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Suit Against Pacific Lumber Is Dismissed

Judge declares that the company was protected from civil liability as part of a deal with the state. Critics say the ruling rewards deceit.

June 16, 2005|Tim Reiterman | Times Staff Writer

SAN FRANCISCO — A judge has thrown out a controversial lawsuit filed against Pacific Lumber Co. by Humboldt County prosecutors who alleged that the company fraudulently obtained state permission to cut many millions of dollars in timber on environmentally sensitive land.

In a ruling filed Tuesday, Humboldt County Superior Court Judge Richard L. Freeborn did not address the merits of the allegation. But he agreed with Pacific Lumber that there was no legal basis for the suit, because the company's conduct during the logging permit process was protected from civil action.

The ruling is the latest chapter in a dispute that has lasted for more than a decade over how much logging Pacific Lumber is entitled to do on its own land, thousands of acres of north coast forest that hold many of the last ancient redwood trees still in private hands.

Dist. Atty. Paul Gallegos said Wednesday that his office was seriously considering an appeal. The judge, he said, sent a signal that Pacific was "totally immune from lying. People out there are getting permits all over the place, thinking they have an obligation to tell the government the truth," Gallegos said. "This is not the law, in my opinion, and if am wrong, it is an outrage because it rewards deceit."

The lawsuit, which sought several hundred millions of dollars, divided the county and prompted an unsuccessful bid last year to recall Gallegos -- an effort largely bankrolled by Pacific Lumber. Filed in 2003, the suit pits residents who view the timber company as indispensable to the local economy against those who believe it is over-logging its vast holdings of valuable redwoods and Douglas fir, endangering fish and wildlife, and causing erosion that has damaged adjacent property.

Defeat would have been a major blow for Pacific Lumber, a 140-year-old firm that is financially troubled and has downsized and sold off assets since it was acquired in the mid-1980s by Maxxam Corp., a Texas firm controlled by financier Charles Hurwitz.

"We are pleased with this decision," said company spokesman Chuck Center. "We did not think it would take this long. We always thought it was frivolous and political as well."

The lawsuit accused the company of lying to state regulators during the historic 1999 deal that created the Headwaters Forest Preserve. As part of the more than $400-million transaction, Pacific Lumber transferred 7,000 acres of virgin timber to the federal and state governments and agreed to logging restrictions on its remaining 200,000 acres to protect wildlife habitat.

The suit contended that Pacific gave state agencies false information and data understating the landslide risks of its future logging plans -- then delayed the submission of correct information. The alleged fraud, the lawsuit said, resulted in extensive logging of many thousands of trees on unstable slopes, with damage to streams and watersheds. The suit sought $2,500 per tree.

For the last two years, the company has been seeking dismissal of the suit. Freeborn sided with its contention that, even if it had made misrepresentations to get logging plan approvals, the firm was protected from civil liability.

The judge concluded that Pacific Lumber's interaction with state officials was a quasi-judicial matter that insulated the company from the lawsuit. And he declared that the company's lobbying of state regulators to be free speech protected by the 1st Amendment.

Mark Lovelace, head of the Humboldt Watershed Council, which has opposed Pacific Lumber logging of fragile watersheds, said of the decision, "It is frustrating ... that a corporation is protected from lying when it harms the public."

Freeborn invited the company to submit a judgment for him to sign and said the county would be compelled to pay the company's legal costs. Edgar Washburn, a San Francisco attorney representing the company, said the costs are substantial but have not been tallied.

The State Water Resources Control Board is scheduled to meet today in Sacramento to decide whether to withdraw timber harvest permits for two watersheds that Pacific Lumber says are essential to the company's survival.

The company has threatened to lay off employees and file for bankruptcy if it does not get permission to log the watersheds, which residents say have filled with silt from logging operations.

Company officials say the damage is mainly a result of logging by former owners of Pacific Lumber and is being repaired.

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