UNITED STATES v. NAVAJO NATION


Syllabus

UNITED STATES v. NAVAJO NATION ( No. 01-1375 )
263 F. 3d 1325, reversed and remanded.

UNITED STATES v. NAVAJO NATION

certiorari to the united states court of appeals for the federal circuit


No. 01–1375. Argued December 2, 2002—Decided March 4, 2003

The Indian Mineral Leasing Act of 1938 (IMLA) provides that “[u]nallotted lands within any Indian reservation,” or otherwise under federal jurisdiction, “may, with the approval of the Secretary [of the Interior (Secretary)] … , be leased for mining purposes, by authority of the tribal council or other authorized spokesmen for such Indians.” 25 U. S. C. §396a. The Act aims to provide Indian tribes with a profitable source of revenue and to foster tribal self-determination by giving Indians a greater say in the use and disposition of the resources on their lands.

In 1964, the Navajo Nation (Tribe) permitted the predecessor of Peabody Coal Company (Peabody) to mine coal on the Tribe’s lands pursuant to Lease 8580 (Lease or Lease 8580). The Lease established a maximum royalty rate of 37.5 cents per ton of coal, but made that figure subject to reasonable adjustment by the Secretary on the 20-year anniversary of the Lease and every ten years thereafter. As Lease 8580’s 20-year anniversary approached, its 37.5 cents per ton rate yielded for the Tribe about 2% of gross proceeds. This return was higher than the ten cents per ton minimum established by then-applicable regulations implementing the IMLA. It was substantially lower, however, than the rate Congress established in 1977 as the minimum permissible royalty for coal mined on federal lands under the Mineral Leasing Act. In June 1984, the Area Director of the Bureau of Indian Affairs, acting pursuant to authority delegated by the Secretary and at the Tribe’s request, sent Peabody an opinion letter raising the Lease 8580 rate to 20 percent of gross proceeds. While Peabody’s administrative appeal was pending before Deputy Assistant Secretary for Indian Affairs John Fritz, Peabody wrote to Secretary Hodel, asking him either to postpone decision on the appeal or to rule in Peabody’s favor. Peabody representatives also met privately with Hodel during that period. In July 1985, Hodel sent a memorandum to Fritz “suggest[ing]” that he inform the parties that his decision was not imminent and urging them to continue their efforts to resolve the matter in a mutually agreeable fashion. The Tribe resumed negotiations with Peabody. In November 1985, the parties agreed to amend the Lease to provide, among other things, for a royalty rate of 12 1 / 2 percent of monthly gross proceeds, which was the then-customary rate for coal leases on federal and Indian lands. Pursuant to §396a of the IMLA, Secretary Hodel approved the amended Lease in December 1987.

In 1993, the Tribe brought this action for damages against the United States, alleging, inter alia , that the Secretary’s approval of the Lease amendments constituted a breach of trust. Although granting summary judgment for the United States, the Court of Federal Claims found that the Secretary had flagrantly dishonored the Government’s general fiduciary duties to the Tribe by acting in Peabody’s best interests rather than those of the Tribe. The court nevertheless concluded that the Tribe had entirely failed to link that breach of duty to any statutory or regulatory obligation which could be fairly interpreted as mandating compensation for the Government’s actions. The Federal Circuit reversed. Relying on 25 U. S. C. §399 and regulations promulgated thereunder, the appeals court determined that the measure of control the Secretary exercised over the leasing of Indian lands for mineral development sufficed to warrant a money judgment against the United States. Agreeing with the Federal Claims Court that the Secretary’s actions regarding Peabody’s administrative appeal violated the Government’s fiduciary obligations to the Tribe, the Court of Appeals remanded for further proceedings, including a determination of damages.

Held: United States v. Mitchell , 445 U. S. 535 (Mitchell I), and United States v. Mitchell, 463 U. S. 206 (Mitchell II), control this case. The controversy here falls within Mitchell I ’s domain, and the Tribe’s claim for compensation from the Government fails, for it does not derive from any liability-imposing provision of the IMLA or its implementing regulations. Pp. 11–23.

