Opinion ID: 210370
Heading Depth: 2
Heading Rank: 6

Heading: Scope and Breach of Government's Trust Duties

Text: Even with a substantive source of law that can fairly be interpreted as mandating compensation for a breach of trust, the government asserts that the breach alleged by the Nation does not fall within the scope of the government's fiduciary trust duties. Specifically, the government asserts that the Nation must allege a violation of a specific rights-creating or duty-imposing statute or regulation and that the common law of trusts cannot be applied. These arguments fail for two independent reasons. In addition, the undisputed facts as determined by the Court of Federal Claims demonstrate that the government breached its trust duties. This court thus holds that the Nation is entitled to judgment as a matter of law. SmithKline, 403 F.3d at 1337 (stating that if both parties sought summary judgment and if this court determines that no material facts remain in dispute, [this court] may proceed to determine entitlement to judgment under the law). First, the Supreme Court heard, considered, and rejected these arguments by the government in Apache. See Apache U.S. Br., 2002 WL 1559747, at -43. It is true that in determining whether there is a claim cognizable under the Indian Tucker Act, the analysis must train on specific rights-creating or duty-imposing statutory or regulatory prescriptions. Navajo III, 537 U.S. at 506, 123 S.Ct. 1079. But once that focus [for the trust relationship i]s provided, general trust law [i]s considered in drawing the inference that Congress intended damages to remedy a breach of obligation. Apache, 537 U.S. at 477, 123 S.Ct. 1126. The Court thus found in Apache that common-law trust duties helped to define the contours of the United States' fiduciary responsibilities. See id. at 474-75, 123 S.Ct. 1126. While it is true that the 1960 Act does not, like the statutes cited in that case, expressly subject the Government to duties of management and conservation, the fact that the property occupied by the United States is expressly subject to a trust supports a fair inference that an obligation to preserve the property improvements was incumbent on the United States as trustee. This is so because elementary trust law, after all, confirms the commonsense assumption that a fiduciary actually administering trust property may not allow it to fall into ruin on his watch. Id. at 475, 123 S.Ct. 1126. Likewise, in Mitchell II, the Court stated that a fiduciary relationship necessarily arises when the Government assumes such elaborate control over forests and property belonging to Indians. 463 U.S. at 225, 103 S.Ct. 2961 (noting that [a]ll of the necessary elements of a common-law trust are present even though `nothing is said expressly in the authorizing or underlying statute (or other fundamental document) about a trust fund, or a trust or fiduciary connection' (quoting Navajo Tribe of Indians v. United States, 224 Ct.Cl. 171, 183, 624 F.2d 981 (1980))). In this case, the government's arguments are identical to those it made in Apache. Therefore, this court rejects the government's arguments and holds that the common law trust duties of care, candor, and loyalty help define the fiduciary responsibilities in this case. In Navajo I, the Court of Federal Claims found that the government violated these basic duties of care, loyalty, and candor owed a beneficiary by a trustee. See 46 Fed.Cl. at 226-27 (Let there be no mistake. Notwithstanding the formal out-come of this decision, we find that the Secretary has indeed breached these basic fiduciary duties.). We agree that the government violated these common-law trust duties. Second, the asserted network of statutes and regulations enumerates specific duties that the government violated. The Navajo-Hopi Rehabilitation Act of 1950 provides that the Tribal Councils of the Navajo and Hopi Tribes and the Indian communities affected shall be kept informed and afforded opportunity to consider from their inception plans pertaining to the program authorized, including the program of basic improvements for the conservation and development of the resources of the Navajo and Hopi Indians. 25 U.S.C. §§ 631, 638. Similarly, 30 C.F.R. § 750.6(d) (1987), promulgated pursuant to the Surface Mining Control and Reclamation Act of 1977, specifically makes the Bureau of Indian Affairs responsible for providing representation for Indian mineral owners and other Indian land owners in matters relating to surface coal mining and reclamation operations on Indian lands. In this case, the Court of Federal Claims found that the government met secretly with parties having interests adverse to those of the [Nation], adopt[ed] the third parties' desired course of action in lieu of action favorable to the [Nation], and then misle[d] the [Nation] concerning these events. Navajo I, 46 Fed.Cl. at 226. Under these facts, the government violated its duty to keep the Nation informed regarding the development of its coal resources and to provide the Nation representation in a matter related to coal mining operations. In addition, the Indian lands section of the Surface Mining Control and Reclamation Act of 1977 mandates that the Secretary shall include and enforce terms and conditions . . . as may be requested by the Indian tribe in such leases. 