4.25.2008

TS - Supreme Court won't reverse Palco case decision

The California Supreme Court has refused to hear Humboldt County District Attorney Paul Gallegos' major fraud case against the Pacific Lumber Co.

The court turned down the DA's request to review a scalding decision handed down in January by the California Court of Appeals' First District.

”Further, we conclude the state has failed to prove, on its third try, a reasonable possibility that the operative pleading's defect can be cured by amendment,” the three-judge panel wrote for the First District.

The Supreme Court ruled without comment. It also denied Gallegos' request that the First District decision be depublished, which would have prevented it from being a precedent-setting opinion.

The 2002 suit alleged that Palco secured a overly liberal long-term logging plan when it agreed to sell the 7,400-acre Headwaters Forest and other groves for $480 million. The company submitted false data on landslides in one watershed and didn't correct the record until the last minute -- which prompted the California Department of Forestry to adopt a less stringent logging strategy, the complaint held.

The suit was filed shortly before an effort was launched to recall Gallegos, a campaign that was largely funded by Palco. The recall failed.

Palco is now in bankruptcy.

”The trial court, the appellate court and now the California Supreme Court have all recognized this case to be more an exercise in spite and sloganeering than an action of any substance or legal merit,” said Palco Vice President and General Counsel Frank Bacik.

Gallegos did not return the Times-Standard's phone call by deadline.

Humboldt County Superior Court visiting Judge Richard Freeborn threw out an amended complaint in 2005, writing that Gallegos didn't prove that Palco had scammed the government to gain an advantage over a competitor.

The appellate court determined that Palco's lobbying efforts with the state during the 1999 Headwaters negotiations led CDF to drop a stricter logging plan and adopt a more liberal one.

The so-called Noerr-Pennington Doctrine protects anyone petitioning the government or government agencies against civil liability. That doctrine prevails unless the actions taken during lobbying are a “sham.” Since Palco's efforts weren't intended to affect a competitor's business relationship, the appellate court determined, it didn't meet the definition of a sham.

Palco's communications with the CDF during the Headwaters negotiations -- whether fraudulent or not -- are privileged under state unfair competition laws, the appeals ruling reads. California Environmental Quality Act proceedings at the time were the right means to ferret out any false evidence, the First District judges wrote.

Supreme Court won't reverse Palco case decision
John Driscoll The Times-Standard
Article Launched: 04/25/2008 01:15:42 AM PDT