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Federal Court Rules EEOC Should Include Navajo Nation in Navajo Employment Preference Suit

  • July 21, 2010

The Navajo Nation should be joined as a defendant in a case for employment discrimination under Title VII of the Civil Rights Act brought by the Equal Employment Opportunity Commission, the federal appeals court in San Francisco has ruled.  EEOC v. Peabody Western Coal, No. 06-17261 (9th Cir. June 23, 2010).  The EEOC had sued a mining company for discrimination against non-Navajo Indians by maintaining an employment preference for Navajo workers.  Avoiding any ruling on the merits of the case, the Ninth Circuit Court of Appeals ruled that the EEOC’s claims for injunctive relief should be allowed to proceed, but claims for damages should be dismissed.  The case was returned to the district court for further proceedings.

Mining Leases Required Employment Preference

The employer, Peabody Western Coal Company, mines coal at the Black Mesa Complex and Kayenta Mine on the Navajo and Hopi reservations in northeastern Arizona.  Peabody does so pursuant to leases with the Navajo and Hopi Tribes.  The leases, entered into with the Navajo Nation (“Nation”) in 1964 and 1966, require Peabody to provide an employment preference to Navajo job applicants.

The leases were drafted and approved by the Department of Interior under the Indian Mineral Leasing Act of 1938.  In a declaration submitted in the case, a former head of the Department stated that the Department drafted the leases and required the inclusion of the Navajo employment preferences.  The Department also approved amendments and extensions of the leases.

Title VII Allegations

Title VII of the Civil Rights Act prohibits employers from refusing to hire applicants because of their race, color, religion, national origin, or sex.  Indian Tribes are explicitly excluded from the definition of “employers” under Title VII.  Moreover, to encourage employment of Native Americans, Title VII allows non-tribal employers to give preferential treatment to Indians under certain circumstances.

The EEOC sued Peabody, alleging the company was unlawfully discriminating on the basis of national origin by implementing the Navajo employment preferences contained in the leases.  It requested both injunctive relief prohibiting Peabody from continuing to implement the Navajo employment preferences and damages, including back pay with interest, compensatory damages, and punitive damages. 

FRCP Rule 19

Peabody moved for summary judgment and dismissal of the action, arguing, in part, that Rule 19 of the Federal Rules of Civil Procedure required dismissal when a necessary and indispensable party to the action cannot be joined to the action.  Since the Nation is such a party and has sovereign immunity from being joined, Peabody argued, the case must be dismissed.  The district court agreed and granted dismissal.

Peabody II Decision

The Ninth Circuit court reversed the district court, ruling that the EEOC could join the Nation to the action because the Nation could not assert sovereign immunity against the federal government.  EEOC v. Peabody Western Coal Co., 400 F.3d 774 (9th Cir. 2005) (“Peabody II”).  The case was returned to the district court and, in an amended complaint, the EEOC added the Nation as a defendant under Rule 19.

Prior to Peabody II, Ninth Circuit case law said that a Navajo employment preference violated Title VII, but an individual claimant could not bring a suit for the violation without joining the Nation as an indispensable party, and the Nation had sovereign immunity from being joined.  See Dawavendewa v. Salt River Project Agric. Improvement & Power Dist., 276 F.3d 1150 (9th Cir. 2002); Dawavendewa v. Salt River Project Agric. Improvement & Power Dist., 154 F.3d 1117 (9th Cir. 1998).

Court Reiterates Nation Can Be Joined in Suit

On remand, the district court again ruled against the EEOC, granting summary judgment to the defendants.  Among other things, the court found the Nation is a party that could not be joined in the case because any affirmative relief would be contrary to Title VII’s exemption of Indian Tribes from suit.  The court also found the Secretary of Interior had sufficient interest in the case to make it a necessary and indispensable party that could not be joined under Rule 19.

The Ninth Circuit reversed the district court again and sent the case back.  The Court, summoning up Peabody II, said that even though the “EEOC has no claim against the party it seeks to join [the Nation] and is not seeking any affirmative relief directly from that party…
[j]oinder is necessary for the ‘sole purpose’ of effecting complete relief between the parties by ensuring that both Peabody and the Nation are bound to any judgment upholding or striking down the challenged lease provision.”

Claims for Damages Dismissed, But Claim for Injunction May Proceed

The appellate court then considered the argument that under Rule 19 the suit could not proceed without joinder of the Secretary of the Interior as a necessary party and joinder of the Secretary was not feasible because the Secretary has sovereign immunity from being joined. 

The Court said Peabody was “between the proverbial rock and a hard place — comply with the injunction prohibiting the hiring preference policy or comply with the lease requiring it.”  The Court explained the dilemma thus:

If the district court were to hold the Navajo employment preference violates Title VII and to award damages against Peabody, it would be profoundly unfair if Peabody could not seek indemnification from the Secretary.  It would be similarly unfair if the district court were to grant an injunction requiring Peabody to disregard the preference provision, but leaving the Secretary free, despite the court’s holding, to insist that Peabody comply with it.

As Peabody could not seek indemnification from the Secretary of Interior, the Court determined that the EEOC’s claims for damages should be dismissed.  The Court nevertheless ruled that the claim for injunctive relief may proceed without the Secretary.  According to the Court, should the district court grant injunctive relief to the EEOC, a suit against the Secretary for “prospective relief in the form of an injunction or declaratory judgment” is enough to protect Peabody and the Nation.

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This case raises a troubling outlook for Indian Tribes.  The ultimate resolution may narrow significantly a Tribe’s ability to maintain long-held employment preferences. 

While it is encouraging from the perspective of Tribes as employers that the damage claims will not be allowed to proceed, the fact that prospective, injunctive relief may still be available and the Secretary of the Interior will be interpled are problematic.  As Tribes continue involvement in significant economic enterprises, including gaming, the United States government continues to look for opportunities, such as the EEOC’s efforts here, to assert jurisdiction and attempt to impose remedies.

Jackson Lewis attorneys are available to answer questions about this case and other issues that affect Native-American Tribes.

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