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Navajo Win Another Court Round

WASHINGTON - The Navajo Nation won another round in its comeback effort to
outflank Peabody Coal in a high-stakes lawsuit against the energy giant.

The Navajo lost a $600 million claim against the United States and its
delegate, the Interior Department, in January 2003. The groundbreaking
Supreme Court decision established that the tribe could not collect damages
because the Indian Mineral Leasing Act offered no provision for monetary
penalty if the Secretary of Interior failed to obtain prices higher than
the legal minimum on Navajo coal leases.

Last fall, a federal appeals court ruled the Navajo could revisit their
lawsuit against the government based on a thicket of other provisions in
law and policy that give rise to a federal fiduciary trust obligation for
Indian resource leasing, or so the Navajo contend. Breach of fiduciary
trust obligations could conceivably activate specific laws mandating
monetary compensation for material damages the tribe suffered pursuant to
the breach.

And on April 13, Emmet G. Sullivan, federal District Court Judge for the
District of Columbia, ruled that a Navajo lawsuit against Peabody Coal can
proceed under RICO, the Racketeer-Influenced and Corrupt Organizations law.
(Peabody now generally goes by the name Peabody Energy, and by Peabody
Holding Company as the named plaintiff in the Navajo RICO lawsuit.)

The energy company had moved for dismissal of the case, arguing that the
Supreme Court settled it in March 2003. But Sullivan found that the Supreme
Court settled only the tribe's lawsuit against the United States, and that
only as pertains to the Indian Mineral Leasing Act. Underlying elements in
the lawsuits may be the same, he concluded, but the defendant is different
and so is the tribe's argument.

The underlying elements are these: the Navajo Nation sought to adjust its
coal leases in 1984, as provided for under the lease terms on the 20th
anniversary of the lease. The nation had ascertained that its royalties
from Peabody proceeds fell well below the 12.5 percent of gross proceeds
established by Congress, under 1977 amendments to the 1938 Indian Mineral
Leasing Act, as a minimum for coal mined on federal lands.

Don Hodel, then Secretary of Interior, delegated the area office of the BIA
(a branch of Interior) to contact Peabody with an opinion letter boosting
the tribe's percentage to 20. Peabody, apprised of the rate hike, filed an
administrative appeal against it and hired a friend of Hodel's from the
energy industry as a lobbyist. Peabody representatives met with Hodel in
1985, without the tribe's knowledge or presence at the meeting. The rate
hike to 20 percent, anticipated earlier in the year by both the tribe and
Peabody, got shelved in favor of a return to the negotiating table, all
this in a memo unknown to the tribe. Eventually the tribe agreed to the
minimum percentage of gross proceeds, 12.5 percent. The lower percentage
cost the Navajo Nation $600 million over time, the tribe contends.

The private meeting between Peabody representatives and Hodel, as well as
the memo shelving a 20 percent royalty to the tribe and urging
negotiations, remained unknown to the Navajo until the discovery period of
the court case they filed against Interior in 1993, for breach of trust.

In relying on RICO, the Navajo are insisting that Peabody's activities
leading up to the coal lease agreement fall within the law's definitions of
racketeering and organizational corruption. RICO convictions can trigger up
to three times the requested damages, depending on multiple factors.