The Humboldt County district attorney cannot sue Pacific Lumber Company for allegedly submitting false information during the state's processing of an environmental impact report and sustainable logging plan, the First District Court of Appeal has ruled.
The court ruled that the district attorney's lawsuit was blocked by a section of the state Civil Code and by the Noerr-Pennington doctrine, which protects lobbying and petitioning activities. The court did not rule on the legitimacy of Pacific Lumber's allegedly fraudulent statements.
Pacific Lumber Company has been involved in an enormous amount of litigation since financier Charles Hurwitz acquired the logging company in 1986. (The company is currently in bankruptcy proceedings in Texas. See CP&DR Environment Watch, November 2007.) However, the suit filed by Humboldt County District Attorney Paul Gallegos in early 2003 was different. Gallegos contended that Pacific Lumber submitted false information downplaying the potential for logging to cause landslides in the Bear Creek, Elk River and Jordan Creek watersheds. The California Department of Forestry and Fire Protection (CDF) relied on this information to certify an EIR and approve a "sustained yield plan" that permitted logging, according to county prosecutors. They sought a civil penalty of $2,500 for every illegally harvested tree, or about $250 million all together.
Even though Humboldt County has been the scene of logging protests and litigation for many years, the district attorney's suit appeared to take the controversy to a higher level. Pacific Lumber poured $300,000 into an effort to recall Gallegos, who was first elected in 2002, but 61% of voters backed the district attorney in a March 2004 recall election.
While it lost in the political realm, Pacific Lumber had much better success in court. In May 2004, Humboldt County Superior Court Judge Christopher Wilson rejected the prosecutor's request to prohibit Pacific Lumber timber harvesting, but he allowed the district attorney to amend the lawsuit. Gallegos did so, but Superior Court Judge Richard Freeborn ruled in June 2005 that the company was immune from the lawsuit. The district attorney appealed, but a unanimous three-judge panel of the First District upheld the lower court.
The trial court ruled that Civil Code § 47, subdivision (b) provides absolute immunity to communications made as part of a judicial or quasi-judicial proceeding. The idea is that citizens should be able to communicate with government agencies without fear of litigation over what they say. "Pacific Lumber's communications, whether fraudulent or not, fall squarely within the scope of the litigation privilege," wrote Alameda County Superior Court Judge Jeffrey Horner, sitting by assignment to the First District.
The district attorney argued that § 47(b) was inapplicable because his lawsuit was brought under the Unfair Competition Law (Business and Professions Code § 17200 et seq.). The Unfair Competition Law forbids "any unlawful, unfair or fraudulent business act or practice." The district attorney contended that Pacific Lumber's actions were fraudulent because the company submitted false information after the close of the 90-day public review period, and then submitted a correction at the last minute to the wrong government office.
The First District, however, found that the § 47(b) immunity does not "evaporate merely because the plaintiff discovers a conveniently different label for pleading what is in substance an identical grievance arising from identical conduct as that protected by § 47(b)."
The federal Noerr-Pennington Doctrine provides similar immunity for any petitioning activities before the courts and government agencies. But there is a "sham exemption" to Noerr-Pennington. The district attorney argued that Pacific Lumber's activities fell into an area covered by the sham exemption.
The First District disagreed. For the sham exemption to apply, Pacific Lumber had to believe that there was no way it could prevail in the government process, and that it was using the government process to interfere with a competitor. Neither was the case here, the court found. Not only did Pacific Lumber believe it could prevail, it in fact did, the court noted.
"[E]ven if we were to recognize an expansion of the sham exemption for fraudulent conduct in adjudicatory proceedings," Horner added, "we would nonetheless conclude that the fraudulent conduct alleged here is not actionable because the state [district attorney] has failed to adequately allege that it deprived the CEQA proceedings of legitimacy."
Besides, the court noted, CDF adopted a restrictive logging plan as a result of the CEQA process. Only after intense lobbying by Pacific Lumber in early 1999 did CDF modify the plan to permit more logging — and that is the plan of which the district attorney complains. Pacific Lumber's lobbying is "a classic form of political expression" that is immune from liability under Noerr-Pennington, the court concluded.
After the decision came down, District Attorney Gallegos said he disagreed with the ruling but probably would not seek state Supreme Court review. That does not mean, however, Pacific Lumber is in the clear.
In 2007, former CDF Director Richard Wilson and former CDF forestry regulator Chris Maranto filed a whistle-blower lawsuit that alleged a computer model used to support Pacific Lumber's logging plan was intentionally flawed to exaggerate the rate of tree regeneration. In addition, the state Supreme Court currently is considering an environmental group's challenge of the sustained yield plan, the EIR and a habitat conservation plan. That case is Environmental Protection Information Center v. California Department of Forestry and Fire Protection, No. S140547 (see CP&DR Legal Digest, May 2006; Environment Watch, March 2006). That state Supreme Court case has been extensively briefed, but no date for oral argument has been set.
People v. The Pacific Lumber Co., No. A112028, 2008 DJDAR 361. Filed January 10, 2008.
For the People: Christa McKimmy, Humboldt County district attorney's office, (707) 445-7411.
For Pacific Lumber: Edgar Washburn, Morrison & Foerster, (415) 268-7860.