30 U.S.C. § 1300(e); see also 30 C.F.R. 750.20 (1987) (using nearly identical language). This language indicates Congress' apparent desire that terms and conditions requested by the Nation be included in leases. Cf. Agwiak v. United States, 347 F.3d 1375, 1380 (Fed.Cir.2003) (We have repeatedly recognized that the use of the word `shall' generally makes a statute money-mandating.). The Nation has cited legislative history to support this interpretation: This is Indian land. There is a section in this bill that deals specifically with how the Indians will be protected, and so forth, as they negotiate. 123 Cong. Rec. S15,575 (daily ed. May 19, 1977) (statement of Sen. Goldwater). In this case, the Nation's request was reasonable. The Nation did not ask the Secretary to incorporate an outrageous term or condition. Rather, the Nation asked that the royalty rate be adjusted to a reasonable level, and Peabody had consented to such a reasonable adjustment explicitly in Lease 8580. Prior to the ex parte interference, the Bureau of Indian Affairs had deemed proper and approved an increase in the royalty rate to 20%. Despite the mandate of § 1300(e) and the Nation's request for an adjustment to a reasonable royalty rate, however, it is undisputed that Secretary Hodel refused to make this royalty adjustment permanent after meeting with Peabody's representative, whom the government conceded was a former aide and friend of Secretary Hodel. The Nation thus entered negotiations with Peabody unarmed with critical knowledge and unaware that it no longer had [a] competitive edge in its bargaining while the companies were well aware of the fact. Navajo I, 46 Fed.Cl. at 227. Then after very briefly reviewing the merits of the proposals, the Secretary approved lease amendments with royalty rates well below the rate that had previously been determined appropriate by those agencies responsible for monitoring the federal government's relations with Native Americans. Id. at 226-27. Under these facts, the government violated its duty to include and enforce terms and conditions requested by the Nation. Similarly, in Escondido Mutual Water Co. v. La Jolla Band of Mission Indians, 466 U.S. 765, 104 S.Ct. 2105, 80 L.Ed.2d 753 (1984), the Supreme Court held that requested terms must be incorporated where mandated by a statute. The statute at issue in Escondido placed a specific condition on the power of the Federal Energy Regulatory Commission (Commission) to issue licenses for hydroelectric project works located on the public lands and reservations of the United States, including lands held in trust for Indians. Id. at 767, 104 S.Ct. 2105. Specifically, § 4(e) of the Federal Power Act, 41 Stat. 1066 (codified as amended at 16 U.S.C. § 797(e)), stated that the licenses  shall be subject to and contain such conditions as the Secretary of the department under whose supervision such reservation falls shall deem necessary for the adequate protection and utilization of such reservations (emphasis added). Based on this statutory language, the Court stated that Congress' apparent desire that the Secretary's conditions `shall' be included in the license must therefore be given effect unless there are clear expressions of legislative intent to the contrary. Id. at 772, 104 S.Ct. 2105. Finding that Congress was no doubt interested in centralizing federal licensing authority into one agency and that it did not intend to relieve the secretaries of all responsibility for ensuring that reservations under their respective supervision were adequately protected, the Court concluded that there was no clear legislative intent to the contrary. See id. at 773-75, 104 S.Ct. 2105. In addition, the Court was untroubled by the ability of the Secretary to require the Commission to include the Secretary's conditions in the license over its objection because the statute limited the types of conditions that the Secretary could require to those reasonably related to the protection of the reservation and its people. See id. at 776-79, 104 S.Ct. 2105. The government appears to assert that the Secretary's duty to include and enforce terms and conditions requested by the Nation under § 1300(e) is limited to environmental protection standards. It is true that the Surface Mining Control and Reclamation Act of 1977 focuses on environmental protection, not royalty rates. Neither § 1300(e) nor its companion regulation, however, contains any subject matter limitation. The government also asserts that § 1300(e) does not apply because Lease 8580 did not issue after August 3, 1977. The government, however, fails to note the lease amendments, which the parties executed and the Secretary approved after August 3, 1977. While § 1300(e) and its companion regulation do not specify whether the statutory requirement should apply to the lease amendments in this case, this court concludes in the affirmative. The lease amendments to Lease 8580 did not incorporate a minor change. Rather, the package of amendments adjusted the royalty rates for three different leases, resolved a broad range of issues between Peabody and the Nation, and added 90 million tons of coal to the 200 million tons originally leased from the Nation's reservation lands in Arizona. Without its exhibits, the amendments numbered more pages than the original Lease 8580. Therefore, while an amendment in form, the agreement was in substance a new lease. Indeed, within the agreement, the parties acknowledged that the parties could have executed a separate lease or leases to address the same issues, and that they chose to do so instead in a document that amended Lease 8580. Under these circumstances, this court holds that § 1300(e) applied to the lease amendments at issue in this case and thus, imposed a duty on the Secretary to include and enforce a reasonable royalty rate.