Judge’s Tweets Didn’t Justify Unwinding $122M Settlement

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By Samson Habte

Allegations of prosecutorial misconduct and inappropriate judicial “tweeting” don’t justify unwinding a $122 million settlement that the federal government obtained from lumber producers blamed for a massive wildfire that engulfed two national forests, the U.S. Court of Appeals for the Ninth Circuit held July 13 ( United States v. Sierra Pac. Indus., Inc. , 2017 BL 241716, 9th Cir., No. 15-15799, 7/13/17 ).

The ruling was a victory for federal prosecutors in Sacramento, who denied claims that the settlement they secured from a handful of timber industry defendants—including Sierra Pacific Industries, one of the nation’s largest lumber producers—was tainted by fraud and perjury.

The appeals court said the defendants failed to show “that any ‘grave miscarriage of justice’ occurred” in connection with the 2012 settlement, which resolved a lawsuit to recover damages for a fire that burned 46,000 acres in the Plumas National Forest and Lassen National Forest.

The three-judge panel said the defendants’ allegations were insufficient to trigger Federal Rule of Civil Procedure 60(d)(3), which authorizes judges to “set aside a judgment for fraud on the court.”

The court dedicated about two-thirds of its legal analysis to a discussion of why the defendants—who accused prosecutors of suborning perjury from fire investigators—failed to satisfy “the high standard for a Rule 60(d)(3) motion.”

The balance of the legal analysis focused on a secondary issue that generated a great deal of discussion within the Central California legal community: the alleged social media activities of U.S. District Judge William B. Shubb, who previously denied the defendants’ motion to set aside the settlement.

The defendants said Shubb should have been recused because he maintains a pseudonymous Twitter account that “followed” an account administered by the U.S. Attorney’s office handling the case.

“The mere existence of a social network relationship between a judge and one of the parties appearing before him creates an appearance of bias and raises ‘significant concern’ regarding the risk of ex parte communications,” the defendants said in a motion that asked the 9th Circuit to take judicial notice of the existence of the account and Shubb’s alleged control over it.

That motion included nearly 400 pages of exhibits, including screenshots of the now-protected Twitter account, maintained by someone with the handle “@nostalgist1.” A subsequent filing highlighted that person’s connections to Twitter accounts maintained by some of Shubb’s relatives and co-workers in an effort to rebut the government’s “evidence-free hypothesis that the Twitter account might be the work of a hacker.”

The defendants sought leave to supplement that filing with additional information that might establish Shubb’s ownership of the account. But the 9th Circuit denied that motion as moot after concluding that “the allegations do not warrant retroactive recusal even if [Shubb] is the owner of the account.”

Stretching Microsoft

“The claim that an unknown account, not identified with a judge or the judiciary, followed a public Twitter account maintained by the U.S. Attorney does not provide a basis for recusal here,” the appellate panel said in an opinion by Chief Judge Sidney R. Thomas.

“[T]he fact that an account holder ‘follows’ another Twitter user does not evidence a personal relationship, and certainly not one that, without more, would require recusal,” Thomas wrote. “Thus, assuming the account belonged to the district judge, the judge did not plainly err in not recusing himself because he ‘followed’ the U.S. Attorney’s office on Twitter.”

For similar reasons, the panel rejected the argument that tweets published by the U.S. Attorney’s office would have “constituted improper ex parte communications” with Shubb if he were the owner of the @nostalgist1 Twitter account.

None of the tweets the defendants identified “were specifically directed from the U.S. Attorney to the judge,” Thomas noted. Rather, they were “news items” that were “intended for wide distribution to an anonymous public audience,” he said.

The defendants also argued that Shubb had to be recused because he tweeted a link to an allegedly erroneous news article about this case. They relied on United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001), which retroactively disqualified a judge from a blockbuster antitrust case, and vacated one of his orders, because of public statements he made about the case.

But “the conduct in Microsoft was far more problematic,” the court said. The judge there “had given numerous secret interviews to the press, in which he spoke extensively about his views on the merits of the case,” Thomas wrote. “Here, in contrast, the tweets allegedly posted by [Shubb] expressed no opinion on the case or on the linked news articles.”

No ‘Fraud on the Court’

The defendants who filed this appeal entered into the challenged settlement in 2012, shortly before trial was scheduled to begin in the U.S. government’s federal case against them. The government alleged that contractors hired by Sierra Pacific started the fire while operating bulldozers.

Sierra Pacific agreed to pay $47 million and convey 22,500 acres of private land ( worth at least $67.5 million) to the government. The remaining defendants agreed to pay a combined $8 million to settle the claims against them.

The defendants entered into that settlement before winning the dismissal of a lawsuit that California authorities had filed against them in state court. The defendants subsequently sought to unwind the federal settlement, citing “newly-discovered fraud” that surfaced during the state court litigation.

Among other claims, the defendants alleged that prosecutors failed to disclose that Edwin Bauer—whose son was spotted near the “origin site” of the forest fire—had approached the government and falsely reported that Sierra Pacific’s lawyer offered to bribe him if he said his son started the fire. The defendants said that information was exculpatory because it suggested the father was trying to point investigators away from his son, who may have actually started the blaze.

But the appeals court said the government lawyers—who were held to the same “standard discovery obligations” as any other lawyers because this was a civil case—didn’t have “a specific duty to disclose the false bribe” allegation. “Under the high standard for a Rule 60(d)(3) motion, a mere discovery violation or non-disclosure does not rise to the level of fraud on the court,” Thomas wrote.

The defendants also accused prosecutors of suborning perjury from fire investigators who were deposed in the federal litigation. But the appellate panel said that claim lacked evidentiary support and didn’t rise to the level of fraud on the court.

Settlement Agreement Waived Relief

The appellate panel noted that the defendants may not have been entitled to relief even if their allegations against the government did constitute actionable “fraud on the court” under Rule 60(d)(3).

That’s because “the express settlement terms appear to preclude any relief, even for newly discovered facts or evidence,” Thomas said.

“[C]ourts have consistently required a very high showing for relief for judgment on the basis of fraud on the court,” Thomas wrote. “After voluntarily settling this case and asking the district court to enter judgment based on that settlement, the Defendants’ allegations of newly discovered fraud fail to meet this high standard.”

Judge Mary H. Murguia and District Judge Jon P. McCalla, sitting by designation from the U.S. District Court for the Western District of Tennessee, joined the decision.

Downey Brand LLP argued for Sierra Pacific. The U.S. Attorney’s Office argued for the government.

To contact the reporter on this story: Samson Habte in Washington at shabte@bna.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bna.com

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