough to

“rise above a generalized trust obligation.” Id. at 231-

33. In addition, the court concluded that even if a

fiduciary obligation does exist,the Nation failed to “link

any breach [it alleged] to a specific money-mandating

statutory or regulatory provision.“ Id. at 233-34.

The court also found that the government owed no

contractual obligation toward the Nation under the

1964 Lease. Id. at 234. The court pointed out that the

government was not a party to the lease, and that no

consideration had passed to the government under the

1964 Lease from either the Nation or Peabody. Id. at

234-35. Finally, the court dismissed the Nation’s claim

that there was an implied-in-fact contract between the

government and the Nation with respect to the revision

of the royalty rate of the 1964 Lease because there was

no intent to contract by the government, no considera-

tion to the government, and no clear offer and accep-

23a

tance by the government.“ Id. at 236. Based on its

— the — of Federal Claims granted the gov-

ernm 2nt’s motion or summary judgment and dismi

all of the Nation’s claims. Id. rs

On appeal, the Nation argues that the government

has general fiduciary obligations to it 22 to

2 leases — 2 —— land, and that, in this case,

e government breached those obligations. Specifi-

cally, the Nation asserts that IMLA — —

ernment to review all leases and lease amendments in

order to assure that they are in the best interests of the

Indians and that Indian profits are maximized. The

N ation contends that the government breached this

obligation by prohibiting a 20% royalty rate and

approving the Agreement for a lower royalty rate of

12.5%. The Nation also contends that the government

violated its general fiduciary duties of care, candor, and

loyalty to the Nation by preventing the royalty rate

adjustment of 20%, engaging in ex parte communica-

tions with Peabody, misleading the Nation into resum-

ing negotiations with Peabody, and approving the

Agreement to amend the 1964 Lease without review.

The Nation further argues that the government vio-

lated 25 U.S.C. § 396a and 25 C. 1. R. § 211.2 by approv-

ing the Agreement without any economic analysis. The

Nation contends that the government violated 25

C.F.R. § 211.2 by colluding with Peabody to compel

* The Nation does not appeal the Court of F ims’ di

iene! of ita — — of Federal Claims’ dis-

24a

established by 30 U.S.C. § 207(a) and

aa Te Mama) BLAM, 54 BIAM § 604.05. ——

ing to the Nation, the government — — —

Manual, 130 DM 10.5, and the BIA Manual by —

perform any economic analysis before — —

Agreement to amend the 1964 Lease. F — 4 —

Nation argues that the government — —

of the 1964 Lease by preventing a — Zz ‘

adjustment that was explicitly required y 2 —

The Nation concludes that these specific —

the governments fiduciary duties entitle it

damages against the United States.

The majority concludes that IMLA and the —

panying regulations, “assign to the — <<

Interior and ether gvvereme™ Indien mineral lensing

i ision, and con e i

— Majority, op. at 1331. Based on this finding

of supervision and control, the majority — —

a trust relationship is created, giving the — —

* clear and unqualified fiduciary 3 co

manage the mineral resources for the bene — —

Indians.” Jd. at 1332. The majority holds 4—

Court of Federal Claims erred in finding 11 —

relationship between the government and * —

with regard to the Nation’s coal leases. : a —

— A — — 5 — — royalty

, ions with res

rey de violated common law —— a

owed to the Nation, the majority conclu es =

Ra a mig

at *

erry — f izes as + — etary’s he on

ncealment” of BIA’s decision acted in direct

poor be of the [IMLA’s] charge to the Secretary

25a

to obtain the Indians the maximum return for their

minerals.” Jd. at 1332. It therefore reverses the deci-

sion of the Court of Federal Claims dismissing the

complaint and remands for further proceedings. Id. at

1333.

I agree with the majority that IMLA and the

regulations at 25 C.F.R. part 211 create a scheme under

which the government plays a major role in mineral

leasing on Indian land and that, therefore, there exists

a general fiduciary relationship between the Nation and

the government regarding coal leases, such as the 1964

Lease at issue here.

It is at this point, however, that I part company with

the majority. A court first must decide whether a

general fiduciary relationship exists in a particular area

between Indians and the government. Then, it must

determine whether, in the context of that relationship,

the government has breached any specific fiduciary

responsibilities. It makes this determination by con-

sidering the government conduct at issue in light of the

requirements of the statutes and regulations that

create the general fiduciary relationship in the first

place. See Brown, 86 F. gd at 1563; see also Mitchell II,

463 U.S. at 224, 103 S. Ct. 2961 (noting that “the statu-

tes and regulation now before us . establish a

fiduciary relationship and define the contours of the

United States’ fiduciary responsibilities.” (emphasis

added)); White Mountain Apache Tribe, 249 F.3d at

1377-80 (determining, after finding a fiduciary relation-

ship, what the government's specific obligations are and

whether the statute that created the relationship

altered the general law of trusts in any way); Pawnee,

26a

claim by the Indian lessor necessarily states a proper

claim for breach of the trust”). In this case, the major-

ity properly undertakes the first step of the analysis

but not the second. After concluding that a general

fiduciary relationship exists between the government

and Indians with respect to the mining of coal on Indian

lands, the majority, focusing exclusively on Secretary

Hodel’s actions relating to BIA’s royalty decision, fails

to properly conduct the required second step of the

analysis. I believe the majority errs in two respects:

first, it fails to find a breach of a specific fiduciary

responsibility that falls within the scope of the statutes

and regulations that establish the general fiduciary

relationship; second, it only considers one aspect (Sec-

retary Hodel’s actions relating to BIA’s royalty deci-

sion) of the overall government conduct that is at issue.

IV.

In my view, the only government action in this case

that implicated a specific fiduciary responsibility to the

Nation was DOI’s approval of the Agreement. The

Nation and Peabody submitted the Agreement to DOI

for review. DOI indicated, in an internal report, that it

was reviewing the Agreement pursuant to DOI’s

powers of lease approval under 25 U.S.C. § 396a and the

regulations under 25 C.F.R. part 211, sources of law

that establish a fiduciary relationship between the Na-

tion and the government. Thereafter, when DOI ap-

proved the Agreement, it invoked its approval powers

under 25 U.S.C. § 396a and 25 C.F.R. § 211.2, both of

which subject the leasing of mineral rights on Indian

land to DOI approval.“ The government’s obligation

5 The Nation also argues that 25 C.F.R. § 211.2 places upon the

government the obligation of overseeing negotiations for leases

27a

under 25 U.S.C. § 396a and 25 C. F. R. § 2112 f

approve, or disapprove, a lease, or lease —

= — this obligation falls within “the contours of

4 nited States fiduciary responsibilities,” Mitchell

463 U.S. at 224, 108 S. Ct. 2961, the government

must make its approval decision with the reasonable

care and skill demanded of a trustee, White Mountain

Apache Tribe, 249 F.3d at 1378-79. It is undisputed

that, when deciding whether to approve the amend-

financially beneficial for the Indi

ans involved. See

pene (Second) of Trusts § 174 (1959) (noting

a trustee is under a duty to the beneficiary to

and lease amendments. However the regulati

vernmen — ’ on does not discuss

Go t supervising lease negotiations. As § 211.2 indi-

28a

Initially, the Nation alleges general violations of the

common trust obligations of care, candor, and loyalty.

In making this allegation, the Nation points to the ex

communications between Secretary Hodel and

Peabody and DOI’s failure to secure a 20% royalty rate.

