U.S. v. Union Pacific R. Co.

• Decision Date: 13 February 2008
• Docket Number: No. CIV S-06-1740 FCD/KJM.,CIV S-06-1740 FCD/KJM.
• Citation: 565 F.Supp.2d 1136
• Parties: UNITED STATES of America, Plaintiff, v. UNION PACIFIC RAILROAD COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of California

Page 1136

565 F.Supp.2d 1136

UNITED STATES of America, Plaintiff, v. UNION PACIFIC RAILROAD COMPANY, Defendant.

No. CIV S-06-1740 FCD/KJM.

United States District Court, E.D. California.

February 13, 2008.

Kendall J. Newman, United States Attorney, Sacramento, CA, Kimberly Anne Gaab, Kirk Edward Sherriff, Kurt A. Didier, United States Attorney, Fresno, CA, for Plaintiff.

Peter Charles Lyon, Susan M. Keeney, Ryan Conor Donlon, Severson & Werson, San Francisco, CA, for Defendant.

MEMORANDUM AND ORDER

FRANK C. DAMRELL, JR., District Judge.

This case arises out of the "Storrie Fire" that occurred on August 17, 2000 and resulted in damages to approximately 52,000 acres of National Forest System ("NFS") land in the Plumas and Lassen National Forests before it was suppressed. This matter is before the court on four motions for partial summary judgment, three brought by defendant Union Pacific Railroad Company ("defendant" or "UP") and one brought by plaintiff United States of America ("plaintiff").¹ In general, the motions ask the court to adjudicate core legal issues regarding the proper measures of alleged natural resource damages in this action and to issue specific orders defining the application of those measures. Because the motions raise overlapping issues, the court considers them jointly herein.²

At issue are the following key questions: (1) whether diminution of market value of the subject real property is the proper, over-arching measure of plaintiffs natural resource damages in this case;³ (2) if diminution in market value is not the proper standard, whether plaintiff may recover as separate and distinct injuries alleged timber damages, of over $121 million, reforestation⁴ costs, between $24 and $33 million, and loss of use of non-timber forest services, including loss of habitat and environmental services, during the period of regrowth (the so-called "habitat equivalency" damages), of approximately $13 million; (3) as to plaintiffs alleged timber damages, whether such damages are recoverable for burned NFS lands located on "deferred" or "offbase" lands under the "Quincy Library Group Act" or located in designated "Wilderness" areas, when certain legal restrictions preclude commercial logging of these lands; (4) if such an award of timber damages is legally permissible, whether defendant is entitled to an offset of such damages based upon the full administrative costs of any such theoretical sale of the timber and for the theoretical salvage value of the timber; (5) as to plaintiffs reforestation costs, whether said costs are unreasonable or too speculative to serve as a basis for a damages award; and (6) as to plaintiffs habitat equivalency damages, whether said damages are duplicative or unauthorized and thus excludable from any damages award.

For the reasons set forth below, defendant's motions are DENIED and plaintiffs motion is GRANTED in part and DENIED in part.⁵ The court finds that diminution in market value is not the proper measure of damages in this case. Plaintiff may recover damages for its separate injuries to the trees, to the soil and pre-merchantable timber, and its loss of use of habitat and environmental services during the period of forest regrowth. Defendant will not be permitted to argue at trial that plaintiffs requested timber damages, which amount is in dispute, are inflated due to a failure to consider certain administrative costs, and it will not be permitted an offset, pursuant to its affirmative defense of failure to mitigate damages, based on the theoretical salvage value of the timber. Plaintiffs reforestation costs are recoverable, in addition to the other requested damages, and are not unreasonable or too speculative. And finally, plaintiffs habitat equivalency damages are legally permissible and separately compensable from the other requested damages.

BACKGROUND⁶

The Storrie Fire ignited on August 17, 2000 on NFS lands in Plumas County, California. (T-RUF ¶ 1.)⁷ As addressed in plaintiffs separate motion for summary adjudication on liability issues, plaintiff contends a UP work crew ignited the fire while repairing a rail at the origin area of the Storrie Fire, and UP and its crew breached the standard of care in conducting the repair and in failing to monitor and suppress the fire before leaving the scene.⁸ Plaintiff asserts it sustained a range of damages as a result of the fire, including fire suppression costs, resource damages and rehabilitation costs. The latter two types of damages are the subject of the instant motions.⁹

