Timber Firm Loses Bid to Revoke $55 Million Fire Settlement

Federal lawyers did not lie to the federal court either before or after the $55 million settlement of with timber giant, Sierra Pacific Industries, and others over a 46,000 acre forest fire in Plumas and Lassen National Forests in 2007, a federal appeals court held Thursday.

The 9th U.S. Circuit Court of Appeals decision upholds the financial deal that included 22,500 acre transfer of land to federal protection for Sierra Pacific’s role in causing the fire. The panel rejected the Sierra Pacific claim that the deal was tainted by fraud.

Sierra Pacific was accused, along with the logging firm, Howell’s Forest Harvesting Co., of failing to inspect for smoldering after driving bulldozers in a rocky clearing on a very hot day. The blaze that erupted burned both private land and national forest lands.

Sierra Pacific settled prior to trial, agreeing to pay $55 million and transfer 22,500 acres of timber land to the federal government.

But following the deal, the company had second thoughts and made the bold claim that the government had committed a fraud on the court by and thus the company should be allowed to undo the deal.

Judge Sidney Thomas said the panel found that a fraud on the court claim is reserved for material, intentional misrepresentations that could not have been discovered earlier, even through due diligence. There was no demonstration of such a fraud on the court, the panel concluded, not prior to the deal or after.

California fire investigators, CalFire and the U.S. Forest Service, concluded the fire began when one of the Howell bulldozers struck a rock, which created a spark that ignited forest litter on the ground. The fire eventually broke out and spread to the surrounding forest.

The U.S. filed suit against Sierra Pacific and Howell in 2009, shortly after the fire origin report was issued. The government sought $800 million in damages for what was known as the Moonlight Fire and compensation for fighting the fire.

CalFire filed a separate state action, which is not part of this case.

Sierra Pacific alleged a fraud during and after the investigation after it discovered photographs and an early sketch that appeared to put the origin in a slightly different spot and an aerial video of a smoke plume that allegedly undermined the government’s point-of-origin claim.

The company argued that the state failed to adequately investigate arson as a possible cause of the fire. They pointed to a wood cutter who had been using a chainsaw in the area of the fire the day it began.

But two days before the trial was set to begin, Sierra Pacific agreed to pay $47 million and transfer 22,500 acres of land, Howell’s would pay $1 million and the landowners agreed to pay $7 million.

After the settled case was dismissed, Sierra Pacific filed a motion to reopen the case based on newly discovered fraud.

The panel held that the terms of the settlement preclude any opportunity to go back on the deal, even for newly discovered evidence, and even if the terms of the settlement did not bar reopening, “the district court properly concluded that relieve is unwarranted because the allegations of after-discovered fraud fail to rise to the level of fraud on the court.”

And Thomas went farther, writing for the panel. Even assuming Sierra Pacific’s claims were true, they do not rise to the level of a fraud on the court, he concluded.

The deal remains good. Judges Mary Murguia and Jon McCalla, a visiting judge from the Western District of Tennessee, joined Thomas.

Case: U.S. v. Sierra Pacific, No. 15-15799



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