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United States v. Sierra Pacific Industries, Inc.

United States Court of Appeals, Ninth Circuit

July 13, 2017

United States of America, Plaintiff-Appellee,
Sierra Pacific Industries, Inc.; W.M. Beaty and Associates, Inc.; Ann Mckeever Hatch, as trustee of the Hatch 1987 revocable trust; Richard L. Greene, As Trustee of the Hatch Irrevocable Trust; Brooks Walker, Jr., as Trustee of the Brooks Walker, Jr. Revocable Trust and the Della Walker Van Loben Sels Trust for the issue of Brooks Walker, Jr; Brooks Walker III, individually and as trustee of the Clayton Brooks Danielsen, the Myles Walker Danielsen, and the Benjamin Walker Burlock trust, the Margaret Charlotte Burlock Trust; Leslie Walker, individually and as trustee of the Brooks Thomas Walker Trust, the Susie Kate Walker Trust and the Della Grace Walker trusts; Wellington Smith Henderson, Jr., as Trustee of the Henderson Revocable Trust; Elena D. Henderson; Mark W. Henderson, as Trustee of the Mark W. Henderson Revocable Trust; John C. Walker, individually and as trustee of the Della Walker Van Loben Sels trust for the issue of John C. Walker; James A. Henderson; Charles C. Henderson, as Trustee of the Charles C. and Kirsten Henderson Revocable Trust; Joan H. Henderson; Jennifer Walker, individually and as trustee of the Emma Walker Silverman Trust and the Max Walker Silverman Trust; Kirby Walker; Lindsey Walker, AKA Lindsey Walker-Silverman, individually and as trustee of the Reilly Hudson Keenan and Madison Flanders Keenan Trust; Eunice E. Howell, DBA Howell's Forest Havesting Company, individually, Defendants-Appellants.

          Argued and Submitted May 17, 2017 San Francisco, California

         Appeal from the United States District Court for the Eastern District of California D.C. No. 2:09-cv-02445-WBS-AC William B. Shubb, Senior District Judge, Presiding

          William R. Warne (argued), Meghan M. Baker, Annie S. Amaral, and Michael J. Thomas, Downey Brand LLP, Sacramento, California; Jennifer T. Lias and Richard W. Beckler, Bracewell & Giuliani LLP, Washington, D.C.; for Defendants-Appellants Sierra Pacific Industries, Inc.

          Richard S. Linkert (argued) and Julia M. Reeves, Matheny Sears Linkert & Jaime, Sacramento, California; Phillip R. Bonotto, Rushford & Bonotto LLP, Sacramento, California; for landowner Defendants-Appellants.

          David T. Shelledy (argued), Matthew D. Segal, and Kelli L. Taylor, Assistant United States Attorneys; United States Attorney's Office, Sacramento, California; for Plaintiff-Appellee.

          Julie A. Weis, Haglund Kelley LLP, Portland, Oregon, for Amicus Curiae Michael Cole and Tom Hoffman, Retirees of the California Department of Forestry and Fire Protection.

          Theodore J. Boutrous, Jr. and Blaine H. Evanson, Gibson Dunn & Crutcher LLP, Los Angeles, California; Katherine C. Yarger, Gibson Dunn & Crutcher LLP, Denver, Colorado; Stephen S. Schwartz and Daniel Z. Epstein, Cause of Action Institute, Washington, D.C.; for Amicus Curiae Cause of Action Institute.

          Parker Douglas, Utah Federal Solicitor, and Sean D. Reyes, Attorney General, Utah Attorney General's Office, Salt Lake City, Utah; Mark Brnovich, Attorney General, United States Attorney's Office, Phoenix, Arizona; Adam Paul Laxalt, Attorney General, United States Attorney's Office, Carson City, Nevada; Doug Peterson, Attorney General, Attorney General's Office, Lincoln, Nebraska; Brad D. Schimel, Attorney General, Wisconsin Department of Justice, Madison, Wisconsin; for Amici Curiae Attorney Generals for the States of Arizona, Nebraska, Nevada, Utah, and Wisconsin.

          Before: Sidney R. Thomas, Chief Judge, Mary H. Murguia, Circuit Judge, and Jon P. McCalla, [*] District Judge.


         Fraud on the Court / Fed.R.Civ.P. 60(d)(3)

         The panel affirmed the district court's denial of defendants' motion for relief from judgment under Fed.R.Civ.P. 60(d)(3) based on allegations of fraud, following a settlement in a civil action brought by the United States against private forestry operators and individuals to recover damages for the Moonlight Fire that burned portions of the Plumas and Lassen National Forests in 2007.

         The defendants argued that the government's alleged misrepresentations throughout the investigation and litigation constituted fraud on the court. The defendants also alleged newly-discovered fraud after the settlement.

         The panel held that a finding of fraud on the court is reserved for material, intentional misrepresentations that could not have been discovered earlier, even through due diligence. The panel held that the district court properly concluded that Sierra Pacific Industries, Inc. did not demonstrate fraud on the court regarding any of the alleged fraud it discovered before settlement. The panel further held that none of the allegations of after-discovered fraud, either individually or as a whole, established that the government committed fraud on the court within the meaning of Rule 60.

