A federal appeals court on Thursday rejected efforts by Sierra Pacific Industries to back out of a $100 million settlement over the massive Moonlight Fire that it claims was based on fraud and deception by government prosecutors in Sacramento.
A three-judge panel of the 9th U.S. Circuit Court of Appeals found that claims by Sierra Pacific that it was the victim of a “trail of fraud” by government prosecutors seeking a huge payday from a deep-pocketed defendant did “not constitute fraud on the court” as the company had claimed.
The decision comes after years of intensely bitter fighting by Sierra Pacific, the state’s largest private landowner, over a settlement agreement the timber giant entered into in 2012.
U.S. Attorney Phillip A. Talbert said his office was “gratified but not surprised” by the opinion.
“When negligent logging operations cause massive forest fires, this office will respond with exactly the kind of tenacious, professional advocacy shown by Assistant U.S. Attorneys David Shelledy and Kelli Taylor and the rest of the team,” Talbert said. “Consistent with the best traditions of the U.S. Department of Justice, our office will continue to hold the careless to account.”
Sierra Pacific attorney William Warne had no immediate comment.
After the Moonlight Fire erupted on Labor Day 2007 and raged for two weeks, federal and state investigators pinpointed the blame on a bulldozer operator who was employed by a logging company doing work for Sierra Pacific. Investigators determined the bulldozer blade struck a rock and created a spark that set off the blaze, and they sued in August 2009 to recoup $800 million for the cost of fighting the blaze and damage to the Plumas and Lassen national forests.
After three years of legal fights – and three days before the trial was to begin – Sierra Pacific agreed to a $100 million settlement under which it would pay $47 million in cash and transfer 22,500 acres of land to the government to settle the case.
Despite the settlement, Sierra Pacific insisted it was not to blame and that investigators from the California Department of Forestry and Fire Protection and the U.S. Forest Service concocted a fraudulent report on the origins of the fire and lied under oath.
The company’s claims were bolstered by a 2014 victory in Plumas Superior Court, where a judge ruled that conduct by government investigators and lawyers in the case was “egregious and reprehensible.” That case is under appeal.
The federal government called such claims hogwash, and said the Shasta County-based company’s efforts to overturn the settlement agreement were “professional misconduct of the worst kind” and consisted of “scandal mongering and unscrupulous legal tactics.”
The fight came to a head in April 2015, when Senior U.S. District Judge William B. Shubb rejected Sierra Pacific’s claims, writing in a 63-page order that they were “wholly devoid of any substance.”
The appeals court affirmed Shubb’s findings, writing that “almost all of the evidence of alleged fraud” already had been delivered to Sierra Pacific through documents provided by the government before the company agreed to settle the case.
The company claimed that investigators changed their original findings about where the fire started, and that they “failed to adequately investigate arson” as a possible cause.
Sierra Pacific also raised questions about a tweet that Judge Shubb allegedly sent out hours after his decision in the case linking to a news story. The Twitter account, which does not include the judge’s name, tweeted out the news link at 9:51 p.m. the night of the judge’s order, the company argued, showing that Shubb had revealed “a willingness to step out of the role of a neutral.”
The 9th Circuit panel didn’t buy that argument, writing that “the allegations do not warrant retroactive recusal even if the judge is the owner of the account.”
The Twitter account, @Nostalgist1, listed 335 tweets as of Thursday, with 36 followers. The account’s tweets and profile information were set to “protected” and viewable only to confirmed followers.
In its 34-page opinion, the appeals court panel noted that courts “have consistently required a very high showing for relief for judgment on the basis of fraud on the court.”
“After voluntarily settling this case and asking the district court to enter a judgment based on that settlement, the defendant’s allegations of newly discovered fraud fail to meet this high standard,” the panel found.
In a footnote included in the opinion, the three-judge panel added that “in making this decision, we do not express any opinion as to the veracity of either party’s factual assertions, attempt to decide any of the underlying issues or express any opinion as to the troubling issues discussed in the state court opinion.”
“Nor do we make any findings as to the alleged use of the judge’s Twitter account,” they wrote, adding that “those questions must be addressed, if at all, in another forum.”
Despite the years-long battle, Sierra Pacific already has paid the $47 million in cash and has turned over 12,000 of the 22,500 acres to the government. The total amount of the settlement was $122.5 million – including amounts from other defendants – and is the largest ever received by the federal government for damage from a forest fire, the U.S. Attorney’s Office said.