Ninth Circuit Denies Challenge to $122.5M Settlement for 2007 Moonlight Fire

SACRAMENTO, Calif. July 14, 2017 – In a unanimous opinion, the U.S. Court of Appeals for the Ninth Circuit affirmed the denial of relief from judgment for Sierra Pacific Industries and the other defendants held responsible for the Moonlight Fire in a settlement they entered with the United States five years ago.[1]

U.S. Attorney Phillip A. Talbert said, “We are gratified but not surprised by today’s decision, which helps make an important point this fire season. 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, Kelli Taylor and the rest of the team. Consistent with the best traditions of the U.S. Department of Justice, our office will continue to hold the careless to account.”

The fire started on Labor Day 2007 and burned over 46,000 acres of the Plumas and Lassen National Forests before it could be extinguished. In a complaint filed in 2010, the United States alleged that the fire started and escaped due to the neglect by Sierra Pacific and one of its contractors in operating bulldozers on a remote logging site on a “red flag” warning day. The contractor’s employees abandoned the job site to get a soda and cellphone soon after completing work, without inspecting the area to ensure they had not started a fire, as required by company policy and state law. The same contractor started two other fires the same summer working on other projects for Sierra Pacific. Sierra Pacific knew the contractor had started one of those fires yet took no action to ensure fire safety.

After litigation commenced, the contractor formally admitted that the fire started in its work area where no one but its employees was seen all day. Sierra Pacific, however, engaged in extensive litigation in an effort to avoid responsibility.

In 2012, the district court in Sacramento ruled that Sierra Pacific could present at trial some of its claims that the government engaged in fraud in attributing blame for the fire. However, in July 2012, Sierra Pacific and the other defendants averted trial by entering a settlement.

In exchange for dismissal of the United States’ complaint, the defendants agreed to pay a total of $55 million in cash. Sierra Pacific’s share of the settlement was $47 million and a conveyance of 22,500 acres of undeveloped land for incorporation into the National Forest System.

With a total value of at least $122.5 million, the settlement is the largest ever received by the United States for damages caused by a forest fire. All of the settlement payments are now complete. Land transfers totaling more than 12,000 acres have been completed with the remainder ongoing.

In the settlement agreement, Sierra Pacific and the other defendants specifically agreed to release all claims—known or unknown. Nonetheless, in October 2014, they filed a motion for relief from judgment, seeking to back out of the settlement based on allegations of fraud. Almost all accusations in the motion repeated the baseless claims made by Sierra Pacific in litigation before the settlement.

In April 2015, U.S. District Judge William B. Shubb issued a detailed 63-page order denying the motion and emphatically rejecting every allegation by Sierra Pacific’s counsel that there was fraud on the court.[2] After an exhaustive review of the law and the record, Judge Shubb concluded that the defendants “failed to identify even a single instance of fraud on the court, certainly none on the part of any attorney for the government. They repeatedly argue that fraud on the court can be found by considering the totality of the allegations. . . . Stripped of all its bluster, defendants’ motion is wholly devoid of any substance.” This is the order affirmed today by the court of appeals.

In a unanimous, 34-page opinion the Ninth Circuit ruled that “[a]fter voluntarily settling this case and asking the district court to enter judgment based on that settlement,” the defendants’ allegations of newly discovered fraud failed to meet the high showing required for relief from judgment. The court ruled that all accusations of fraud discovered before the settlement were legally insufficient — whether those accusations were true or not — because Sierra Pacific and the other defendants “voluntarily settled instead of going to trial.” The settlement agreement also precluded all accusations that the defendants claimed to have discovered after settlement, the court explained, because under the express terms of the settlement agreement, the defendants “bound themselves not to seek future relief, even for fraud on the court.” And finally, the court ruled that even if the settlement terms did not bar relief, “we conclude [those accusations] do not constitute fraud on the court.”

The court specifically rejected Sierra Pacific’s claim that an Assistant U.S. Attorney encouraged perjury by telling a federal investigator the government’s lawyers considered Sierra Pacific’s core scandal claim (that a white flag at the fire investigation scene marked the initial, “concealed” point of origin) to be “a non-issue.” The court explained that this comment was “merely an opinion about the relative importance of an element of the case; . . . not an instruction to commit perjury.”

Despite Sierra Pacific’s inflammatory accusations against the Assistant U.S. Attorneys representing the government in this case, not one of the number of federal judges to have issued rulings before and after settlement have sustained any of those accusations.


[1] (link is external) The case is United States v. Sierra Pacific Industries, et al., Ninth Circuit No. 15-15799.

[2] (link is external) United States v. Sierra Pacific Industries, et al., No. 2:09-02445 (E.D. Cal. April 17, 2015).