While these duties, based on the common law of trust,

are relevant to determining the government’s obliga-

tions, White Mountain Apache Tribe, 249 F.3d at 1377-

78, the scope and extent to which these obligations

apply to governmental action is governed by the stat-

utes and regulations that create the fiduciary relation-

ship, id. at 1380. See also Mitchell II, 463 U.S. at 224,

103 S. Ct. 2961; Brown, 86 F.3d at 1563. The Nation

must explain how DOI’s actions, which may demon-

strate disloyalty to the Nation in a vacuum, fall within

the boundaries of a specific fiduciary obligation. That it

has not done.

The Nation also alleges violations based on internal

agency policy, expressed in BIA Manuals, 54 BIAM §

604.5 for example, and DOI manuals, 130 DM 10.5 for

example. Neither of these manuals, or general agency

policy, can support a claim for monetary damages be-

cause a substantive right to monetary relief must be

found in some . . source of law, such as the Con-

stitution, or any Act of Congress, or any regulation of

an executive department. Mitchell II, 463 U.S. at 216,

103 S. Ct. 2961 (citing 28 U.S.C. s 1491). The Nation

fails to show how these manuals “can be fairly inter-

preted to create a substantive right to monetary com-

pensation from the United States,” Hamlet v. United

States, 63 F.3d 1097, 1102 (Fed. Cir. 1995).

The same analysis applies to the Nation’s claims

based upon Article VI of the 1964 Lease and DOI’s

actions relating to the review of BIA’s initial royalty

29a

rate decision. While the language of Article VI states

that the government will, after 20 years, raise the

royalty rate under the Lease to a reasonable rate, the

1964 Lease is not a document by which the government

is bound. Consequently, actions under the Lease are

not within the contours of the government's fiduciary

relationship with the Nation. As the Court of Federal

Claims correctly noted, the government was not a party

to the 1964 Lease and there is no evidence of an intent

by the government to assume any contractual obliga-

tions under the Lease. Navajo Nation, 46 Fed. Cl. at

235-36. Finally, the government’s actions during the

review of BIA’s initial decision to raise the royalty rate

to 20%, including Secretary Hodel’s ex parte communi-

cations with Peabody and his actions relating to BIA’s

royalty decision, occurred in the context of DOI’s

review of an internal decision, under 25 C.F.R. part 2

not in the context of a fiduciary responsibility regarding

mineral leases arising under IMLA. The N ation also

asserts a breach of trust based on 30 U.S.C. § 207(a)

which establishes a minimum royalty rate for coal

leases of 12.5%. Section 207(a), which applies to federal

land in general, did not apply to leases of Indian land

until 1996, when 25 C. F. R. § 211.43(a)(2) was promul-

gated. The government was not required to conform to

— —- set in 30 U.S.C. § 207(a), because, at the

of the government’s actions in thi

did not apply to Indian land. —

In sum, I agree with the majority that a genera

fiduciary relationship exists between the ph mt

and the Nation with respect to coal leases on the

Nation’s lands. However, the analysis cannot stop

there. In order to state a claim upon which relief can be

granted, the Nation must show the breach of a specific

30a

fiduciary obligation that falls within the contours of the

statutes and regulations that create the general

fiduciary relationship at issue. In my view, the only

conduct that is alleged in this case that implicates a

specific fiduciary obligation owed by DOI to the Nation

is DOI’s failure to perform an economic analysis on the

Agreement between Peabody and the Nation that was

approved by the government under 25 U.S.C. § 396a

and 25 C.F.R. § 211.2. I believe that this failure

amounted to a breach of a fiduciary obligation owed to

the Nation. I would remand the case to the Court of

Federal Claims for the limited purpose of determining

what damages, if any, the Nation suffered as the results

of that breach. Otherwise, I would, in all respects,

affirm the decision of the Court of Federal Claims.

For the foregoing reasons, I respectfully concur-in-

part and dissent-in-part.

31a

APPENDIX B

UNITED STATES COURT OF FEDERAL CLAIMS

No. 98-763L

THE NAVAJO NATION, PLAINTIFF

UNITED STATES, DEFENDANT

Feb. 4, 2000

OPINION

BASKIR, Judge.

Mr. Donald Hodel, Secretary of the Interior during

the critical period of this dispute, offered this denuncia-

tion of ex parte contacts in his deposition:

The decision-maker isn’t suppose (sic) to talk to one

of the two sides while he is in the process of making

a decision or may be in the process of making a

decision. And it goes to fundamental fairness.

E „ „ „„ „ &

I should go further in saying one other thing, that

the ex parte communication taints the subsequent

decision. So that even if you would have made

exactly the same decision, you can never establish

that, if you are challenged on it.

32a

it’ to en in ex parte communications.

22 — att who dealt with me inside

and outside the Department would have known that

I would have been pretty firm on that as a matter of

practice.

Deposition of Donald P. Hodel, November 20, 1995; I

Plaintiff’s Appendix (Pl. App.) at 1149-50.

Although Mr. Hodel’s memory fails him on this *

the evidence is overwhelming that he did * A 0

condemns. On or about July 17, 1985, he met — a

personal friend who had been hired a few days —

solely because of his access, by one party in a —

dispute with the Navajo Nation. The Secretary si —

with his friend's new employer in this brief ex *

meeting, a meeting which rema)r ed undisclosed —

eleven years until revealed inadvertently during dis-

covery in this case. *

el might well have added that ex parte

eae — ty those that result in decisions worth

millions of dollars to the party with special —

high officials, betray the publie trust and transgress —

high ideals of public service. Not incidentally, by !

conduct Mr. Hodel also violated basic fiduciary duties

owed the plaintiff in this action, the Navajo Nation.

ps July 1985 meeting forms the dramatic

au — Nation's suit for breach of

trust and breach of contract against the United States.

However, it is not the act which the plaintiff contends

constitutes the government’s specific wrongs. Both

breaches allegedly arise from the entire series of events

which ultimately resulted in the December 1987

approval by Mr. Hodel of royalty revisions to one of the

33a

Navajo Nation’s coal leases with Peabody, the subject

of that earlier meeting.

According to plaintiff, by this approval the Secretary

breached fiduciary duties owed the Navajo Nation

under the Indian Mineral Leasing Act of 1938,

25 U.S.C. § 396 et seg. (IMLA) and related treaties and

regulations, and breached contractual obligations under

the coal lease itself. The present matter comes before

the Court on cross-motions for summary judgment on

the issue of liability.

We conclude that the defendant, acting through for-

mer Secretary Hodel, violated the most basic common

law fiduciary duties owed the Navajo Nation. Re-

grettably, we also conclude that the trust relationship

necessary for our jurisdiction does not exist, and these

violations do not mandate monetary relief, both as

required by our jurisdictional precedents. We also

conclude that the government owed no contractual duty

to the plaintiff. We are thus compelled to deny

plaintiffs motion for summary judgment and to grant

the government’s cross-motion.

The Dispositive Motions In Context

A number of related matters require mention at this

early juncture to place this Opinion in context. In

February 1999, prior to oral argument on these

motions, the Navajo Nation filed a collateral lawsuit in

United States District Court for the District of Colum-

bia. The Navajo Nation v. Peabody Holding Company,

Inc., et al., No. CA-99-469-EGS O. D. C.). Plaintiff

named as a defendant, Peabody, the lessee at the heart

of our case. Plaintiff's elaims against Peabody evolve

out of the same factual context. Also currently pending

before our Court is Peabody’s motion to find plaintiff in

34a

contempt in connection with the N avajo use in District

Court of materials produced in discovery pursuant

to a Confidentiality and Protective Order, entered

February 26, 1996, in our litigation. Plaintiff sub-

sequently filed a motion asking this Court to determine

the status of those same materials, some of which

plaintiff claims are not properly subject to the

protective order.

n this Opinion, we no doubt make use of documents

4 — that are the subjeet of both these

motions. However, in preparing this Opinion, we have

relied only on the pleadings and other matters of public

record. Those pleadings were received in unredacted

form and were filed publicly. To this day, Peabody has

not sought to apply the protective order to these filings

and thereby remove them from the public domain.