(a) To state a litigable claim, a tribal plaintiff must invoke a rights-creating source of substantive law that “can fairly be interpreted as mandating compensation by the Federal Government for the damages sustained.” Mitchell II, 463 U. S., at 218. Although the Indian Tucker Act, 28 U. S. C. §1505, confers jurisdiction upon the Court of Federal Claims in cases where this requirement is met, the Act is not itself a source of substantive rights. E.g., Mitchell II, 463 U. S., at 216. Pp. 11–12.

(b) Mitchell I and Mitchell II are the pathmarking precedents on the question whether a statute or regulation (or combination thereof) “can fairly be interpreted as mandating compensation by the Federal Government.” Mitchell II , 463 U. S., at 218. In Mitchell I , the Court held that the Indian General Allotment Act of 1887 (GAA)—which authorized the President to allot agricultural or grazing land to individual tribal members residing on a reservation, 25 U. S. C. §331, and provided that the Government would hold land thus allotted in trust for the sole use and benefit of the allottee, §348—did not authorize an award of money damages against the United States for alleged mismanagement of forests located on allotted lands. The Court concluded that the GAA created only a limited trust relationship that did not impose any duty upon the Government to manage timber resources. Mitchell I, 445 U. S., at 542. In Mitchell II, however, the Court held that a network of other statutes and regulations did impose judicially enforceable fiduciary duties upon the United States in its management of forested allotted lands, 463 U. S., at 222–224, and that the relevant prescriptions could fairly be interpreted as mandating compensation by the Federal Government when it breached those duties, id. , at 226–227. To state a claim cognizable under the Indian Tucker Act, Mitchell I and Mitchell II instruct, a Tribe must identify a substantive source of law that establishes specific fiduciary or other duties, and allege that the Government has failed faithfully to perform those duties. See Mitchell II, 463 U. S., at 216–217, 219. If that threshold is passed, the court must then determine whether the relevant source of substantive law “can fairly be interpreted as mandating compensation for damages sustained as a result of a breach of the duties [the governing law] impose[s].” Id., at 219. Although “the undisputed existence of a general trust relationship between the United States and the Indian people” can “reinforc[e]” the conclusion that the relevant statute or regulation imposes fiduciary duties, id. , at 225, that relationship alone is insufficient to support jurisdiction under the Indian Tucker Act. Instead, the analysis must train on specific rights-creating or duty-imposing statutory or regulatory prescriptions. Those prescriptions, however, need not expressly provide for money damages; the availability of such damages may be inferred. See id. , at 217, n. 16. Pp. 12–15.

(c) The statutes and regulations at issue cannot fairly be interpreted as mandating compensation for the Government’s alleged breach of trust in this case. 15–23.

(1) The IMLA and its regulations do not provide the requisite “substantive law” that “mandat[es] compensation by the Federal Government.” Mitchell II , 463 U. S., at 218. They impose no obligations resembling the detailed fiduciary responsibilities that Mitchell II found adequate to support a claim for money damages. The IMLA simply requires Secretarial approval before coal mining leases negotiated between Tribes and third parties become effective, §396a, and authorizes the Secretary generally to promulgate regulations governing mining operations, §396d. Unlike the “elaborate” provisions before the Court in Mitchell II , 463 U. S. , at 225, the IMLA and its regulations do not “give the Federal Government full responsibility to manage Indian resources … for the benefit of the Indians,” id. , at 224. The Secretary is neither assigned a comprehensive managerial role nor, at the time relevant here, expressly invested with responsibility to secure “the needs and best interests of the Indian owner and his heirs.” Ibid. Instead, the Secretary’s involvement in coal leasing under the IMLA more closely resembles the role provided for the Government by the GAA regarding allotted forest lands. See Mitchell I , 445 U. S., at 540–544. Although the GAA required the Government to hold allotted land in trust for allottees, that Act did not “authoriz[e], much less requir[e], the Government to manage timber resources for the benefit of Indian allottees.” Id., at 545. Similarly here, the IMLA and its regulations do not assign to the Secretary managerial control over coal leasing. Nor do they even establish the “limited trust relationship,” id. , at 542, existing under the GAA; no provision of the IMLA or its regulations contains any trust language with respect to coal leasing. Moreover, as in Mitchell I , imposing fiduciary duties on the Government here would be out of line with one of the statute’s principal purposes, enhancing tribal self-determination. See id. , at 543. Pp. 15–18.

