The Supreme Court's Recent
Ignoring Longstanding Fiduciary Duties to Tribes

By EDWARD LAZARUS

Thursday, Mar. 20, 2003

For hawks and doves alike, the next few months are likely to define with fearful clarity what the United States now stands for in the world, and to determine how much of a moral compass this nation now possesses.

This large question looming on the horizon of foreign affairs led me to think about a relatively small and unremarked case that the Supreme Court decided two weeks ago, United States v. Navajo Nation.

The holding of the case, which involves an interpretation of the Indian Mineral Leasing Act, appears anything but profound on first glance. But on reflection, it suggests that the Court - including several of the more "liberal" justices - has retreated into a brittle formalism and hyper technicalism that allows no room for moral judgment.

Thus, a burning question at the Court - as on the battle front - is whether the democratic experiment that is the United States, is in danger of losing its soul.

The Facts of the Navajo Nation Case

Under the Indian Mining Leasing Act, the Secretary of Interior must approve any lease negotiated between a tribe and a third party. According to legislative history and past Court rulings, the approval requirement is designed "to give Indians the greatest return for their property," and to protect Indian interests by "maximiz[ing] tribal revenue from Indian lands." Accordingly, the Interior Department's regulations require that lease approvals be provided "in the best interest of the Indian mineral owner."

Longstanding Supreme Court precedent makes clear that the Secretary's approval power is deemed to be an essential aspect of the government's general trust responsibility towards Indian tribes. More specifically, according to the Court, it is a tool "for the protection of Indians against their own improvidence and designs of those who would obtain their property for inadequate compensation."

In 1964, the Navajo tribe entered into a mineral lease with Peabody Coal company, allowing the company to mine the extremely high-grade coal located on the Navajo reservation. It was approved by the Secretary.

The lease allowed the royalty rate Peabody had to pay to the tribe to be adjusted after 20 years by the Secretary. Thus, in 1984, the Chairman of the Navajo Tribe wrote the Secretary asking him to do so. As a result, under the Secretary's authority, an opinion letter was sent to Peabody raising the royalty rate to 20% of gross proceeds, a very substantial increase over the 1964 rate.

Peabody filed an administrative appeal, but the Assistant Secretary of Indian Affairs, the official presiding over the appeal, was unimpressed. Several independent studies recommended royalty rates of 20% (and some even more). Accordingly, the Assistant Secretary prepared to deny Peabody's appeal.

Meanwhile, however, Peabody went to higher authority. It contacted then-Secretary of Interior Donald Hodel himself. The company arranged a private meeting with the Secretary to press their case. No representative of the tribe attended, nor did the tribe even have notice that such a meeting was to occur.

And guess what? After the meeting, Secretary Hodel personally intervened on Peabody's behalf. He sent a letter to the Assistant Secretary of Indian affairs - a letter actually drafted by Peabody's attorneys. In the letter, he suggested to his subordinate that he tell the tribe (absolutely falsely) that no decision on the appeal was imminent, and recommend that the tribe return to the negotiating table, where a 20% royalty was never going to materialize. The Assistant Secretary did so, and on his advice, the tribe did so.

In the end, the impoverished tribe settled for a 12-and-½ % royalty, roughly 8 percentage points below market value. At least one of the Department's independent studies had labeled this royalty totally inadequate. After all, this is the minimum royalty rate for coal mined on federal lands, and the coal on the Navajo reservation is high-value, low-sulfur coal.

The Secretary, having induced this drastic discount, signed off on the agreement to amend the lease to set this new royalty rate, and in 1987, so did the parties.

The Suit by the Tribe: Claiming a Breach of Fiduciary Duty

The tribe sued under the Indian Tucker Act, alleging that the government had breached a specific fiduciary duty to the tribe that a statute - in particular, the IMLA - had created. (A "fiduciary duty" is the duty of a fiduciary, one with a special relationship to another party, to protect that party's interests.)