Although we reserve ruling on the motions respecting

plaintiff's activities in District Court and the status of

the protected documents, we view any objection by

Peabody to inclusion of protected documents in this

Opinion as waived.

SUMMARY OF ISSUES

At issue in plaintiff’s first claim for relief is the scope

of the Secretary’s fiduciary duties, if any, under IMLA.

Do those duties establish a trust relationship between

the United States and the Navajo Tribe the violation of

which gives rise to a claim for money damages in this

Court? The Navajo Nation has asserted that the

statute imposes a host of strict fiduciary duties upon

the government and that each of those duties has been

clearly breached. In particular, the Navajo Nation

contends the statute imposes a fiduciary obligation to

maximize the financial returns from coal leases; in this

case, a fiduciary duty to require a twenty percent

35a

royalty rate for the Peabody lease. The Secretary’s

1987 approval of a rate of 12.5 percent violates this

duty.

The government counters that plaintiff’s claim is not

properly before the Court. First, plaintiff has failed to

establish subject-matter jurisdiction in this Court. The

trust relationship imposed by IMLA is of so limited a

nature, it argues, that it cannot serve as the basis for a

claim for money damages. Second, the Navajo’s claim is

barred by the statute of limitations. Failing those

arguments, the government maintains that it is entitled

to summary judgment because the Secretary satisfied

any fiduciary duties owed the Navajo Tribe.

With the Navajo’s second claim for relief, breach of

contract, the Court faces issues of fundamental contract

formation. Plaintiff alleges that the Secretary violated

the pertinent coal lease to which the government was a

party when he failed to provide a “reasonable adjust-

ment” of the royalty according to the lease provisions,

twenty percent being that reasonable adjustment. In

the alternative, plaintiff argues under a contract

implied-in-fact theory that the government failed to act

in good faith and treat the parties fairly in reviewing

and approving lease amendments between the Navajo

Nation and the private parties involved in this dispute.

The government denies that the lease formed any

contractual relationship between the Secretary and the

Navajo Nation. Alternatively, defendant argues that to

the extent any contractual duties have been created,

the Secretary has sufficiently carried them out. Fur-

thermore, defendant alleges that the breach of contract

claim, like the breach of trust claim, is barred by the

six-year statute of limitations.

36a

The Court finds the government’s statute of limita-

tions argument without merit. However, the statutory

and regulatory provisions upon which the Navajo

Nation relies are not “money-mandating” as required

under the Tucker Act, 28 U.S.C. § 1491 (1988), or the

“Indian Tucker Act,” 28 U.S.C. § 1505 (1999), to 1

the jurisdietion of this Court and to afford t e

requested relief. Plaintiff's breach of contract theory b

equally unavailing. As we will explain, the Court finds

as a matter of law that the Secretary is not a contrac-

tual party to the lease in question.

BACKGROUND

asp of the extensive history of this case is

— 4 an understanding of the trust relation.

ship between the United States and the Navajo Tribe

in the mineral leasing context. The parties have spared

no detail in describing the background of this case in

their briefs and argument. The Court held two ——

ings on dispositive motions, the first of which exceed ;

five hours. For the most part, the following series 0

events is undisputed, and subject only to interpretation.

Introduction

j j federally

On February 1, 1964, the Navajo Nation, a !

recognized Indian tribe, entered into Lease 8580 with

the Sentry Royalty Company for the mining of coal on

tribal lands. Pursuant to the Indian Mineral Leasing

Act the Assistant Area Director of the Bureau of

Indian Affairs (BIA) approved the lease on August 28,

1964, under authority delegated by the Secretary of the

Interior. *

The original lease provided for an extremely low

royalty rate of not more than 37.5 cents per ton, but

Article VI allowed the Secretary or his delegate to

37a

adjust the royalty rate to a “reasonable” level on the

twentieth anniversary of the lease. Ultimately the

Secretary did not exercise this authority. Instead, on

December 14, 1987, he approved amendments to the

lease, negotiated by the parties, establishing a royalty

rate of 12.5 percent.

A few years earlier, in anticipation of the maturity of

Article VI, the Navajo Nation had instituted pro-

ceedings in the Department of Interior (DOI) with a

view toward converting the royalty to a percentage

basis, and dramatically boosting its level. At this time,

the rate for coal leases on federal lands was 12.5

percent, which the Navajo considered a minimum. In-

deed, the first-level DOI authority’s initial decision in

June 1984 was to increase the royalty to a rate of

twenty percent. The lessee, Peabody Coal Company,

Sentry’s successor in interest, appealed that decision.

By mid-summer 1985 it was apparently well-known

to all parties that the BIA planned to deny the appeal

and affirm the twenty percent rate. The Secretary then

intervened and directed that the decision on Peabody’s

appeal be deferred so that the parties to the lease could

negotiate a royalty rate. This directive, the events

leading up to it, and the Secretary’s subsequent ap-

proval of a lease package the parties negotiated, form

the basis of plaintiff’s breach of trust and contract

claims. With this outline in mind, we now examine the

events and their legal context in more detail.

Basis of Trust Relationship

Two treaties—the 1849 Treaty and the 1868 Treaty

—form the foundation of the trust relationship between

the United States and the Navajo Nation. See 9 Stat.

974; 15 Stat. 667. Under the 1849 Treaty, the United

38a

assumed the responsibility to regulate trade and

— with the Navajo and to secure their perma-

nent prosperity and happiness. een

inciples of the treaties were in the

Bd 23 established by the United

States. The BIA was established as an agency within

DOI in order to encourage and train Indians to manage

their own affairs and to utilize fully their natural

resources under the trust relationship. As early as 1975

it was DOI policy to provide technical assistance to

assure that development of coal resources provided a

fair monetary return. Furthermore, the Code of Fed-

eral Regulations and departmental manuals governing

the affairs of Interior and its agencies establish proce-

dures intended to prevent private industry from ex-

ploiting Native Americans in the management of their

resources. These measures range from placing limi-

tations on the tribe’s negotiations to providing technical

and economic support for mineral management.

The Royalty Rate Revision of Lease 8580

The cents-per-ton basis of determining royalties

under the original 1964 lease was, by any measure, an

inequitable deal for the mineral owner. In fact, in 1977

Congress set a 12.5 percent minimum royalty rate for

federal strip-mined coal, and the Department of the

Interior adopted a policy prohibiting the federal trustee

of Indian coal from approving a tribal coal lease with

royalties less than that amount.

During this same period, it was noted that Lease

8580 violated several of the limitations later put in place

by the DOI and BIA. Economic studies, some commis-

sioned by federal agencies, confirmed that the royalty

rate was not providing the Navajo a fair return for

39a

their coal. It is in this context that on June 18, 1984,

Donald Dodge, the BIA Navajo Area Director, imple-

mented Article VI and significantly raised the royalty

rate to twenty percent. This decision was made under

delegated authority of the Secretary of Interior, and in

consultation with the Department of Justice.

