Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_08-cv-08028/USCOURTS-azd-3_08-cv-08028-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:2201 Declaratory Judgment

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Salt River Project Agricultural

Improvement and Power District, a

municipal corporation and political

subdivision of the State of Arizona;

Headwaters Resources, Inc., a Utah

corporation, 

Plaintiffs, 

vs.

Reynold R. Lee; Casey Watchman;

Woody Lee; Peterson Yazzie; Evelyn

Meadows; Honorable Herb Yazzie;

Honorable Lorene B. Ferguson; Honorable

Lorene B. Begay; Leonard Thinn; Sarah

Gonnie, 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. CV 08-8028-PCT-JAT

ORDER

Pending before the Court are the Navajo Defendants’ Motion to Dismiss (Doc. #34)

and Motion for Summary Judgment (Doc. #66), Defendants Gonnie and Thinn’s Motion for

Summary Judgment (Doc. #70), and Plaintiff SRP’s Motion for Summary Judgment (Doc.

#54). Because the Court’s ruling on the Motion to Dismiss disposes of the case, the Court

will not address the Motions for Summary Judgment. 

I. BACKGROUND

This case originated with two separate employee complaints filed by Defendants

Leonard Thinn and Sarah Gonnie, both members of the Navajo Nation, who worked at the

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 1 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 2 -

Navajo Generating Station (“NGS”) located near Page, Arizona. Plaintiff Salt River Project

Agricultural Improvement and Power District (“SRP”) operates NGS, a large electrical plant

that is located on the Navajo Reservation. SRP contracts with Plaintiff Headwaters

Resources (“Headwaters”) at NGS.

SRP and other energy utilities entered into a lease (the “1969 Lease”) with the Navajo

Nation in 1969 to allow SRP to operate the NGS on Navajo Nation land. At the same time

SRP entered into the 1969 Lease, the United States Secretary of the Interior granted SRP and

the other utilities certain easements and rights-of-way (the “§323 Grant”). The Secretary

entered into the §323 Grant to induce SRP and the others to proceed with the development

of the NGS.

On December 2, 2004, Mr. Thinn, a former employee of SRP, filed a charge with the

Office of Navajo Labor Relations (“ONLR”), an office created by the Navajo Tribal Council,

alleging that he had been terminated without just cause in violation of the Navajo Preference

in Employment Act (“NPEA”). The ONLR determined there was probable cause to believe

SRP had violated the NPEA and issued a Notice of Right to Sue. Mr. Thinn filed a

complaint against SRP with the Navajo Nation Labor Commission (“NNLC”) on November

15, 2005. The NNLC granted SRP’s motion to dismiss the complaint for lack of jurisdiction.

Mr. Thinn filed a notice of appeal on May 12, 2006. 

On March 2, 2005, Ms. Gonnie, a former employee of Headwaters, filed a charge with

the ONLR alleging that she had been terminated for unreasonable and insufficient reasons.

On September 16, 2005, the ONLR issued Ms. Gonnie a Right to Sue letter. On September

22, 2005, Ms. Gonnie filed a complaint with the NNLC. On April 28, 2006, the NNLC

granted Headwaters’s motion to dismiss for lack of jurisdiction. Ms. Gonnie appealed on

May 12, 2006. 

The Navajo Nation Supreme Court (“NNSC”) consolidated the Thinn and Gonnie

appeals and reversed the judgments of the NNLC. The NNSC ruled that the NPEA applies

to SRP and Headwaters and that the NNLC has jurisdiction to enforce the NPEA against

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 2 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 3 -

them. The NNSC remanded to the NNLC for further proceedings on the merits of the Thinn

and Gonnie claims.

The NNLC set the two cases for hearings in April of 2008. Based on SRP’s request

to have the Secretary of the Interior (the “Secretary”) address the jurisdictional issue, SRP

and Headwaters filed motions to stay the Thinn and Gonnie hearings. On February 27, 2008,

the NNLC denied the motions to stay. Plaintiffs filed this action on February 29, 2008. The

NNLC later stayed the Thinn and Gonnie cases.