(2) The Court rejects the Tribe’s arguments that the Secretary’s actions in this case violated discrete statutory and regulatory provisions whose breach is redressable in a damages action. The Tribe misplaces reliance on 25 U. S. C. §399, which is not part of the IMLA and does not govern Lease 8580. Enacted almost 20 years before the IMLA, §399 authorizes the Secretary to lease certain unallotted Indian lands for mining purposes on terms she sets, and does not provide for input from the Tribes concerned. That authorization does not bear on the Secretary’s more limited approval role under the IMLA. Similarly unavailing is the Tribe’s reliance on the Indian Mineral Development Act of 1982 (IMDA), 25 U. S. C. §2101 et seq. The IMDA governs the Secretary’s approval of agreements for the development of certain Indian mineral resources through exploration and like activities. It does not establish standards governing her approval of mining leases negotiated by a Tribe and a third party, such as Lease 8580. The Tribe’s vigorously pressed arguments headlining §396a, the IMLA’s general prescription, fare no better. Asserting that Secretary Hodel violated a §396a duty to review and approve proposed coal leases only to the extent they are in the Tribe’s best interests, the Tribe points to various Government reports identifying 20 percent as the appropriate royalty, and to the Secretary’s decision, made after receiving ex parte communications from Peabody, to withhold departmental action. In the circumstances presented, the Tribe maintains, Hodel’s eventual approval of the 12 1 / 2 percent royalty rate violated §396a in two ways: (1) It was improvident because it allowed conveyance of the Tribe’s coal for what Hodel knew to be about half of its value, and (2) it was unfair because Hodel’s intervention into the Lease adjustment process skewed the bargaining by depriving the Tribe of the 20 percent rate. These arguments fail, for they assume substantive prescriptions not found in §396a. As to the first argument, because neither the IMLA nor any of its regulations establishes anything more than a bare minimum royalty, there is no textual basis for concluding that the Secretary’s approval function includes a duty, enforceable in an action for money damages, to ensure a higher rate of return for the Tribe. Similarly, the Tribe’s second argument is not grounded in specific statutory or regulatory language. Nothing in §396a or the IMLA’s implementing regulations proscribed the ex parte communications in this case, which occurred during an administrative appeal process largely unconstrained by formal requirements. Moreover, even if Deputy Assistant Secretary Fritz had rendered an opinion affirming the 20 percent royalty approved by the Area Director, the Secretary could have set aside or modified his subordinate’s decision in the exercise of his authority as head of the Interior Department. Accordingly, rejection of Peabody’s appeal by Fritz would not necessarily have yielded a higher royalty for the Tribe. Pp. 18–23.

263 F. 3d 1325, reversed and remanded.

Ginsburg, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Scalia, Kennedy, Thomas, and Breyer, JJ., joined. Souter, J., filed a dissenting opinion, in which Stevens and O’Connor, JJ., joined.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.


TOP

Dissent

UNITED STATES, PETITIONER v. NAVAJO NATION

on writ of certiorari to the united states court of appeals for the federal circuit


[March 4, 2003]

Justice Souter , with whom Justice Stevens and Justice O’Connor join, dissenting.

The issue in this case is whether the Indian Mineral Leasing Act and its regulations imply a specific duty on the Secretary of the Interior’s part, with a cause of action for damages in case of breach. The Court and I recognize that if IMLA indicates that a fiduciary duty was intended, it need not provide a damages remedy explicitly; once a statutory or regulatory provision is found to create a specific fiduciary obligation, the right to damages can be inferred from general trust principles, and amenability to suit under the Indian Tucker Act. See United States v. White Mountain Apache Tribe , ante , at 4–6; United States v. Mitchell , 463 U. S. 206, 226 (1983) (Mitchell II) . I part from the majority because I take the Secretary’s obligation to approve mineral leases under 25 U. S. C. §396a as raising a substantial fiduciary obligation to the Navajo Nation (Tribe), which has pleaded and shown enough to survive the Government’s motion for summary judgment. I would affirm the judgment of the Federal Circuit.