Appeal of the Rate Adjustment

Not surprisingly, the prospect of such a significant

increase in the cost of coal concerned Peabody and its

major utility customers, Southern California Edison

Company and the Salt River Project Agricultural Im-

provement and Power District (collectively, the “com-

panies”). The companies appealed the Area Director’s

decision formally in July 1984. However, the record

also establishes parallel ex parte attempts on behalf of

industry representatives to communicate with those

deciding the appeal. Whether these attempts sought to

overturn the adjusted rate or merely to defer the

decision on appeal is not clear. What is clear is that

they were rebuffed by then-Secretary William P. Clark,

who had a firm policy against ex parte meetings. The

Navajo were apparently not apprised of the efforts.

John Fritz, Acting Assistant Secretary of Interior for

Indian Affairs, the decision-maker on Peabody’s appeal,

took the matter under consideration. In March 1985,

Mr. Fritz granted the companies’ petitions to supple-

ment their briefs, and asked them for additional cost,

revenue and investment data. This request apparently

led the companies to suspect that the decision was

going to be favorable to the Navajo.

On April 16, 1985, the Supreme Court decided Kerr-

McGee Corp. v. Navajo Tribe of Indians, 471 U.S. 195,

105 S. Ct. 1900, 85 L. Ed. 2d 200 (1985). That case

the

io taxes that had been contested by

—— supported the Navajo Nation's position

that it was entitled to obtain maximum ———

its mineral leases. This confirmation of tribal au —

no doubt concerned the companies, and argua —

improved the bargaining position of the Navajo, who

had broken off negotiations on lease amendments in

November 1984 to await a decision on the appeal.

In June 1985, the decision document affirming the

Area Director’s decision awaited Mr. Fritz’s —

The companies learned that a decision 8

twenty percent adjustment was imminent. On — 4 >

1985, Peabody wrote a letter to — —

requesting he postpone decision on the appeal — — —

the Navajo to negotiate. This letter was yt ;

the Navajo Nation, which promptly rejected —

negotiations and urged DOI to decide the appeal

all deliberate speed. i n

ver, the Navajo were not e aw ot

— efforts aimed at delaying the rate ——

Early in July 1985, Peabody retained Stanley Hule —

former high-level DOI — * — a :

i new Secre . .

— . — by Southern California Edison —

one of the power plant customers which relies 3 —

coal mined by Peabody. There is little doubt

Hulett met with Secretary Hodel, probably on — + tb

On July 22, 1985, a Peabody attorney named ~~

Sullivan drafted an internal company * — 4

seribing what transpired in the meeting. — 0

andum demonstrates that even Peabody a — y ,

speculated on “whether this activity would be co

sidered an ‘ex parte’ contact as part of Peabody’s appeal

4la

of the Navajo Area Director's decision.” See I Pl. App.

595-96.

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. Copies of the draft and the version

signed by the Secretary are attached as appendices to

this Opinion.

In the memorandum, melodramatically described by

a former DOI official as a “march or die” order, Secre-

tary Hodel instructed Mr. Fritz not to issue the appeal

decision affirming the twenty percent rate. Instead, he

adopted the companies’ preference and directed nego-

tiations. Mr. Fritz, who subsequently made no secret of

his sympathy for the Navajo Nation and his unhappi-

ness with these developments, resigned in August,

pursuant to an earlier decision.

Secretary Hodel’s directive was not revealed to the

Navajo Nation. Instead, on August 29, 1985, well after

the Secretary’s order deferring the rate decision in

favor of negotiations, the Navajo Nation was informed

or, more accurately, misinformed:

The Secretary has received your letters dated July

19, July 5, and July 11, 1985, and has asked me to

respond. Your letters concern an appeal by Pea-

body of the Navajo Area Director’s decision adjust-

ing the royalty rate on a Navajo coal lease with

Peabody.

As you are aware the briefing schedule has been

completed and a decision on the appeal is currently

being considered by the Deputy Assistant Secretary

Indian Affaire and his staff. They are aware of

both Peabody’s and the Tribe’s concerns regarding

42a

settlement but the decision has not yet been

finalized. 4

8 ,

I Pl. App. at 622 (Letter from Tim Vollman, Associa

Solicitor, Indian Affairs) (emphasis added).

then moved at a rapid, albeit puzzling pace.

Domne the apparently imminent favorable decision on

their twenty percent rate adjustment, in the face of an

eight year history of desultory negotiations with the

companies, and despite a firm refusal re-iterated just a

month earlier to resume talks pending a decision on the

Dodge royalty adjustment, the Navajo Nation changed

course immediately and dramatically.

mptly upon receipt of Mr. Vollman’s letter, the

1 Nation abandoned its five-year effort to have

the rate revised by the DOI, and on August 30, 1985,

resumed discussions with Peabody that had broken off

a year earlier. They quickly reached a tentative agree-

ment within a month, by September 23, 1985. This

agreement, negotiated under the auspices of Chairman

Peterson Zah, was noteworthy for its adoption of the

12.5 percent federal royalty rate, nowhere near the

twenty percent rate under appeal. The agreement ini-

tially failed to get Tribal Council approval, but it

survived without major change an insurgent victory by

Peter MacDonald later that year for Navajo Nation

leadership. (MacDonald, as Chairman, had begun nego-

tiations with Peabody back in 1979). In late 1987,

essentially the same agreement was formally approved

by the Navajo Nation and referred to DOI for review.

The abrupt abandonment of their effort to have DOI

set a high royalty rate at the moment of its apparent

uccess, and the Navajo Nation’s return to negotiations

they had broken off and had steadfastly refused to

43a

resume, defy explanation on this record. So does the

breathtaking speed with which the parties reached an

agreement that had eluded them for so many years.

The record is bare of any formal communication by the

Navajo Nation on the status of the appeal between

September 1985 and December 1987, although there is

a suggestion of an isolated and unsuccessful inquiry in

1986 or 1987.

The Navajo Nation has denied contemporaneous

knowledge of the Hodel-Hulett meeting or its results.

At most they admit that “someone from Washington”

had urged a return to the bargaining table. No less

intriguing and unexplained is the fact that the agree-

ment reached in September 1985, with its 12.5 percent

rate, survived without change in the face of political

upheavals in the Navajo Nation leadership.

The Negotiated Amendments

Apparently the favorable decision in Kerr-McGee

prompted Mr. Zah to expand the scope of negotiations

on the royalty rate adjustment to other topics such as

tax matters. Consequently, the renegotiated agree-

ment encompassed not only a 12.5 percent royalty on

Lease 8580, but confirmed the validity of tribal taxa-

tion. It also raised the royalty rate to 12.5 percent on

two other leases which were not by their terms subject

to rate revision. The agreement also addressed ancil-

lary matters such as provisions for future royalty

adjustments, arbitration procedures, rights of way, the

establishment of a tribal scholarship fund, and the

payment by Peabody of back royalties, bonuses, and

water payments. And, as the government points out,

the agreement obviated a long, costly and uncertain

legal challenge by Peabody.

44a

a tentative agreement had been reached,

23 er passed to Peter MacDonald, who

quickly reached essentially the same deal with —

companies by the fall of 1985, preserving the adj t-

ment of the royalty rate at 12.5 percent. The Navajo

Nation forfeited $33 million in back taxes and ——

million in back royalties. The tax inereases that the

companies would likely face in light of the *

decision were capped at eight percent. The effect o

these provisions would thus permit the tribe to realize

as much as 20.5 percent yield in royalties and taxes

combined.

