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Oregon Court of Appeals overturns $1 billion timber verdict against state

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The Oregon Court of Appeals has overturned a $1 billion jury verdict against the state government that sought to compensate counties for insufficient logging on state forests

SALEM — The Oregon Court of Appeals Wednesday struck down a $1 billion jury verdict that was intended to compensate 14 county governments for insufficient logging on state forestlands.

A law that requires Oregon to manage the forestland for the “greatest permanent value” does not create an “immutable promise” to maximize revenue for the counties, the appeals court ruled.

The appellate court said that “historically, ‘value’ has myriad definitions, some of which could relate to revenue production and others that do not relate to revenue production.”

The statute also directs that forests be managed for the “greatest permanent value” to the state, rather than to the counties, which means the text falls short of the “clear and unmistakable intent” of making a contractual promise, the ruling said.

For that reason, a state judge in Linn County wrongly refused to dismiss the class action lawsuit against the state government, the ruling said.

John DiLorenzo, attorney for the counties, vowed to challenge the ruling before the Oregon Supreme Court because it “does not align with the law or the evidence we presented at trial.”

The ruling doesn’t take into account the economic and social damage that rural communities have suffered after the state government changed its logging policies without input from the counties, he said in an email.

Oregon’s leaders have decided the timber economy is inconsistent with their “urban values,” but the resulting problems must be addressed to bridge the urban-rural divide, DiLorenzo said.

“The lack of productive employment in these communities has led to substance abuse, violence, lack of educational opportunity and general hopelessness and despair,” he said.

After a month-long trial in 1990, a jury determined the State of Oregon violated a contract requiring it to maximize revenue from forestlands donated by the counties in the 1930s and ‘40s.

State forests must be managed for the “greatest permanent value” by law, but the 14 counties claimed the Oregon Department of Forestry impermissibly expanded that definition beyond its original intent.

Under language adopted in the late 1990s, the “greatest permanent value” was changed to include environmental and recreational considerations that restricted timber harvests, shortchanging the 14 counties and tax districts within them of revenues, the plaintiffs claimed.

Attorneys for Oregon appealed the jury verdict on the grounds that the counties didn’t have an enforceable contract that dictated how state forest officials must manage the nearly 700,000 acres of donated property.

The law governing state forestlands pertains to “matters of statewide concern” that cannot be challenged in court by the counties, state attorneys claimed. As political subdivisions of the Oregon government, the counties cannot sue over such state policies.

Federal environmental laws enacted since the property was donated, such as the Endangered Species Act, also effectively limit how much timber can be extracted from state forestlands, according to state attorneys.

The counties claimed that Oregon forestry officials weren’t obligated to create habitat for federally-protected species that resulted in logging restrictions. In any case, the counties said the state government can alter forest management policies but must still pay them damages for breaching the contract.

Counties provide healthcare and other functions under contract with the state government, so they must be able to rely on such agreements being enforceable, the plaintiffs said. If the counties had known the state government could re-interpret the contract’s terms at will, they’d never have donated such huge amounts of forestlands.

The appeals court ruling does nothing to alleviate the hardships that forest mismanagement created for rural communities, said Roger Nyquist, a commissioner for Linn County, the lead plaintiff.

Aside from economic issues, the state’s forest management approach has caused these communities to live with the danger of deadly wildfires, Nyquist said in an email.

“The wildfires in September 2020 that caused death and destruction have changed the public’s attitude about forest practices,” he said. “We hope that same change in attitude will take place with Oregon’s political class.”

Ralph Bloemers, attorney for fishing and conservation groups involved in the case, said that increased logging on the fraction of Oregon forests owned by the state government wouldn’t do much to help rural communities.

In comparison, the elimination of the timber severance tax in the 1990s has allowed “Wall Street timber corporations” to avoid paying their “fair share” of taxes to support rural communities, Bloemers said in an email.

“If major timber companies paid more in taxes, that money would go to the counties for firefighting, repairing roads and essential services,” he said.

The appeals court ruling affirms that state officials can manage these forestlands for the benefit of all Oregonians by protecting watersheds and wildlife, storing carbon and providing recreation as well as timber, Bloemers said.

“All of these things generate value for the people of Oregon,” he said

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