The Navajo Defendants filed the pending Motion to Dismiss (Doc. #34) on March 31,

2008. They argue that Plaintiffs must submit the jurisdictional dispute to the Secretary

pursuant to the 1969 Lease and cannot file the case with the District Court as a first resort.

Plaintiff SRP filed a Motion for Summary Judgment (Doc. #54), which Plaintiff Headwaters

joined, on August 8, 2008. Plaintiffs argue that the NPEA does not apply to the operation

of NGS because the Navajo Nation waived its right to regulate employment relations there

pursuant to the 1969 Lease.

During the pendency of this case, Plaintiffs also have pursued a dispute resolution

before the Secretary. On February 4, 2008, Plaintiffs sent a letter to the Secretary requesting

that he rule that the NPEA does not apply to SRP or Headwaters at NGS (Doc. #5 Ex. 12).

The Secretary initially responded in a letter dated May 10, 2008, by finding that the Navajo

Nation had not clearly waived in the 1969 Lease the Nation’s right to regulate employment

relationships at NGS. (Doc. #55-2 Ex. 1 to Ex. A). Following this response, SRP sent

correspondence dated June 24, 2008 to the Secretary requesting reconsideration of his

decision. (Doc. #55-2 Ex. 2 to Ex. A). In a letter dated August 1, 2008, a different Acting

Deputy Assistant Secretary indicated that the Secretary would entertain the request for

reconsideration. (Doc. #55-2 Ex. 3 to Ex. A). Then, in a letter dated October 2, 2008, the

Secretary declined to decide the jurisdictional dispute and instead deferred to the Court’s

determination of this litigation. (Doc. #74-2 Ex. 1 to Ex. B).

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 3 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

Because the Navajo Defendants’ Motion to Dismiss deals with jurisdiction, rather

than failure to state claim, the Court can consider items not in the Complaint. 

- 4 -

II. ANALYSIS

The Navajo Defendants argue that the Court should dismiss this case in favor of the

dispute resolution procedure set out in the 1969 Lease. The Court therefore must decide

whether it should exercise jurisdiction over the case or dismiss in favor of the Secretary.

“Federal Rule of Civil Procedure 12(b)(1) allows litigants to seek the dismissal of an action

from federal court for lack of subject matter jurisdiction.” Tosco Corp. v. Communities for

a Better Environment, 236 F.3d 495, 499 (9th Cir. 2001). Normally, on a 12(b)(1) motion,

the court is, “free to hear evidence regarding jurisdiction and to rule on that issue prior to

trial, resolving factual disputes where necessary. In such circumstances, no presumptive

truthfulness attaches to plaintiff’s allegations, and the existence of disputed material facts

will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.”

Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987) (internal quotations and citations

omitted).1

 

The Navajo Defendants base their Motion to Dismiss on the dispute resolution process

in the 1969 Lease. Plaintiffs counter that the concomitant §323 Grant provides for judicial

resolution of this case. Despite relying on the §323 Grant’s dispute resolution provisions,

Plaintiffs rely on the 1969 Lease for their argument that the Navajo Nation waived its right

to regulate employment relations at NGS.

In order to decide the dispute resolution issue, the Court must look at the purposes and

provisions of the 1969 Lease and the §323 Grant. The Navajo Nation entered into the 1969

Lease with SRP and other energy utilities to allow SRP to locate NGS on the Navajo

Reservation. The 1969 Lease contains the following “non-regulation” clause:

Operation of Navajo Generation Station. The Tribe covenants

that, other than as expressly set out in this Lease, it will not

directly or indirectly regulate or attempt to regulate the Lessees

in the construction, maintenance or operation of the Navajo

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 4 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 5 -

Generation Station and the transmission systems of the Lessees,

or the construction, maintenance or operation of the fuel

transportation system of the Lessees or the Fuel Transporter.

This covenant shall not be deemed a waiver of whatever rights

the Tribe may have to regulate retail distribution of electricity

on the Reservation Lands. Nothing herein shall convey to the

Lessees, or any of them, any rights to engage in retail

distribution of electricity on Reservation Lands.

(Doc. #5 Ex. 1, §16).