Approval of Negotiated Lease Amendments |

nt reached by the successive Navajo

22 tn Meo fixed for over two

years. It was conditioned upon the approval of this

same rate for another lease, Lease 5743, which was a

joint enterprise of the Navajo Nation and Hopi. This

lease did not provide for any rate revisions. The 2

approved that lease's amendment in July 1986. The

amendments were formally placed before the Navajo

Nation Tribal Couneil and approved by that body in

August 1987. Subsequently, Peabody and the Navajo

executed the amendments, making them ripe for

Secretarial review pursuant to the IMLA. Although

the parties do not raise the point, we would be

surprised if the Department was not fully apprised of

the draft months, if not years, earlier.

On November 26, 1987, the agreement was officially

forwarded to DOI for its review and approval as

required by IMLA. Given the twenty-year history of

Lease 8580 under the previous provisions and the long

negotiating process ultimately resulting in the new

lease terms, the facts indicate a relatively quick review

45a

process of a few days over the Thanksgiving holiday.

Plaintiff condemns this “rush job” and notes that a

flawed economic analysis of the lease amendments was

performed as part of the review process. And one of

the officials in the DOI to whom the amendments were

sent for review, Mr. Frank Ryan, refused to sign his

approval because he felt he “would be participating in a

breach of trust.” Deposition of Frank Ryan, November

7, 1995; III Pl. App. at 1510.

On December 14, 1987, the Secretary formally ap-

proved the lease amendments. The recommendation

accompanying the endorsement asserted as a basis for

approval “that the parties hald] negotiated at arm’s

length, in good faith to reach [the] amendments.” Four

days after the approval, the BIA- Navajo Area Direc-

tor’s royalty adjustment of twenty percent, dating back

to June 18, 1984, was formally vacated.

DISCUSSION

The Statute of Limitations

Plaintiff filed this case on December 14, 1993, the

sixth anniversary of the Secretary’s approval of the

lease amendments. The government does not agree

that the statute of limitations begins to run with the

Secretary’s approval. The government argues that to

the extent plaintiff’s claim is based on the Secretary’s

actions in July, 1985, the claim is time-barred under the

six-year statute of limitations. See 28 U.S.C. § 2501

(1999). We reject that position for two independent

reasons: (1) the Navajo Nation’s cause of action had not

yet accrued in July, 1985; and (2) the Secretary’s

conduct remained secret until after the Navajo Nation’s

complaint was filed. 5

46a

Accrual of a cause of action occurs “when all events

which fix the government’s liability have occurred and

the plaintiff was or should have been aware of their ex-

istence.” Hopland Band of Pomo Indians v. United

States, 855 F.2d 1573, 1577 (Fed. Cir. 1988) (emphasis in

original); Kinsey v. United States, 852 F. 2d 556, 557 n.“

(Fed. Cir. 1988); see also, Sankey v. United States, 22

Cl. Ct. 743 (1991) (statute begins to run when underly-

ing facts of claim become known or knowable to plain-

tiff), aff'd 951 F.2d 1266, 1991 WL 260869 (1991). In our

view the events that transpired in July 1985 initiated a

course of conduct that was complete only with the chal-

lenged approval of December 1987. The government

does not contend any claim based on the 1987 approval

is barred. See Def. Clarification of Certain Proposed

Findings of Fact at 1-2. The Navajo Nation’s claim

cannot be barred while events that directly affect the

rights asserted have yet to take place.

Further, when the Navajo Nation filed its complaint

it was unaware, through no fault of its own, of the July

1985 events. The complaint challenged the December

1987 approval. The statute of limitation does not run

against a plaintiff who is unaware of a cause of action,

whether because the defendant concealed the actions or

because the injury was inherently unknowable at that

point in time. LaMear v. United States, 9 Cl. Ct. 562,

569, aff'd, 809 F.2d 789 (Fed.Cir.1986) (citations

omitted.) The parties’ submissions concerning the

events following the Hodel-Fritz memorandum reveal

no evidence that the Navajo Nation was aware of the

memorandum or the meeting that produced it. Specula-

tion aside, the Navajo Nation states it first became

aware of the Secretary’s July 1985 decision in 1994, but

they offer no specifics. The Sullivan memorandum

47a

debriefing the meeting and its anteceden

. ts, was not

produced until January 31, 1997. The government —

not rebutted the Navajo Nation’s claim that it was

unaware of Secretary Hodel’s actions before this.

; Unaware of the earlier events, the Navajo j

initially urged in its complaint that the 41 —

approval itself constituted a breach of trust. Having

learned more from discovery—that is, after all, the

purpose of discovery—the Navajo Nation now argues

that the 1987 approval was tainted by the July 1985

events, among other things. The statute of limitations

is intended to avoid the prosecution of stale claims

which might prejudice the defendant; it does not pre-

clude early evidence supporting timely claims. Sankey

22 Cl. Ct. at 747 (citations omitted). Had the Navajo

— sued ee of trust in 1985, the government

persuasiv ve j

yet ripe for this Court 8 — W

Standard of Review

Summary judgment is appropriate where there i

genuine issue of material fact and the moving ratnted

entitled to judgment as a matter of law. RCFC 56(c):

Cincom Systems, Inc. v. United States, 37 Fed. Cl. 663,

670 (1997). In its consideration of motions for

judgment, the Court relies upon the pleadings, deposi-

tions, answers to interrogatories, answers to admis-

sions, and affidavits, and especially in jury cases

resolves all reasonable inferences in the light most

favorable to the non-moving party. RCFC 56(c).

Where, as here, both parties have moved for summary

judgment as to plaintiff’s fiduciary claim for relief, it is

incumbent upon the Court to evaluate each motion on

its own merits. Kanehl v. United States, 38 Fed. Cl. 89

98 (1997) (citing Celoter Corp. v. Catrett, 477 U.S. 317,

48a

- S. Ct. 2548, 91 L.Ed.2d 265 (1986)).

— te existence of a dispute on a material fact

would defeat a summary judgment motion, there are, as

we have said, no such disputes.

Breach of Trust Claim

relationship between the United States govern-

ota — tribes is a fiduciary one,

with the United States serving as trustee for the

Indians. This trust was first created when the govern-

ment entered into treaties with Indians concerning the

use and occupation of tribal lands. The Navajo Nation,

like other tribal governments, has reserved the right to

live off of the bounty of their natural resources while

entrusting the government to develop those resources

in order to secure the prosperity of the Indians.

Although the fiduciary relationship between Native

Americans and the federal government is not necessar-

ily described by the common law of trusts, we find it

useful first to measure the government's actions

against this familiar standard. The standards govern-

ing private fiduciaries and their beneficiaries provide

effective analogies in the Indian claims context.

Nevada v. United States, 463 U.S. 110, 127, 103 S. Ct.

2906, 77 L. Ed. 2d 509 (1983); Mitchell v. United States,

229 Ct. Cl. 1, 14, 664 F.2d 265, 274 (1981), af d, 463 U.S.

206, 103 S. Ct. 2961, 77 L. Ed. 2d 580 (1983); Begay v.

United States, 16 Cl. Ct. 107, 127 n.17 (1987).

Breach of Trust in Court of Equity

The basic duties owed a beneficiary by a trustee are

clear—care, loyalty, and candor. A trustee must use

reasonable skill and care both to preserve the trust

property and to make it productive. See generally,

RESTATEMENT (SECOND) OF THE LAW OF TRUSTS

49a

§§ 174-76, 181 (1959). Furthermore, a trustee is obli-

gated to administer the trust solely in the interests of

the beneficiary, over the interests of third parties and

even over those of the trustee, itself. Jd. at § 170.