The question for the Court, then, was whether the IMLA created such a duty, in particular when it provided for Secretarial approval of tribal mineral leases. Certainly, the legal precedents noted above, which made clear that the Secretary was to act in the tribe's interest in approving the lease, strongly suggested such a duty. The precedents and statutes had painted the Secretary as the tribe's advocate - not a neutral arbiter, and certainly not an advocate for the company, the role he had actually taken.

Nevertheless, in an opinion authored by Justice Ruth Bader Ginsburg and joined (among others) by fellow Clinton appointee Justice Stephen Breyer, the Court ruled that the IMLA created no such duty.

In the majority's view, the Secretarial approval carried no substantive obligation. All that was necessary was that the lease royalty met the statutory minimum - even if it was far below market value - and that all specific procedural rules were complied with.

In other words, the Court held that Secretary had no fiduciary duty to the tribe even in an extreme situation - where the lease royalty rate was patently inadequate, as measured by the Department's own consistent internal data, and where the tribe had negotiated under a disadvantage that the Secretary himself had personally interjected.

In sum, not only did the Court fail to find that the Secretary had any duty to protect the tribe, it also allowed him to actually protect the company instead - turning the intention behind the approval requirement entirely on its head.

Turning a Blind Eye to Fiduciary Duties and Longstanding Obligations

This is a perverse result effected by a stunningly parsimonious approach to the government's statutory obligations. Among the ruling's various flaws, it turns a blind eye to the longstanding congressional intent of Secretarial approvals to safeguard the interests of the tribes - the government's trustees.

The ruling also suggests the Court is wearing blinkers that prevent it from seeing the plain reality - borne out in the sad history of this case itself - that even now, tribes are in need of some protection against the rapacious interests of powerful entities who seek to exploit tribal resources.

But more generally, the opinion abandons the Court's own moral traditions in the field of Indian affairs. Once upon a time, Justice Benjamin Cardozo opined for the Court that "a trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior."

Now speaking for the Court majority in Navajo Nation, Justice Ginsburg measured the government's trust responsibility by something short even of the morals of the marketplace and takes her moral cues not from a sense of honor but the quibbling technicalities of the Administrative Procedures Act.

This is the mark of a soulless Court - one that has lost sight of the aspiration that its duty to interpret the law should co-exist, wherever possible, with a larger mission to do justice. If ever there was a case for such co-existence, it was this case.

Here, the relevant statute and precedents required the Court to look to morality - the high moral standard of a government official who acts as advocate of a tribe - because morality and law converged in the concept of "fiduciary duty."

The Court has no trouble understanding fiduciary duty in the context of corporate law - when, for instance, a broker must be faithful to a client's interests, not those of the party opposite him in the transaction. Why can't it understand, and apply, the concept here?

Instead, the Court blithely countenanced the jobbing of the Navajo. Like the recent decision that saw no constitutional problem with a life sentence for a petty crime, the Navajo Nation decision, too, suggests the Court has simply lost its way.

On the eve of war, especially a war justified as a moral imperative, it feels especially sad that the nation's highest court has forsaken the moral aspect of its mission, and shirked a longstanding fiduciary duty to tribes mistreated literally for centuries.

If the war on Iraq is successful, soon the country and its resources will be held by the U.S. and allies in trust for the Iraqi people - with all the fiduciary duties that entails. Will we shirk those duties too? Will we ensure that sweetheart contracts for Iraq's rebuilding go to our companies, with little participation by Iraqis themselves? Will we bargain favorable oil rates for ourselves, instead of accepting market rates? Will we act like conquerors, or like fiduciaries and advocates?

We have little choice but to hope - and insist - that we may rediscover our ideals in far-flung lands, despite the fact that our own Court has betrayed them at home.


Edward Lazarus writes about, practices, and teaches law in Los Angeles. A former federal prosecutor, he is the author of two books - Black Hills, White Justice: The Sioux Nation Versus the United States, 1775 to the Present, and Closed Chambers: The Rise, Fall, and Future of the Modern Supreme Court.