Judge douses Cal Fire suit, exacting record $30 million fine for e-discovery abuse

February 13, 2014

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A case, literally, of “who started the fire?” has gone up in flames for the California Department of Forestry and Fire Protection and its lawyers at the state Attorney General’s Office.

For engaging in a “stratagem of obfuscation that infected virtually every aspect of discovery,” a state judge in Plumas County has dismissed  the agency’s suit accusing Sierra Pacific Industries and other landowners of sparking a blaze that burned to the ground more than 65,000 acres of woodlands in Northern California.

That terminating sanction is accompanied by fines of about $32 million, which lawyers for the defendants say represent the largest ever penalty for discovery misdeeds.

Superior Court Judge Leslie Nichols lambasted the government agency, commonly referred to as Cal Fire, in a 26-page order of February 4, issued simultaneously with a 57-page order that finely parses a litany of deceptions. Cal Fire was blasted for spoliating evidence, belatedly producing thousands of pages of documents, and withholding potentially damning emails related to an illegal fund it had created to secretly stash proceeds of wildfire settlements.

The defendants argued that the so-called WiFITER fund, which essentially set aside the spoils of legal victories that are supposed to be dispersed to authorities statewide, biased the plaintiff’s investigators, who emails show were attempting to pad the hidden account.

“Cal Fire failed to comply with discovery orders and directives, destroyed critical evidence, failed to produce documents it should have produced months earlier, and engaged in a systematic campaign of misdirection,” Judge Nichols wrote. “The misconduct in this case is so pervasive that it would serve no purpose for the court to attempt to recite it all here.”

Janet Upton, Cal Fire Deputy Director of Communications, told ACEDS the agency is “assessing its next course of action,” which she said could include an appeal of the monetary fine. She said the agency “vigorously” opposes the ruling.

Judge ‘suspicious’ of AG’s tactics

Though Judge Nichols declined to sanction California Justice Department attorneys Tracy Winsor and Daniel Fuchs, citing lack of statutory authority, he did not hide his displeasure with their conduct.

“The sense of disappointment and distress conveyed by the Court is so palpable, because it recalls no instance in experience over forty seven years as an advocate and as a judge, in which the conduct of the Attorney General so thoroughly departed from the high standard it represents, and, in every other instance, has exemplified,” he wrote.

“One hopes that this conduct is not explained in our law schools as ‘what good lawyers do’ to win their cases.”

Judge Nichols also said that while evidence does not support a definitive conclusion, it “supports a strong suspicion” that the lawyers from the state attorney general’s office “directed or advised the egregious and reprehensible conduct” of Cal Fire. He noted, however, that attorney-client privileges and other protections might have limited the ability of the lawyers to defend against accusations of misconduct. Neither Winsor nor Fuchs submitted a written declaration responding to charges of wrongdoing.

The public affairs office of California Attorney General Kamala Harris did not return a phone call seeking comment.

The case sparks from a 2007 wildfire that engulfed much of Moonlight Park in Plumas County, in northeastern California. Cal Fire alleged that a contractor hired by Sierra Pacific Industries started the fire when his truck hit a rock.

After a three-day hearing in July, Judge Nichols said the government did not have enough evidence to proceed. Sierra Pacific moved to recover the fees and expenses it incurred in the litigation, and for sanctions, in October. The terminating order dismisses a flurry of motions and briefing that erupted post-judgment after the defendants discovered Cal Fire failed to produce thousands of crucial documents in violation of the court’s discovery orders.

A ‘chance’ discovery 

Many of the WiFITER emails Cal Fire had withheld came to light only when they were published in a report by the California State Auditor’s Office, which found the fund to be illegal. Cal Fire subsequently admitted that it had not turned over more than 5,000 pages of related documents, in violation of the court’s April 30, 2013 discovery order, after the defendants brought the report to the court’s attention.

The persistence of the defendants and court in demanding the WiFITER documents ultimately led to much of what is known about the off-the-books account. According to the Wall Street Journal, existence of the fund first appears in a 2009 demand letter by a Cal Fire investigator seeking from Sierra Pacific two checks for the wildfire damage — one for $7.7 million to the state, and one for $400,000 to WiFITER. Sierra Pacific refused. Cal Fire sued shortly thereafter, seeking to recover $8.1 million from the defendants. Several private parties joined the lawsuit.

“Some of these documents,” Judge Nichols wrote, referring to 2,000 pages of materials produced by the plaintiffs almost a month after an October 2013 deadline, “belie Cal Fire’s own representations to the court that there was no evidence whatsoever that that the WiFITER fund was improper.”

One particularly sensitive email Cal Fire said it produced inadvertently triggered a squall of side litigation to determine the privilege status of the email, and whether the plaintiff could claw it back. That document alone produced two separate motions, on which Judge Nichols ultimately ruled the email was not privileged.

The case, which consolidated six separate actions, was originally set to go to trial last July, but Judge Nichols tossed the suit upon finding Cal Fire could not make a basic showing of its case. Cal Fire appealed that ruling in September to the California Court of Appeals. The order Judge Nichols issued last week could prevent the appeal from moving forward, barring a finding that he “abused his discretion” in issuing sanctions.

“This Court finds that Cal Fire has engaged in misconduct during the cause of the litigation that is deliberate, that is egregious, and that renders any remedy short of dismissal inadequate to preserve the fairness of the trial,” he wrote.

Mark Pawlicki, Sierra Pacific Director of Corporate Affairs and Sustainability, did not respond to a request for comment. William Warne, attorney for Sierra Pacific at Downey Brand in Sacramento, could not be reached for comment.

Cal Fire v. Sierra Pacific Industries 2-4-14 Order 1

Cal Fire v. Sierra Pacific Industries 2-4-14 Order 2