Finally, both of these duties implicate a third respon-

sibility of the trustee—the obligation “to communicate

to the beneficiary material facts affecting the interest of

the beneficiary which [the trustee] knows the benefici-

ary does not know and which the beneficiary needs to

know for his protection in dealing with a third person

with respect to his interest.” Id. at § 173, Comment d.

Needless to say, a fiduciary may not deal in secret with

a third party to his beneficiary’s detriment. Collec-

tively, these duties call for the trustee continually to

show good faith and fair dealing. See generally, GEORGE

GLEASON BOGERT AND GEORGE TAYLOR BOGERT, THE

LAW OF TRUSTS AND TRUSTEES §§ 541, 548-44 (2d

ed. rev. vol. 1998).

Let there be no mistake. Notwithstanding the formal

outcome of this decision, we find that the Secretary has

indeed breached these basic fiduciary duties. There is

no plausible defense for a fiduciary to meet secretly

with parties having interests adverse to those of the

trust beneficiary, adopt the third parties’ desired

course of action in lieu of action favorable to the bene-

ficiary, and then mislead the beneficiary concerning

these events. Even under the most generous inter-

pretation of the series of events leading up to the

approval in December 1987 of the renegotiated lease

package, the Secretary of Interior violated his common

law fiduciary responsibilities.

The government argues that the settlement package

ultimately approved gave the Navajo a quid pro quo for

any reduction in the royalty rate. This argument has

50a

some appeal when we consider that the Navajo re-

quested the Secretary to approve the lease amend-

ments. After all, the Secretary also must consider the

right of tribes to govern their own affairs, which

includes making intelligent choices sv~h as trade-offs in

royalties for other economic benefits. At oral argu-

ment, plaintiff conceded that there are many aspects of

the renegotiated lease package that are favorable to the

Navajo Nation—counsel informed the Court that the

Navajo did not wish to invalidate the entire agreement.

But we do not have to look to the end result to find a

breach—the road to approval of the amendments is

much more disturbing. A fiduciary’s breach is not

negated by a favorable end result; it requires full dis-

closure and ratification, both absent here. See BOGERT,

supra, § 548 at 247 n.18 (“in the application of the

loyalty rule to fiduciaries the courts are not concerned

with the question of actual damage to the beneficiaries

in the case at hand, but rather in the preventative

aspects of the rule and with the possibilities of loss in

trust administration in general.”) (citation omitted); c.

REST. 2D, supra, §§ 213 and 216. Even if the 1987

approval was a correct outcome, Secretary Hodel has

accurately observed “that the ex parte communication

taints the subsequent decision . . even if you would

have made exactly the same decision.” Hodel Dep., I

PL App. at 1149-50.

Entirely independent of whether profits were

maximized, the Secretary and members of the Depart-

ment engaged in ex parte communications with private

industry at the expense of the Navajo, the beneficiary

of the trust relationship. Then after very briefly

reviewing the merits of the proposals, the Secretary

approved lease amendments with royalty rates well

5la

below the rate that had previous}

y been determined

Neg oye by those agencies responsible for monitor-

ing federal government’s relations with Native

Defendant argues that in suspending Mr. Fritz’

proposed ruling, the United States mo allowed the

Navajo Nation to exercise its sovereignty in negotiat-

ing terms for the Lease 8580 amendments and in gain-

ing additional ground through the bargain regarding

other leases and tax matters. The same rationale is

asserted as the justification for the Secretary's ap-

proval of the amendments—the Secretary was hesitant

to intrude upon “arms length negotiations.”

A negotiator’s weapon is know On this

we can only conclude the — the —

unarmed with critical knowledge. Clearly, with Mr.

Dodge’s twenty percent royalty adjustment and Mr.

Fritz’ pending endorsement of that adjustment, the

Navajo Nation had the upper hand for any negotiated

settlement. In August 1985, when it resumed negotia-

tions with the companies, the Navajo Nation no longer

enjoyed the benefit of the threat that the twenty

percent royalty rate was about to be affirmed.

Worse yet, the Navajo Nation was not aware that it

no longer had this competitive edge in its bargaining,

. In its

— August 1985 response to the Navajo's inquiry on

anne, Ce Departament of interior hed represented

the decision had not yet been made. The cor-

respondence made no mention of the ex parte contacts

or the fact that the Secretary had already determined

— 2 ——— .

naware Secretary had already promised their

opponents he would not decide the dispute, the Navajo

52a

, arguably already at a competitive disadvan-

tage, could not tly be sid to have negotiated from 2

position of equality with Peabody and the utilities

2 actions of

Inciden , we imply no comment on the 0

Peabody or any of the other private interests involved

Plaintiff has sued them in District Court, where e

appropriateness of the ex parte efforts to influence

Messrs. Hodel and Fritz may ultimately be determined:

But that would not change our view of the ——

government conduct in this matter. For as J —

Benjamin N. Cardozo observed prior to his appo -

ment to the Supreme Court, “{mJany forms of conduct

permissible in a workaday world for those acting a

arms length, are forbidden to those bound by fiduciary

ties.” Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E.

545. 546 (1928). Subsequent events do not obviate our

5 ion that the Seeretary's conduct be “kept at a

level higher than that trodden by the crowd.” Id. at

547.

prep ee — court ot equity). But a

gester showing is required to warrant a remedy in this

Court.

53a

Breach of Trust in the Court of Federal Claims

In order to succeed in litigation in this Court, the

plaintiffs must show that IMLA imposes specific

fiduciary duties on the government, as opposed to

general duties, and that the United States violated a

specific fiduciary duty which Congress intended to

compensate with money damages. If plaintiff fails to

meet these requirements, we must reject its complaint

for want of jurisdiction or failure to state a claim, or on

summary judgment. While these are conceptually

different issues, they tend to merge, especially in this

case.

This Court’s jurisdiction requires that the substan-

tive right to monetary recovery be found in some

source of law, independent of the Tucker Act, 28 U.S.C.

§ 1491, or the Indian Tucker Act, 28 U.S.C. § 1505.

United States v. Mitchell, 463 U.S. 206, 212, 103 S. Ct.

2961, 77 L. Ed. 2d 580 (1983) (Mitchell IH: United

States v. Testan, 424 U.S. 392, 96 S. Ct. 948, 47 L. Ed.

2d 114 (1976). Plaintiff asserts as its independent basis

the trust duties that are created by IMLA. Therefore,

pursuant to 28 U.S.C. §§ 1491 and 1506, plaintiff must

convince this Court that IMLA can fairly be inter-

preted as mandating monetary damages from the

United States for the violations it claims. Mitchell II,

463 U.S. at 218, 108 S. Ct. 2961.

While it is not necessary that the statute explicitly

state the right to damages, the government’s obligation

to pay must be clear and strong. Cape Fox Corp. v.

United States, 4 Cl. Ct. 223, 232 (1983). The mere

existence or even the breach of a limited trust relation-

ship between the government and an Indian tribe does

not establish a claim for money damages within the

meaning of the Tucker Act. United States v. Mitchell,

54a

445 U.S. 586, 542, 100 S. Ct. 1349, 63 L. Ed. 2d 607

(1980) (Mitchell |). It is for this reason that the serious

fiduciary abuses we identified earlier are insufficient to

afford relief in this Court in and of themselves. See

Montana Bank of Circle, N.A. v. United States, 7 Cl.

Ct. 601, 613-14 (1985) (“The general trust relationship in

itself does not impose such duties as are erected in 2

complete trust with fully accountable fiduciary obliga-

tions. When the source of substantive law intended and

recognized only the general, or bare, trust relationship,

fiduciary obligations applicable to private trustees are

not imposed on the United States.”) To establish a

“complete” fiduciary duty, there must be more than

economic assets.