The 1969 Lease also contains a clause dictating that the Lessees shall give preference

in employment to local members of the Navajo Nation. (Doc. #5 Ex. 1, §18). The final

pertinent 1969 Lease provisions are §§ 25 (b) & (c), which read:

(b) All disagreements or disputes between Lessees, or any of

them, and the Tribe, except as provided in Section 25(a) hereof,

arising under or in connection with the Lease or concerning the

validity or binding effect of the Lease, including any disputes

arising as to the provisions of the Lease or the rights, duties and

obligations of the parties under this Lease . . . are to be referred

to the Secretary [of the Interior] for determination, if not

theretofore resolved by agreement between the parties. . . .

(c) In the event the parties fail to promptly resolve a dispute

arising under Section 25(b) hereof either party may at any time

submit the dispute to the Secretary for decision. Such

submission shall be in writing, setting forth the issues and facts

involved with sufficient clarity and detail to apprise the

Secretary and the other party or parties of the nature of the

dispute, and a copy thereof shall be delivered to the other party,

concurrently with the delivery to the Secretary. It is understood

that the Secretary will give notice to the other party of the matter

submitted for his decision and will afford the parties the

opportunity to submit written or oral support for their respective

views. The procedures followed by and the actions of the

Secretary in reaching his decision shall be subject to the

applicable provisions, if any, of the Administrative Procedures

Act (5 U.S.C. §§1001-1011), or any successor statutory

provisions thereto, including those provisions related to judicial

review.

After the Secretary has reached his decision on a matter

submitted to him for decision as herein provided, written notice

of the decision shall be sent to the parties.

(Doc. #5 Ex. 1, §25).

Concurrently with the Lease, the Secretary granted SRP and the other utilities certain

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 5 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 6 -

easements and rights-of-way to encourage them to build NGS on the Reservation. The

Secretary determined that the construction, maintenance, and operation of NGS would

benefit the Navajo Nation and would foster the development of resources at the Reservation.

The Navajo Nation is not a party to the §323 Grant.

 The Secretary entered into the §323 Grant to induce SRP and the others to proceed

with the development of NGS. The §323 Grant gives SRP and its contractors the rights of

“quiet enjoyment and peaceful and exclusive possession of the Granted Lands.” (Doc. #5

Ex. 2, §21). With regard to dispute resolution, the §323 Grant provides:

If under color of Navajo tribal authority, the possession or quiet

enjoyment of the granted lands or other rights accorded the

Grantees by this §323 Grant are interfered with and the Grantees

are unable to obtain redress for such interference by judicial

action in any appropriate State or Federal court because of the

successful assertion, by the Tribe or by any person or persons

purportedly acting under its authority, of immunity from suit or

want of jurisdiction of any such court over the legal issues

involved in such interference or over internal affairs of the

Tribe, the Secretary will take such action as is authorized to

protect the Grantees in the possession and quiet enjoyment of

the granted lands and other rights granted herein . . . It is

understood that before the Secretary shall be called upon to

assist the Grantees hereunder, they must have first taken all legal

action available to them in State or Federal Courts to redress the

interference and have been frustrated by the successful

interposition of tribal immunity from suit or want of jurisdiction

of any such court over the legal issues involved in such

interference or over internal affairs of the Tribe . . . 

(Doc. #5 Ex. 2, §10). 

Plaintiffs brought this action to enjoin the NNLC, ONLR, and the NNSC from

applying the NPEA at NGS. Citing §16 of the 1969 Lease, Plaintiffs argue that the Navajo

Nation waived its right to regulate operations at NGS. Plaintiffs assert that the

§16"operation” waiver extends to the regulation of employment relations at NGS. Because

the NPEA constitutes employment regulation, it therefore cannot be applied at NGS. 

Although the Plaintiffs rely on the 1969 Lease for their waiver argument, they claim

that the §323 Grant’s dispute resolution procedure should control, rather than the 1969

Lease’s procedure. Plaintiffs argue that Defendants’ attempts to have the NPEA apply at

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 6 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

When the Court uses the term “Tribe” to refer to the Navajo Nation, it does so only

because that is the term used in the 1969 Lease.