IMLA requires the Secretary’s approval for the effectiveness of any lease negotiated by the Tribe with a third party. §396a; see also 25 CFR §211.2 (1985). The Court accepts the Government’s position, see Brief for United States 38, that the IMLA approval responsibility places no substantive obligation on the Secretary, save for a minimal duty to withhold assent from leases calling for less than the minimum royalty rate set by IMLA regulations, whatever that may be. Ante , at 20. Since that rate is merely a general standard, which may be a bargain rate when applied to extractable material of high quality, the obligation to demand it may not amount to much. The legislative history and purposes of IMLA, however, illuminated by the Secretary’s historical role in reviewing conveyances of Indian lands, point to a fiduciary responsibility to make a more ambitious assessment of the best interest of the Tribe before signing off.

The protective purpose of the Secretary’s approval power has appeared in our discussions of other statutes governing Indian lands over the years. In Tiger v. Western Investment Co. , 221 U. S. 286 (1911) , for example, we upheld the constitutionality of the Act of Apr. 26, 1906, ch. 1876, §22, 34Stat. 145, which made alienation of certain allotted lands by citizen Indians “subject to the approval of the Secretary of the Interior.” Although allotment and conferral of citizenship had given tribal members greater responsibility for their own interest, see, e.g. , Choteau v. Burnet , 283 U. S. 691, 694 (1931) , we nevertheless understood that the requirement of prior approval was supposed to satisfy the National Government’s trust responsibility to the Indians, Tiger , supra , at 310–311; accord, Sunderland v. United States , 266 U. S. 226, 233 (1924) (restraints on alienation of Indian property are enacted “in fulfillment of [Congress’s] duty to protect the Indians”). Shortly after Tiger , in Anicker v. Gunsburg , 246 U. S. 110 (1918) , we held that the Secretary’s authority to approve leases of allotted lands under the Act of May 27, 1908, ch. 199, §2, 35Stat. 312, was “unquestionably … given to him for the protection of Indians against their own improvidence and the designs of those who would obtain their property for inadequate compensation.” 246 U. S., at 119. The Secretary’s approval power was understood to be a significant component of the Government’s general trust responsibility. See Clinton, Isolated in Their Own Country: A Defense of Federal Protection of Indian Autonomy and Self-Government, 33 Stan. L. Rev. 979, 1002–1003 (1981); Chambers & Price, Regulating Sovereignty: Secretarial Discretion and the Leasing of Indian Lands, 26 Stan. L. Rev. 1061, 1061–1068 (1974).

Congress’s decision in IMLA to give the Secretary an approval authority is well understood in terms of this background, for in the enactment of IMLA, Congress devised a scheme of divided responsibility reminiscent of the old allotment legislation. While it changed the prior law by transferring negotiating authority from the Government to the tribes, it hedged that augmentation of tribal authority in leaving the Secretary with certain powers of oversight including the authority to approve or reject leases once the tribes negotiated them. 25 U. S. C. §§396a–g. The Secretary’s signature was the final step in a scheme of “uniform leasing procedures designed to protect the Indians,” Montana v. Blackfeet Tribe , 471 U. S. 759, 764 (1985) , and imposed out of a concern that existing laws were not “adequate to give the Indians the greatest return from their property,” S. Rep. No. 985, 75th Cong., 1st Sess., 2 (1937); H. R. Rep. No. 1872, 75th Cong., 3d Sess., 2 (1938). The “basic purpose” of the Secretary’s powers under IMLA is thus to “maximize tribal revenues from reservation lands.” Kerr-McGee Corp. v. Navajo Tribe , 471 U. S. 195, 200 (1985) ; see Blackfeet Tribe , supra , at 767, n. 5. Consistent with this aim, the Secretary’s own IMLA regulations (now in effect) provide that administrative actions, including lease approvals, are to be taken “[i]n the best interest of the Indian mineral owner.” 25 CFR §211.3 (2002); see also §211.1 (stating that the overarching purpose of IMLA regulations is to ensure that Indians’ mineral resources “will be developed in a manner that maximizes their best economic interests”). 1 Thus, viewed in light of IMLA’s legislative history and the general trust relationship between the United States and the Indians, see Mitchell II , 463 U. S., at 224–225, §396a supports the existence of a fiduciary responsibility to review mineral leases for substance to safeguard the Indians’ interest. 2