Since no authority relied upon by plaintiff explicitly

provides for monetary relief, we look toward the level

of management and control that the government has

assumed over coal leases under IMLA. Whether the

trust responsibility the Secretary is alleged to have

violated is “money mandating” can only be determined

by evaluating the underlying statutory scheme. See,

e.g., Mitchell II, 463 U.S. at 224, 108 S. Ct. 2961. Ac-

cordingly, we review IMLA and the regulations prom-

ulgated pursuant thereto, and then compare them to

cases applying the Mitchell tests.

55a

The Indian Mineral Leasing Act of 1938

The Indian Mineral Leasing Act of 1988, provides:

On and after May 11, 1938, unallotted lands within

any Indian reservation or lands owned by any tribe,

group, or band of Indians under Federal jurisdiction

- . . May, with the approval of the Secretary of the

Interior, be leased for mining purposes, by author-

ity of the tribal council or authorized spokesman for

such Indians, for terms not to exceed ten years and

as long thereafter as minerals are produced in

paying quantities.

25 U.S.C. § 396a (emphasis added). The remainder of

the Act is very general, providing for the acceptance of

surety bonds by the mineral lessee (25 U.S.C. § 396c),

the promulgation of rules and regulations governing

mining operations (25 U.S.C. § 396d), and the delegation

by the Secretary of lease approval authority (25 U.S.C.

§ 396e). We note, however, that the legislation also

contains separate provisions, more exacting require-

ments if you will, for the leasing of oil and gas. See 25

U.S.C. $§ 396b, 396d, 396g; see also Assiniboine and

Sioux Tribes of the Fort Peck Indian Reservation v.

Board of Oil and Gas Conservation, 792 F.2d 782, 796

(9th Cir. 1986) (in reviewing Secretary’s duties respect-

ing oil and gas leasing, Court observed that IMLA

“imposes extensive responsibilities on the government

in tribal mineral leasing matters for the benefit of the

Indians.”); accord, Jicarilla Apache Tribe v.

Energy Corp., 728 F. 2d 1555, 1564-65 (10th Cir. 1984).

We recognize that in enacting IMLA, the United

States assumed the responsibility to manage minerals

such as coal in a fiduciary . See Montana v.

Blackfeet Tribe of Indians, 471 U.S. 759, 764, 105 S. Ct.

56a

2399, 85 L. Ed. 2d 753 (1985) (leasing procedures de-

tailed by Congress intended to protect the Indians). In

fact, the measure was passed in part because existing

law was considered inadequate to give the Indians the

greatest return from their property. S. REP. No. 75-

985 (1987). Other purposes in enacting the legislation

were to achieve uniformity in tribal leasing and to

increase Indian authority in granting leases. Id. In

general, then, IMLA imposes upon the federal gov-

ernment a fiduciary obligation to develop a mineral

leasing program which would provide the highest

possible financial return to the Indians. Navajo Tribe

of Indians v. United States, 9 Cl. Ct. 227, 238 (1985);

Cheyenne-Arapaho Tribes of Oklahoma v. United

States, 33 Fed. Cl. 464, 468 (1995)(recognizing 10th Cir-

cuit’s finding of breach of trust).

These responsibilities fall upon the Secretary of

Interior and the officials in the specialized subordinate

agencies within the Interior Department. Those

agencies have, in turn, promulgated regulations gov-

erning mineral leasing on tribal lands.

The provisions for leasing of tribal lands for mining

that were in effect at the time plaintiff's cause of action

accrued are set out in 25 C.F.R. Part 211 (1985). The

procedures described within Part 211 cover all mineral

leasing, not just coal. Like the statute itself, the

regulations give extra attention to oil and gas leases.

We mention this because plaintiff has proposed that

management of coal leasing is indistinguishable from oil

and gas leasing under Pawnee v. U.S., 830 F.2d 187

(Fed. Cir. 1987), cert. den d, 486 U.S. 1082, 108 S. Ct.

2014, 100 L. Ed. 2d 602 (1988), a case which we discuss

momentarily.

57a

Although the Navajo Nation has not specificall

addressed many of these regulatory provisions, we

have reviewed them at length. There are provisions

on the manner of payments, inspections, penalties,

— — —

go operations, primarily for petro-

leum products. Finally, the item of interest here is

addressed—royalties. With respect to royalties, sec-

tions 211.13, 211.16, and 211.17 contain very extensive

and explicit procedures governing royalties for oil and

gas leases, including criteria by which the Secretary is

to set 1 — for oil and gas leases. By com-

parison, the only provision governing royalties of coal,

in particular, tersely states:

(flor coal the lessee shall pay quarterly or as other-

wise provided in the lease, a royalty of not less than

10 cents per ton of 2,000 pounds of mine run, or coal

as taken from the mine, including what is commonly

25 C.F.R. § 211.15(c). In glossing over these regulatory

provisions, the Navajo Nation has necessarily failed to

demonstrate how the Secretary violated his duty under

the regulations, if such a duty is created by those

provisions.

Plaintiff’s briefs do make several references to

regulations demonstrating a preference for competitive

bidding over the negotiation of leases by tribal

authorities. See 25 C.F.R. § 211.2. As plaintiff explains,

the provision is designed to prevent overreaching by

those negotiating with Indians and to assure that fair

market value is obtained for tribal resources. Pl. Br. at

41, 44; Pl. Resp. at 46. Although the Navajo Nation

cites case law demonstrating the point, it cites no

decision of this Court, nor does it provide any authority

— — — — —

4 :

58a ’

for the proposition that violation of the regulation calls

for money damages. In any case, the competitive

bidding provision is inapposite. Such a provision by

definition applies to the negotiation of a new leases

among a number of potential lessees, not the renegotia-

tion between lessor and lessee of a term in a pre-

existing lease.

In addition to those procedures defined within the

Code of Federal Regulations, the Navajo Nation has

cited internal policies and procedures in the DOI

Manual and Bureau of Indian Affairs Manual. Pl. Br. at

6. These manuals acknowledge the general duty to

maximize income from Indian mineral leasing. Consis-

tent with this goal, the manuals prescribe economic

appraisals of the transactions between Indians and

private companies such as Peabody.

We have on prior occasions recognized that the

statutory and regulatory framework governing mineral

leasing under IMLA requires the Secretary to use

reasonable skill and care in maximizing economic bene-

fits for the Indian lessors. Cheyenne-Arapaho, 33 Fed.

Cl. at 468; Navajo Tribe, 9 Cl. Ct. at 238. However,

IMLA has a second purpose—to foster Indian self-

determination. The legislative history indicates that

prior to enactment of the IMLA Indians were on occa-

sion compelled to lease land over their opposition. S.

REP. No. 75-985, at 2. Accordingly, IMLA clearly stops

short of turning over control to the Secretary, pro-

viding that “lands within any Indian reservation. . .

may, with the approval of the Secretary of the Interior,

be leased for mining purposes, by authority of the tribal

council or other authorized nm...” 2US.C.

§ 396(a) (emphasis added). The ideal of Indian self-

59a

determination is directly at odds with S i

control over leasing. neue

The lease itself reflects the measure of control as-

sumed by the Navajo, and the correspondingly sub-

ordinate role of the Secretary: (1) the Secretary may

suspend the lease for economic reasons, but only with

the concurrence of the Navajo—Art VIII; (2) the lessee

may not assign the lease without Secretarial and

Navajo consent—Art XI; (3) the lessee’s account books

are open to Secretarial and Navajo inspection—Art

XIII; and (4) the Navajo and the Secretary reserve the

right to cancel the lease for violations of its terms by

the lessee. And, of course, the Secretarial power to

adjust rates after twenty years is conferred by the

lease—Art. VI. See Lease 8580 (Feb. 1, 1964).

