The 9th Circuit Court of Appeals revived a messy Indian preference lawsuit against Peabody Energy, the world's largest coal company, and said the Navajo Nation can be joined in the case.

Peabody entered into agreements with the Navajo Nation to operate coal mines on the reservation. The leases, which were approved by the Interior Department, include a provision that states Navajos will be given preference in employment.

"Former Secretary of the Interior Stewart Udall, who served as Secretary during the period the leases were drafted and approved, stated in a declaration submitted to the district court that DOI drafted the leases and required the inclusion of the Navajo employment preferences," the court observed. "This statement is undisputed."

The dispute began when Equal Employment Opportunity Commission, a federal agency, sued Peabody for allegedly failing to hire Native Americans who are not Navajo. After several rounds of litigation, including a trip to the 9th Circuit in 2005 in which the Navajo Nation was told to answer to the lawsuit, a judge dismissed the case in 2006.

On appeal, the 9th Circuit reversed. The court again concluded that the Navajo Nation cannot raise a sovereign immunity defense in a lawsuit filed by the federal government.

"We held that the Nation’s sovereign immunity did not shield it from a suit brought by EEOC and therefore did not bar its joinder," the court said, referring to the 2005 decision in the litigation.

But on a new issue, the court said the Interior Department cannot be joined without its consent. Only the Justice Department can bring an EEOC suit against a government agency, the 9th Circuit ruled.

"While there is no evidence in the record of a formal referral to and refusal by the Attorney General, we assume for purposes of our decision that the Attorney General either has refused or will refuse to file suit against the Secretary," the court wrote.

As a result, the court said it would be unfair to hold Peabody responsible for a provision in a lease that was requested by the government. "Peabody’s only sin, if indeed it was a sin, was to comply with an employment preference provision inserted in its lease at the insistence of the Secretary," the 9th Circuit said.

So the 9th Circuit said the EEOC cannot seek damages from Peabody for violating federal employment laws. "It would be profoundly unfair for a court to award damages against Peabody while allowing Peabody no redress against the government," the court said.

At the same time, the court said EEOC can continue to seek injunctive relief against Peabody and the Navajo Nation in hopes of resolving the dispute. That leaves open the possibility that Peabody and the Navajo Nation will be forced to ignore a provision in a federally approved lease.

In that event, the court said Peabody and the Navajo Nation can bring a third-party complaint against the Interior Department in order to address Interior's role in the matter.

Turtle Talk has posted briefs from the case, EEOC v. Peabody.

9th Circuit Decision:
EEOC v. Peabody (June 23, 2010)

Related Stories:
Judge dismisses lawsuit over tribal preference (10/5)
Court joins Navajo Nation in discrimination case (3/11)