I do not mean to suggest that devising a specific standard of responsibility is any simple matter, for we cannot ignore the tension between IMLA’s two objectives. If we thought solely in terms of the aim to ensure that negotiated leases “maximize tribal revenues,” Kerr-McGee , supra , at 200, we would ignore the object of IMLA to provide greater tribal responsibility, against which the Secretary’s oversight is acting as a hedge. See Royster, Mineral Development in Indian Country: The Evolution of Tribal Control Over Mineral Resources, 29 Tulsa L. Rev. 541, 558–580 (1994) (noting the twin aims of IMLA). The more stringent the substantive obligation of the Secretary, the less the scope of tribal responsibility. The Court, however, errs in the opposite direction, giving overriding weight to the interest of tribal autonomy to the point of concluding that the Secretary’s approval obligation cannot be an onerous one, ante , at 17–18, thus losing sight of the mixture of congressional objectives. The standard of responsibility simply cannot give the whole hog to the one congressional policy or the other.

While this is not the case to essay any ultimate formulation of a balanced standard, even a reticent formulation of the fiduciary obligation would require the Secretary to withhold approval if he had good reason to doubt that the negotiated rate was within the range of reasonable market rates for the coal in question, or if he had reason to know that the Tribe had been placed under an unfair disadvantage at the negotiating table by his very own acts. See Restatement (Second) of Trusts §§170, 173, 174, 176 (1957). And those modest standards are enough to keep the present suit in court, for the Tribe has pleaded a breach of trust in each respect and has submitted evidence to get past summary judgment on either alternative.

The record discloses serious indications that the 12½ percent royalty rate in the lease amendments was substantially less than fair market value for the Tribe’s high quality coal. In the course of deciding that 20 percent would be a reasonable adjustment under the terms of the lease, the Area Director of the Board of Indian Affairs (BIA) considered several independent economic studies, each one of them recommending rates around 20 percent, and one specifically rejecting 12½ percent as “inadequate.” App. 6–7. 3 These conclusions were confirmed by the expert from the BIA’s Energy and Mineral Division, in a supplemental report submitted after Peabody appealed the Area Director’s decision. That report not only endorsed the 20 percent rate, but expressly found that the royalty rate “should be much higher than the 12.5% that the Federal Government receives for surface-mined coal” because the Navajo coal is “extremely valuable.” Id. , at 22. No federal study ever recommended a royalty rate under 20 percent, and yet the Secretary approved a rate little more than half that. Id. , at 134. When this case was before the Federal Circuit, Judge Schall took the sensible position that the Secretary was obligated to obtain an independent market study to assess the rate in these circumstances, see 263 F. 3d 1325, 1340 (2001) (opinion concurring in part and dissenting in part), and the record as it stands shows the Secretary to be clearly open to the claim of fiduciary breach for approving the rate on the information he is said to have had. Of course I recognize that the Secretary’s obligation is to approve leases, not royalty rates in isolation, but an allegation that he approved an otherwise unjustified rate apparently well below market for the particular resource deposit certainly raises a claim of breach.

What is more, the Tribe has made a powerful showing that the Secretary knew perfectly well how his own intervention on behalf of Peabody had derailed the lease adjustment proceeding that would in all probability have yielded the 20 percent rate. After his ex parte meeting with Peabody’s representatives, the Secretary put his name on the memorandum, drafted by Peabody, directing Deputy Assistant Secretary Fritz to withhold his decision affirming the 20 percent rate; directing him to mislead the Tribe by telling it that no decision on the merits of the adjustment was imminent, when in fact the affirmance had been prepared for Fritz’s signature; and directing him to encourage the Tribe to shift its attention from the Area Director’s appealed award of 20 percent and return to the negotiating table, where 20 percent was never even a possibility. App. 117–118. The purpose and predictable effect of these actions was to induce the Tribe to take a deep discount in the royalty rate in the face of what the Tribe feared would otherwise be prolonged revenue loss and uncertainty. The point of this evidence is not that the Secretary violated some rule of procedure for administrative appeals, ante , at 21–22, or some statutory duty regarding royalty adjustments under the terms of the earlier lease. What these facts support is the Tribe’s claim that the Secretary defaulted on his fiduciary responsibility to withhold approval of an inadequate lease accepted by the Tribe while under a disadvantage the Secretary himself had intentionally imposed. 4