The Storrie Fire area encompassed over 51,000 acres of NFS lands, with trees destroyed on approximately 21,000 acres in the Plumas and Lassen National Forests. (NR-RAF ¶ 1; NR-RUF ¶ 1.)¹⁰ Most of the NFS trees killed in the Storrie Fire, or likely to die because of the fire damage, were located on NFS lands designated as "deferred" or "offbase" for purposes of the Herger-Feinstein Quincy Library Group Forest Recovery Act of 1998 ("Quincy Library Group Act") (sometimes referred to herein as "QLG offbase lands"). (T-RUF ¶ 3.) Trees were also destroyed on another portion of the land damaged in the fire known as the "Bucks Lake Wilderness," designated as "Wilderness" under the California Wilderness Act of 1984 and protected under the federal Wilderness Act of 1964. (SA-RUF ¶ s 20-21.)¹¹ Also damaged in the fire were trees located on areas designated General Forest areas. (SA-RUF ¶ 18.) Overall, less than 1% of the NFS lands within the Storrie Fire perimeter were designated forest land that was unsuitable for timber production. (SA-RUF ¶ 17.)¹²

Plaintiff maintains that the Storrie Fire was predominately a moderate to high intensity burn. As a high intensity burn, plaintiff contends, the fire burned the soil cover so the soil itself eroded, and the needles burned off the trees so that there will not be any future duff to become soil. (NR-RAF ¶ s 8, 9, 10.) In addition to this damage, plaintiff asserts the fire also had a major impact on wildlife habitats and the environment, destroying, among other areas, vast acres of spotted owl habitat and carnivore habitat, as well as an uncounted number of animals. (NR-RAF ¶ s 12-17.) The forests' use for recreation and scenic enjoyment was also sorely impacted, plaintiff asserts, including Highway 70 which is designated a "scenic byway" and the Pacific Crest Trial. (NR-RAF ¶ 18.)¹³

Since 1999 and to the present, the Quincy Library Group Act prohibited the Forest Service from selling the timber on the QLG offbase lands. The Act likewise prohibited the Forest Service, following the fire, from conducting a salvage sale of the burned trees located on the QLG offbase lands. (T-RUF ¶ s 4, 9.) Had the trees on these lands not been wholly destroyed by the fire, plaintiff could have harvested the trees over time, after the expiration of the Quincy Library Group Act.¹⁴ (T-RUF ¶ s 8, 9.) Similarly, no logging or reforestation was allowed in the Bucks Lake Wilderness, at the time of the fire, and no logging or reforestation of the area is permitted today. (SA-RUF ¶ s 20, 21.) The General Forest areas are lands where commercial logging may occur subject to other legal restrictions, such as environmental assessment requirements. (UP's MSJ re: Areas Subject to Special Land Use Restrictions [Docket # 70] at 1 n. 3.)

Plaintiff contends the Storrie Fire destroyed NFS timber that had a total pre-fire timber value of $121,916,774. However, plaintiff seeks by its motion a `finding that, at a minimum, the pre-fire timber value is $79,291,175, representing the value plaintiff contends UP's expert conceded was the pre-fire value of the destroyed timber. Defendant disputes that its timber appraisal expert, James Fleming, made such a concession; rather, defendant maintains that Mr. Fleming proposed this figure as a hypothetical pre-fire value, calculated as if the trees were on private land and were able to be sold without NFS restrictions. (T-RUF ¶ 2.)

As to the NFS timber that was not located on QLG offbase lands, the Forest Service conducted post-fire salvage sales, recovering $335,616. (T-RUF ¶ 7.) Defendant contends a post-fire salvage sale of the burned timber on the QLG offbase lands, had federal law permitted it, would have generated $73,592,040. Therefore, defendant claims, if at all, plaintiff incurred only $5,699,135 in net lost timber value ($79,291,175 minus $73,592,040). (T-RUF ¶ 5-6.)¹⁵

STANDARD

The Federal Rules of Civil Procedure provide for summary adjudication when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). One of the principal purposes of the rule is to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In considering a motion for summary judgment, the court must examine all the evidence in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. See Celotex, 477 U.S. at 323-24, 106 S.Ct. 2548. If the moving party does not bear the burden of proof at trial, he or she may discharge his burden of showing that no genuine issue of material fact remains by demonstrating that "there is an absence of evidence to support the non-moving party's case." Celotex, 477 U.S. at 325, 106 S.Ct. 2548. Once the moving party meets the requirements of Rule 56 by showing there is an absence of evidence to support the non-moving party's case, the burden shifts to the party resisting the motion, who "must set forth specific facts showing that there is a genuine...