- 7 -

NGS disturb Plaintiffs’ rights of possession and quiet enjoyment of the land grants. If

members of the Navajo Nation had built an obstruction on NGS’s access road or in some

other away disrupted Plaintiffs’ use of the land, the Court might agree. But the Navajos have

not infringed on Plaintiffs’ right to possession or enjoyment of the rights of way. Rather,

Plaintiffs have characterized Defendants’ actions as violations of the §323 Grant in an effort

to gain the dispute resolution procedures of the Grant. The Court finds that if the Plaintiffs

want to pursue an action based on a right allegedly given to them in the 1969 Lease, they

must use the dispute resolution procedures set forth in that Lease.

Plaintiffs argue the 1969 Lease’s dispute resolution provisions cannot apply because

only the Navajo Nation signed the Lease, not the individual Defendants, and Plaintiffs did

not name the Navajo Nation as a party. The Court first notes that none of the Defendants

were signatories to the §323 Grant either – the agreement Plaintiffs argue controls the dispute

resolution procedure. Nor was the Navajo Nation a party to the §323 Grant. 

Further, the Navajo Nation’s right to regulate Navajo employment relationships at

NGS is at issue here, regardless of whether Plaintiffs named the Nation as a defendant.

Section 25 of the 1969 Lease provides that, with the exception of lease payment defaults, all

disagreements between SRP and “the Tribe”2

 regarding the Lease shall be referred to the

Secretary for determination. 

This case undisputedly involves a provision of the 1969 Lease – the waiver provision;

and the “Tribe” can act only through its members and representatives. Members of the

ONLR, NNLC, and NNSC effectively are acting as the “Tribe” by attempting to apply the

NPEA, a Navajo statute, at NGS. Therefore, although Plaintiffs named the individuals as

Defendants to avoid assertions of sovereign immunity, Plaintiffs’ disagreement is really with

the Nation and its regulation, as enforced by members of the Nation. 

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 7 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 8 -

Because the Plaintiffs’ disagreement regarding the waiver provision of the 1969 Lease

is in essence a disagreement with the Navajo Nation, the parties must follow the Lease’s

dispute resolution process. It is only equitable that if Plaintiffs want the benefit of the 1969

Lease’s alleged waiver, they should follow the resolution procedures contained in the Lease.

The 1969 Lease provides for referral to the Secretary for dispute resolution. The process is

subject to the provisions of the Administrative Procedures Act, including the APA’s judicial

review provisions, 5 U.S.C. §701 et seq., which means that Plaintiffs may yet have their day

in Court. 

The Court understands that in his most recent statement on the jurisdictional dispute,

the Secretary deferred to the Court for decision. The Court respectfully disagrees with the

Secretary’s determination that the Court should initially resolve this dispute. Because the

1969 Lease calls for referral to the Secretary of disputes involving the Lease, the Court will

dismiss this case in favor of the parties proceeding before the Secretary as set out in §25 of

the Lease. The Secretary shall decide whether, under Ninth Circuit precedent, the

“operations” waiver contained in the 1969 Lease waived the Navajo Nation’s right to apply

the NPEA at NGS.

If the Plaintiffs continue to pursue an action before the Secretary, they shall provide

the Secretary with a copy of this Order. Plaintiffs also shall give copies of any writings

submitted to the Secretary to counsel for the individual Defendants.

Accordingly,

IT IS ORDERED GRANTING the Navajo Defendants’ Motion to Dismiss (Doc.

#34). The case is dismissed in its entirety.

IT IS FURTHER ORDERED DENYING as moot Plaintiffs’ Motion for Summary

Judgment (Doc. #54), the Navajo Defendants’ Motion for Summary Judgment (Doc. #66),

Defendants Gonnie and Thinn’s Motion for Summary Judgment (Doc. #70), and any other

pending motions.

IT IS FURTHER ORDERED that if Plaintiffs continue to pursue an action before the

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 8 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 - 9 -

Secretary, they shall provide the Secretary with a copy of this Order.

DATED this 13th day of January, 2009.

Case 3:08-cv-08028-JAT Document 89 Filed 01/14/09 Page 9 of 9