All of this is not to say that the Tribe would end up with a recovery at the end of the day. Disputed facts have not been tried; the negotiations affected not only the 1964 lease that was subject to adjustment on demand, but also other leases apparently not subject to the same option for the Tribe’s benefit; and the renegotiated terms affected lease provisions other than royalties (including tax terms). For all we can say now, the net of all these changes may have been an overall bargain in the Tribe’s interest, despite the smaller royalty figure in the lease as approved. But the only issue here is whether the Tribe’s claims address one or more specific statutory obligations, as in Mitchell II , at the level of fiduciary duty whose breach is compensable in damages. The Tribe has pleaded such duty, the record shows that the Tribe has a case to try, and I respectfully dissent.


Notes

1 In addition, the Interior Department at all times relevant to this case had in place an internal policy providing that mineral leases would be approved only if “the terms and conditions of the lease are in the best interest of the Indian landowner.” App. 2, 133–134.

2 The majority seeks to distinguish Mitchell II, saying that the timber management statutes at issue there gave the Secretary a “comprehensive managerial role” and stated explicitly that timber sales had to be made in consideration of “ ‘the needs and best interests of the Indian owner and his heirs.’ ” Ante, at 16–17. The comprehensiveness of the Secretary’s role just described is what made Mitchell II an easy case. Mitchell II did not say, however, that fiduciary duties can only be found where the Government has “elaborate control.” 463 U. S., at 225. Nor does Mitchell II ’s reference to the statute’s explicit “best interests” language foreclose the use of standard interpretive tools like legislative history to determine whether a statute establishes a fiduciary duty. The majority proceeds to discount IMLA’s legislative history, suggesting that Congress’s concern for Indian revenues was limited to the elimination of certain constraints peculiar to Indian mineral leases. Ante, at 21, n. 16. But the cited IMLA legislative reports do not indicate that Congress’s aims were restricted to curing these specific deficiencies of prior law, and they do nothing to detract from the consistent recognition in our precedents that IMLA’s leasing procedures were designed to protect Indian interests in mineral resources.

3 The United States Bureau of Mines recommended an adjusted royalty rate of 20 percent, while the BIA’s Division of Energy and Mineral Resources recommended 24.44 percent in a separate report. Several private studies also endorsed rates in the 20 percent range: one, conducted by the Council of Energy Resource Tribes, concluded that the rate should be between 15 and 20 percent, and another, prepared by a private management consultant firm at the request of the Navajo, advocated a rate of between 17.08 and 22.77 percent. The only report with a significantly lower rate was the report submitted by Peabody, which recommended a rate of 5.57 to 7.16 percent. This figure was based not on current fair value but rather on what rate would “restore the benefits that were originally contemplated when the 1964 lease was signed by both parties.” Id., at 16–18.

4 The possibility that the Secretary could have set aside Fritz’s rejection of Peabody’s appeal does not, despite the Court’s suggestion, ante, at 22, defeat the Tribe’s claim under §396a. As an initial matter, whatever formal authority the Secretary may have had, nothing cited by the parties suggests that the Secretary was considering such action, which would have painted him plainly as catering to Peabody. Hence the cautious qualification in the memorandum to Fritz, emphasizing that his intervention was “not intended as a determination of the merits” of the 20 percent rate adjustment. App. 118. Given that the federal economic surveys unanimously endorsed 20 percent, it is unclear what basis the Secretary would have had to reject the rate on the merits. More importantly, the gravamen of the Tribe’s claim is not that it is entitled to the 20 percent rate adjustment under the lease. Rather, it is that the Secretary’s actions in deceiving the Tribe about the status of Peabody’s appeal skewed the subsequent bargaining process, and the resulting royalty rate, in Peabody’s favor. On that issue, whether the Secretary might have ultimately favored Peabody’s appeal, while perhaps a subject of relevant evidence, is not dispositive.