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United States v. Hardman

Citation: 32 ELR 20028
No. No. 99-4210, 260 F.3d 1199/(10th Cir., 07/24/2001)

The court reverses a lower court's decision holding that even though the United States breached a fiduciary obligation to a Native American tribe, the United States did not have a trust relationship with the tribe that rendered the breach actionable and subject to monetary damages. In 1964, the tribe entered into a lease agreement with a mining company for the mining of coal on the tribe's land. The agreement provided for a royalty that could be readjusted after 20 years and with the U.S. Department of the Interior's (DOI's) approval. After 20 years, the tribe and the company attempted to negotiate a new royalty rate, but no agreement was reached and the tribe asked the DOI to resolve the issue. The DOI increased the royalty rate from 2% of gross proceeds to 20%, and the mining company appealed to the Board of Indian Appeals (the Board), which affirmed the rate but did not inform the tribe of its decision. Subsequently, the Secretary of the Interior ordered the decision withdrawn, urged settlement, and secretly met with the company. The tribe agreed to a rate of 12.5%, but it eventually learned of the Board's decision. The tribe sued the federal government for breach of fiduciary duty, but the court held that there was no trust relationship between the tribe and the federal government.

The court first holds that the lower court erred in holding that there was no authorization for a trust relationship between the United States and the tribe as to the coal resources. The test of the government's fiduciary responsibility is whether the DOI, rather than the tribe, has control or supervision over the mineral leasing program, even if the government has less than total control. It is quite clear that the Indian Mineral Leasing Act and its regulations assign to the Secretary of the Interior and other government officials the authorization, supervision, and control of Native American mineral leasing activities, including those of the tribe. In fact, the Act and its regulations leave no significant authority in the hands of the tribes whose reservation land contains minerals. Thus, there is a trust relationship between the United States and the tribe. The court next holds that the DOI violated its fiduciary trust duties by suppressing the Board's decision and acting to benefit the mining company to the detriment of the tribe. Such breach is subject to remedy by the assessment of damages. The lower court, therefore, erred in holding that it was without jurisdiction to grant monetary relief and improperly dismissed the complaint. Thus, the court remands the case for further proceedings including determination of damages.

A judge dissenting in part and concurring in part agrees that there was a breach of fiduciary duty owed to the tribe, but would remand the case for the lower court to determine what damages, if any, the tribe suffered as a result of that breach.

The full text of this decision is available from ELR (28 pp., ELR Order No. L-392).

Counsel for Plaintiff
Paul E. Frye
Rothstein, Donatelli, Hughes, Dahlstrom, Schoenburg & Enfield
320 Central SW, Ste. 30, Albuquerque NM 87102
(505) 243-1443

Counsel for Defendant
Todd S. Aagaard
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000