United States v. Sierra Pac. Indus.

100 F.Supp.3d 948

UNITED STATES of America, Plaintiff

v.SIERRA PACIFIC INDUSTRIES, et al., Defendants.

Civ. No. 2:09–02445 WBS AC.

United States District Court, E.D. California.

Signed April 17, 2015.

Kelli L. Taylor, Govt., Matthew Dean Segal, Todd A. Pickles, Colleen M. Kennedy, David Taylor Shelledy, Glen Frederick Dorgan, Govt., U.S. Attorney's Office, Sacramento, CA, for Plaintiff.

Richard Stone Linkert, Matheny Sears Linkert and Jaime LLP, Steven P. Ragland, John W. Keker, Sharif E. Jacob, Keker & Van Nest, LLP, San Francisco, CA, Annie Smith Amaral, Avalon Claire Johnson, William Ross Warne, Meghan M. Baker, Michael John Thomas, Downey Brand LLP, Derek John Vandeviver, Phillip R. Bonotto, Rushford & Bonotto, LLP, Lori J. Gualco, Gualco Law, Sacramento, CA, Jennifer T. Lias, PHV, Richard W. Beckler, PHV, Bracewell & Giuliani LLP, Washington, DC, David H. Dun, Dun & Martinek LLP, Eureka, CA, for Defendants.

MEMORANDUM AND ORDER

WILLIAM B. SHUBB, District Judge.

After reaching a settlement with the government and requesting the court to enter judgment pursuant to that settlement almost two years ago, defendants Sierra Pacific Industries, Howell's Forest Harvesting Company, and fifteen individuals and/or trusts who own land in the Sierra Nevada mountains (referred to collectively as “defendants”) now move to set aside that judgment based upon “fraud on the court.”

I. Brief Factual and Procedural Background

On September 3, 2007, a fire ignited on private property near the Plumas National Forest. The fire, which became known as the Moonlight Fire, burned for over two weeks and ultimately spread to 46,000 acres of the Plumas and Lassen National Forests. The day after the fire started, California Department of Forestry and Fire Protection (“Cal Fire”) investigator Joshua White and United States Forest Service (“USFS”) investigator David Reynolds sought to determine the cause of the fire. As a result of the joint investigation, Cal Fire and the USFS ultimately issued the “Origin and Cause Investigation Report, Moonlight Fire” (“Joint Report”). The Joint Report concluded that the Moonlight Fire was caused by a rock striking the grouser or front blade of a bulldozer operated by an employee of defendant Howell's Forest Harvesting Company. After winning a bid to harvest timber on the private property, Sierra Pacific Industries had hired that company to conduct logging operations in the area.

On August 9, 2009, the Office of the California Attorney General filed an action in state court on behalf of Cal Fire to recover its damages caused by the Moonlight Fire (the “state action”). That same month, on August 31, 2009, the United States Attorney filed this action on behalf of the United States to recover its damages caused by the Moonlight Fire (the “federal action”). The two cases proceeded independently, but the government¹ and Cal Fire operated pursuant to a joint prosecution agreement.

To say that this case was litigated aggressively and exhaustively by all parties would be an understatement. When the court entered judgment almost two years ago, the docket had almost six hundred entries, which included contentious discovery motions and voluminous dispositive motions. Almost three years after the federal action commenced, it was set to proceed to jury trial on July 9, 2012 before Judge Mueller and was expected to last no more than thirty court days. Three days before trial, the parties voluntarily participated in a settlement conference and reached a settlement agreement.

Under the terms of the settlement agreement, Sierra Pacific Industries agreed to pay the government $47 million, Howell's Forest Harvesting Company agreed to pay the government $1 million, and other defendants agreed to pay the government $7 million. (Settlement Agreement & Stipulation ¶ 25 (Docket No. 592).) Sierra Pacific Industries also agreed to convey 22,500 acres of land to the government. (Id. ) At the request of the parties and pursuant to the settlement agreement, the court dismissed the case with prejudice on July 18, 2012 and directed the clerk to enter final judgment in the case. (Id. )

More than two years later, on October 9, 2014, defendants filed the pending motion to set aside that judgment. After Judge Mueller recused herself, the case was reassigned to the undersigned judge. After conferring with the parties, the court required limited briefing addressing the threshold issue of whether the alleged conduct giving rise to defendants' motion constitutes “fraud on the court.” The court now addresses that limited issue.

II. Legal Standards

A. Federal Rule of Civil Procedure 60

To preserve the finality of judgments, the Federal Rules of Civil Procedure limit a party's ability to seek relief from a final judgment. Rule 60(b) enumerates six grounds under which a court may relieve a party from a final judgment:

(1) mistake, inadvertence, surprise, or excusable neglect;

(2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b);

(3) fraud (whether previously called intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;

(4) the judgment is void;

(5) the judgment has been satisfied, released or discharged; it is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable; or

(6) any other reason that justifies relief.