Navajo Coal Mining in Context

There is a wealth of case law presenting varying

degrees of federal management of or control over the

administration of Indian leases. The landscape includes

the Supreme Court’s decisions in Mitchell I and

Mitchell II at the polar extremes. Finding their place

along the resulting continuum, the cases of Brown v.

United States, 86 F.3d 1554 (Fed. Cir. 1996), Wright v.

United States, 32 Fed. Cl. 54 (1994), and Pawnee v.

United States, 830 F.2d 187 (Fed. Cir. 1987), cert.

denied, 486 U.S. 1032, 108 S. Ct. 2014, 100 L. Ed. 2d 602

(1988), provide useful correlations. Wright and Brown

both involve leasing activity by Indians on allotted

lands. In Wright, the limited Secretarial “approval

only” role was insufficient to invoke the jurisdiction of

the Court. Conversely, the statutory scheme in Brown

rr 8 cancel a lease without the

ent of the In essors, and was j

sufficient for jurisdiction. —

60a

In Mitchell I, the Supreme Court evaluated this

Court’s jurisdiction over claims arising from the gov-

ernment’s alleged mismanagement of timber resources

on land allotted to Indians under the Indian General

Allotment Act of 1887, 25 U.S.C. § 331 et geq., and found

it wanting. Specifically, the Court examined whether a

trust duty to manage these resources was compre-

hended by the General Allotment Act. In holding that

the Act created only a limited trust relationship be-

tween the government and Indian allottee, the Su-

preme Court reversed the Court of Claims’ en banc

recognition of a fiduciary duty which conferred jurisdic-

tion. Mitchell I, 445 U.S. at 542, 100 S. Ct. 1349.

Although land allotted to Indians was to be held in

trust by the government, that particular legislation left

it to the Indian allottee to use = land for i

and grazing purposes. Therefore, reason e Su-

preme Court, “the Act does not unambiguously provide

that the United States has undertaken full fiduciary

responsibilities as to the management of allotted lands.

Id. (emphasis added).

Upon remand, however, the Court of Claims found

that a host of other statutes and regulations governing

everything from timber sales to conservation respon-

sibilities created the specific fiduciary duty found

lacking under the general allotment scheme. Mitchell v.

United States, 229 Ct. Cl. 1, 664 F.2d 265 (1981). The

Supreme Court ultimately agreed, holding that the

“‘eomprehensive’ responsibilities of the Federal Gov-

ernment in managing the harvesting of Indian timber”

gave rise to an expectation of benefit sufficient to con-

fer jurisdiction on this Court for breach of those

responsibilities. Mitchell II, 463 U.S. at 222-24, 103

S. Ct. 2961 (citation omitted).

6la

The statutes and regulations cited in Mitchell I]

illustrate pervasive governmental control and daily

supervision over the management and sale of forest

products on allotted land—comprehensive regulations

“addressed virtually ever aspect of forest management”

and conditioned approval of timber sales on compliance

with their requirements. Mitchell II, 463 U.S. at 219-

22, 103 S. Ct. 2961. Therefore, this Court clearly has

jurisdiction over breach of trust claims where the

corpus of the trust is a resource over which “{vlirtually

every stage of the process is under federal control.” Jd.

at 222, 103 S. Ct. 2961 (quoting White Mountain Apache

Tribe v. Bracker, 448 U.S. 136, 147, 100 S. Ct. 2578, 65

L. Ed. 2d 665 (1980)).

In the aftermath of Mitchell I and Mitchell II, claims

based upon fiduciary duties respecting the management

of those resources are denied where the government’s

supervision and control over tribal resources is limited.

Implicated in every instance is the delicate balance

struck between exercising fiduciary responsibilities and

respecting tribal sovereignty and self- determination.

The Brown case involved commercial leasing activity

on allotted land. The Court of Appeals for the Federal

Circuit evaluated the fiduciary relationship formed

under the Indian Long-Term Leasing Act (see also,

Pawnee, 830 F.2d 187 (Fed. Cir. 1987)) and the Indian

General Allotment Act (see also, Mitchell I, 445 U.S.

535, 100 S. Ct. 1349, 63 L.Ed.2d 607 (1979)). Acknowl-

edging that the statutes and regulations did not confer

upon the Secretary comprehensive management leasing

under that scheme. It thus focused on the second prong

in Mitchell II. The “management” test looks to the

existence of a “comprehensive” scheme for there to be a

trust relationship sufficient for our Court to have

62a

‘urisdiction. By contrast, the “control” test has no such

— hie Sees 86 F.3d at 1560-61. The Federal

Circuit held in Brown that — 3 —.

rogram gave the Seeretary effeetive eon ov

— of allotted lands which must be exercised for the

benefit of the Indians. Id. at 1556, 1561. Under those

circumstances, the Court found that the government

had assumed an enforceable fiduciary duty sufficient for

Court of Federal Claims jurisdiction. Id. at 1563.

In particular, the Court distinguished between mere

“oversight power” to review transactions already

negotiated and executed by others, and the broader

authority over commercial leasing under the Indian

Long-Term Leasing Act. Id. at 1566. Allottees, for

example, were entitled to lease allotted lands only for

certain statutorily prescribed purposes and only after

seeking the permission of the Secretary of the Interior

and complying with terms and forms dictated by the

Secretary. Id. at 1561-62. Furthermore, under the

commercial leasing scheme, the allottee could not cancel

a lease without prior approval of the Secretary. By

contrast, the Secretary was entitled to cancel a lease

even over the protest of the Indian allottee-lessor. Id.

The regulations at issue here also require use of

certain forms, an unremarkable requirement in our

view. 25 C.F.R. § 211.30. Likewise, the regulations

provide for Secretarial cancellation, but only for cause,

an important. distinction from the regulations in Brown.

25 C.F.R. §§ 211.27, 211.22. On the whole, IMLA and

the 25 C.F.R. Part 211 regulations, especially as they

relate to the leasing of coal, preserve the Indians’

ability to enter into and cancel leases. As we noted

earlier, IMLA sought to remedy situations in which

“the Indians at no time hald] any voice in the granting

63a

of such leases.” S. REP. No. 75-985 at 2; see also, Crow

Tribe of Indians v. State of Montana, 650 F.2d 1104,

1112 (9th Cir. 1981) (one aim of the 1988 Act was to give

“tribal governments control over decisions to lease

their lands and over lease conditions, subject to ap-

proval of the Secretary of Interior, where before the

responsibility for such decisions was lodged in large

part only with the Secretary.”)

The regulatory scheme for coal stands in stark

contrast to that for oil and gas. A number of cases have

found the oil and gas program amounts to a jurisdic-

tional trust. Cheyenne-Arapaho Tribes v. U.S., 33 Fed.

Cl. 464 (1995); Pawnee, 830 F.2d 187 (Fed. Cir. 1987);

and Assiniboine and Sioux Tribes, 792 F.2d 782 (9th

Cir. 1986). That, however, has not happened as re-

spects coal. Compare, Navajo Tribe of Indians v.

United States, 9 Cl. Ct. 227 (1985) (Lydon, J.) (Court

assumed the existence of a jurisdictional trust for

minerals in general, but without extensive analysis).

Unlike the commercial leasing in Brown, mineral

leasi

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