         The panel rejected defendants' argument that the district court judge was required to recuse himself under Canon 3C of the Code of Conduct for United States Judges and 28 U.S.C. § 455(a) because of an appearance of bias created by activity on a Twitter account that did not bear the judge's name, but was allegedly controlled by him. The panel reviewed the allegations for plain error because defendants failed to first raise the issue before the district court. Specifically, the panel held that the claim - that an unknown Twitter account, not identified with a judge or the judiciary, followed a public Twitter account maintained by the U.S. Attorney - did not provide a basis for recusal. The panel further held that the fact that the Twitter account followed the U.S. Attorney did not mean that the public tweets published by the U.S. Attorney constituted improper ex parte communications. Finally, the panel rejected defendants' allegation that the judge's action in tweeting the link to an allegedly erroneous news article required reversal. The panel concluded that retroactive recusal of the district court judge was not warranted, and vacatur of the district court's order was also unwarranted.


          THOMAS, Chief Judge

         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 settlement, rise to the level of fraud on the court such that relief from the settlement agreement is warranted under Federal Rule of Civil Procedure 60(d)(3). 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 under Rule 60(d)(3), we affirm.


         This case arises from a forest fire that broke out on private property near the Plumas National Forest in northern California on September 3, 2007. The Moonlight Fire, as it came to be known, eventually burned 46, 000 acres of the Plumas and Lassen National Forests and resulted in the United States bringing 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.


         Sierra Pacific contracted with Howell to conduct logging operations on the land where the Moonlight Fire is believed to have started. On the morning of the fire, two Howell employees had been operating bulldozers in the area, but they left without inspecting the site for sparks or signs of fire.

         After the fire was spotted from a U.S. Forest Service ("Forest Service") lookout tower in the early afternoon, Forest Service investigator Dave Reynolds visited the site where the fire was believed to have started. Reynolds interviewed JW Bush, one of the Howell employees who had been working at the site that morning, but the site was too hot to investigate further at the time.

         Reynolds returned to the site the following day with Josh White, an investigator from the California Department of Forestry and Fire Protection ("Cal Fire"). According to the Origin and Cause Investigation Report jointly released by the Forest Service and Cal Fire, that day the investigators identified a "general origin area" and a "specific origin area" based on fire indicators in the area. On September 4th and 5th, White and Reynolds took numerous photos and measurements of relevant points within the origin site, and they placed numbered markers and colored flags to mark certain fire indicators and other evidence.

         Sierra Pacific and the other defendants allege that White and Reynolds identified a specific point of origin that they marked with a single white flag, and took measurements and photographs of that point. The government denies that the investigators identified this point as the specific point of origin. Instead, the government notes that the investigators took photos of two other rocks, which appeared to have marks from bulldozer blades or treads, and which were ultimately identified in the final report as the points of origin for the fire. Investigators White and Reynolds also used a magnet to search the area and identified metal shavings near these two rocks, which they collected as evidence. Diane Welton, another Forest Service investigator, joined the investigation and visited the origin site on September 8th. Welton agreed with the other investigators' assessment of the fire's origin.

         Cal Fire and the Forest Service released their joint Origin and Cause Investigation Report in June 2009. The report concluded that one of the Howell bulldozers had caused the fire by striking a rock, which created a spark that ignited forest litter on the ground and eventually broke out into a fire that spread into the surrounding forest.


         The United States filed this action against Sierra Pacific, Howell, and a number of individual defendants (collectively, "the Defendants") in August 2009. The government sought nearly $800 million in damages caused by the Moonlight Fire and compensation for the resources spent fighting it. The California Attorney General's office, representing Cal Fire, filed a state court action against the Defendants earlier the same month. The U.S. Attorney and the California Attorney General entered into a joint prosecution agreement, but the two cases proceeded separately.[1]

         The parties in this federal case engaged in extensive discovery and motion practice over the next three years. Most relevantly, 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 them. Specifically, the 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 the government had advanced a fraudulent Origin and Cause report based on these cover-ups; 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 in limine to exclude much of the evidence supporting the Defendants' theories of fraud and concealment, and the district court granted this motion in part. The court'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 Defendants also wanted to present evidence that the government had failed to investigate possible arson by Ryan Bauer, though the Defendants disavowed any intention of actually proving that Bauer started the fire. The court 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. Nonetheless, the court's oral ruling explained that the Defendants would be permitted to present evidence that Bauer was "near the scene, seen by witnesses, and there was no follow-up" during the fire investigation. The court's written order specifically stated that each of these in limine rulings was "made without prejudice and [was] subject to proper renewal, in whole or in part, during trial."

         Three days before trial was set to begin, the parties reached a settlement agreement under which the Defendants agreed to pay $55 million and transfer 22, 500 acres of land to the government.[2] The terms also specified:

The Parties understand and acknowledge that the facts and/or potential claims with respect to liability or damages regarding the above-captioned actions may be different from facts now believed to be true or claims now believed to be available ("Unknown Claims"). Each Party accepts and assumes the risks of such possible differences in facts and potential claims and agrees that this Settlement Agreement shall remain effective notwithstanding any such differences. . . . Accordingly, this Settlement Agreement, and the releases contained herein, shall remain in full force as a complete release of Unknown Claims notwithstanding the discovery or existence of additional or different claims or facts before or after the date of this Settlement Agreement.

         Following entry of the settlement agreement, the district court entered judgment dismissing the case with ...

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