Fed.R.Civ.P. 60(b). A motion seeking relief from a final judgment under Rule 60(b) must be made “within a reasonable time” and any motion under one of the first three grounds for relief must be made “no more than a year after the entry of the judgment.” Id. R. 60(c)(1). Defendants concede that any motion under Rule 60(b) in this case would be barred as untimely because it would rely on one or more of the first three grounds for relief but was not filed within a year of the entry of final judgment.

Despite the limitations in Rule 60(b), “[c]ourts have inherent equity power to vacate judgments obtained by fraud.” United States v. Estate of Stonehill, 660 F.3d 415, 443 (9th Cir.2011) (citing Chambers v. NASCO, Inc., 501 U.S. 32, 44, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) ). Rule 60(d)(3) preserves this inherent power and recognizes that Rule 60 does not “limit a court's power to ... set aside a judgment for fraud on the court.” Fed.R.Civ.P. 60(d)(3) ; accord Appling v. State Farm Mut. Auto. Ins. Co., 340 F.3d 769, 780 (9th Cir.2003) (“Federal Rule of Civil Procedure 60(b) preserves the district court's right to hear an independent action to set aside a judgment for fraud on the court.”); Estate of Stonehill, 660 F.3d at 443 (“Rule 60(b), which governs relief from a judgment or order, provides no time limit on courts' power to set aside judgments based on a finding of fraud on the court.”).² Because defendants failed to file a timely Rule 60(b) motion, they are forced to argue that the judgment in this case should be set aside for fraud on the court, and the court must assess defendants' allegations under this narrowly defined term.

B. Definition of “Fraud on the Court”

The Supreme Court has “justified the ‘historic power of equity to set aside fraudulently begotten judgments' on the basis that ‘tampering with the administration of justice ... involves far more than an injury to a single litigant. It is a wrong against the institutions set up to protect and safeguard the public.’ ” In re Levander, 180 F.3d 1114, 1118 (9th Cir.1999) (quoting Chambers, 501 U.S. at 44, 111 S.Ct. 2123 ). Still, “[a] court must exercise its inherent powers with restraint and discretion in light of their potency.” Id. at 1119.

Relief for fraud on the court must be “reserved for those cases of ‘injustices which, in certain instances, are deemed sufficiently gross to demand a departure’ from rigid adherence to the doctrine of res judicata.” United States v. Beggerly, 524 U.S. 38, 46, 118 S.Ct. 1862, 141 L.Ed.2d 32 (1998) (quoting Hazel–Atlas Glass Co. v. Hartford–Empire Co., 322 U.S. 238, 244, 64 S.Ct. 997, 88 L.Ed. 1250 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17, 97 S.Ct. 31, 50 L.Ed.2d 21 (1976) ). The Ninth Circuit has repeatedly emphasized that “[e]xceptions which would allow final decisions to be reconsidered must be construed narrowly in order to preserve the finality of judgments.” Abatti v. Comm'r of the I.R., 859 F.2d 115, 119 (9th Cir.1988) ; see also Appling, 340 F.3d at 780 ; Dixon v. C.I.R., 316 F.3d 1041, 1046 (9th Cir.2003).

Fraud on the court “ ‘embrace[s] only that species of fraud which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery can not perform in the usual manner its impartial task of adjudging cases that are presented for adjudication.’ ” Appling, 340 F.3d at 780 (quoting In re Levander, 180 F.3d at 1119 ) (alteration in original). A finding of fraud on the court “must involve an unconscionable plan or scheme which is designed to improperly influence the court in its decision.” Pumphrey v. K.W. Thompson Tool Co., 62 F.3d 1128, 1131 (9th Cir.1995) (internal quotations marks omitted); see also Appling, 340 F.3d at 780 (“Fraud on the court requires a ‘grave miscarriage of justice,’ and a fraud that is aimed at the court.” (quoting Beggerly, 524 U.S. at 47, 118 S.Ct. 1862 )).

“In determining whether fraud constitutes fraud on the court, the relevant inquiry is not whether fraudulent conduct ‘prejudiced the opposing party,’ but whether it “harm[ed]” the integrity of the judicial process.' ” Estate of Stonehill, 660 F.3d at 444 (quoting Alexander v. Robertson, 882 F.2d 421, 424 (9th Cir.1989) ); see also Estate of Stonehill, 660 F.3d at 444 (“Fraud on the court involves ‘far more than an injury to a single litigant....’ ” (quoting Hazel–Atlas Glass Co., 322 U.S. at 246, 64 S.Ct. 997 )). Although “one of the concerns underlying the ‘fraud on the court’ exception is that such fraud...