Gravel2Gavel Construction & Real Estate Law Blog
On July 13, the U.S. Court of Appeals for the Ninth Circuit decided the case of United States v. Sierra Pacific Industries, et al. This is referred to as the “ Moonlight Fire” case.
The Ninth Circuit framed the issues before it as follows:
We are asked to decide whether certain allegations of fraud, some of which were known before the parties settled, and some of which came to light after the settlement, rise to a level of fraud on the court, such that relief from the settlement agreement is warranted under Federal Rule of Civil Procedure 60(d)(3).
In 2007, a large fire in in California’s Plumas National Forest burned 46,000 acres. The U.S. brought a civil action against private forestry operators, Sierra Pacific Industries, Inc. (Sierra Pacific) and Howell’s Forest Harvesting Company (Howell), and other individuals to recover damages for that fire. Separate actions were filed by the U.S. and State of California.
In the federal case, the parties engaged in extensive discovery and motion practice. The Government produced a number of documents during discovery that led the defendants to believe that the Government had engaged in fraud during and after its investigation of the Moonlight Fire, in an attempt to blame the fire on the Defendants.
[T]he Defendants discovered photographs and an early sketch that appeared to place the point of origin in a slightly different spot than the final report; an aerial video of the smoke plume that allegedly undermined the government’s point-of-origin determination; an expert report that had used the wrong slope angle in modeling fire dynamics and had not been corrected; and evidence regarding alleged employee misconduct at the Forest Service’s Red Rock Lookout Tower before the fire was spotted.
The Defendants also alleged at various points in the pre-trial proceedings that
[T]he government had advanced a fraudulent Origin and Cause report based on these coverups; had misrepresented the investigator’s interview with Howell employee JW Bush shortly after the fire started; had misrepresented evidence regarding other forest fires started by Howell; had proffered false testimony by the investigators regarding the origin of the fire; and had failed to adequately investigate arson as a possible cause of the fire, particularly in light of evidence that wood cutter Ryan Bauer had been using a chainsaw in the vicinity of the fire on the day it began.
The Government moved to exclude much of the evidence supporting the Defendants’ theories of fraud and concealment, and the District Court granted, in part, this motion and the U.S. States District Court for the Eastern District of California’s final pre-trial order “precluded the Defendants from introducing evidence to show conspiracy but permitted them ‘to introduce evidence that there was an attempt to conceal information from the public or the defense.'” The District Court’s order permitted the Defendants to introduce “‘evidence indicating arson was not considered to show weaknesses in the investigation following the fire’ but precluded evidence demonstrating that a particular person, such as Bauer, had started the fire;'” the District Court’s order “made without prejudice and [was] subject to proper renewal, in whole or in part, during trial.”
Three days before trial, the federal action was settled for a civil penalty for $55 million and the transfer of 22,500 acres to the Government; the Government sought nearly $800 million in damages caused by the Moonlight Fire and compensation for the resources spent fighting it.
After the federal action concluded, the California action was dismissed with prejudice by the California Superior Court because of evidence of misconduct, fraud and misrepresentation by state officers. The Defendants then filed a motion from relief from the settlement agreement with the Government under F.R.C.P. 60(d)(3), arguing that the Government’s misrepresentations in the federal case amounted to a fraud on the District Court. The District Court denied relief, and the Ninth Circuit, after a careful review of the record, has now affirmed this ruling.
The Ninth Circuit cautions that such relief is only available “to prevent a grave miscarriage of justice.” and the facts presented to the court do not rise to that level. “In determining whether fraud constitutes fraud on the court, the relevant inquiry is not whether fraudulent conduct ‘prejudiced the opposing party,’ but whether it ‘harmed the integrity of the judicial process.'” “Fraud on the court must be an ‘intentional, material misrepresentation.'” In addition, the Ninth Circuit noted that “the relevant misrepresentations must go ‘to the central issue in the case” and must “affect the outcome of the case.” “[P]erjury may constitute fraud on the court if it ‘involves, or is suborned by, an officer of the court.'” The Ninth Circuit held that because “the instances of alleged fraud known before settlement cannot justify relief and the instances discovered after settlement do not rise to the level of fraud on the court … we affirm.”
The defendants also argued that the judge’s failure to recuse himself was error because of his purported commenting on the case on his twitter account on the very date it was decided. The Ninth Circuit held that the judge’s alleged use of his twitter account in these circumstances did not warrant retroactive recusal. However, the Ninth Circuit also remarked that “this case is a cautionary tale about the possible pitfalls of judges engaging in social media activity relating to pending cases.”