Appeals Court Decision on State Timberland Goes Against Counties; Setting Aside $1 Billion Judgment

EDITOR’S NOTE: The Oregon Court of Appeals has found the state Board of Forestry is not required to maximize logging revenues on forestland obtained from counties. Instead, the Board of Forestry must “secure the greatest permanent value of such lands to the state”. That can include protecting wildlife habitat, preserving forests, and recreation.
The ruling threw out the billion dollar verdict several Counties obtained for what they say were revenues owed to them had the state done more logging. Of course, rural counties more than ever need revenue for services. Let’s work together and start by eliminating the tax cuts for timber corporations that have cost counties at least $3 billion in money for schools, 911 and other emergency services, law enforcement, libraries, roads, and other infrastructure. Here is the “Tillamook” perspective on the Appeals Court decision from the Pioneer’s legal expert, Neal Lemery.

by Neal Lemery

In a major setback to Oregon timber counties, the Oregon Court of Appeals reversed a Circuit Court jury verdict and a $1 Billion plus judgment against the state Forestry Department, on April 27. Tillamook County was the largest stakeholder in the lawsuit, as it has the lion’s share of state forest timberlands that are involved in this lawsuit, due to the large amount of land in what is now the Tillamook State Forest the county had transferred to the state to manage.

Counties with extensive state forest landholdings had argued that various legislative acts and transfers of county timber land to the state Forestry Department during the Great Depression of the 1930s, and other transfers, created a contract between the counties and the state.

The counties had successfully argued to the trial court and the jury that a contract existed and that the state was obligated to conduct timber harvests, which produce enormous amounts of revenue to the counties, and that forest management must be heavily weighed in favor of commercial harvests. The counties pointed to a state statute that declared the state is obligated to “secure the greatest permanent value of such lands to the state”.

In 2020, Tillamook County and its local taxing districts received $22.2 million in state forest timber revenue. Statewide, the revenue was $69.2 million. Under the current practices of the state forester, this is about 64% of total timber revenue. The lawsuit sought a bigger cut of total revenues for the counties.

Wading through numerous legal arguments, and a long history of litigation between the timber counties and the state Department of Forestry, the appellate court rejected the legal argument that the various statutes and state administrative rules created an enforceable contract between the state, as manager of the timber lands, and the counties, which benefit from the volume of timber sales on the lands in question.

“This opinion addresses and resolves defendants’ seventh assignment of error, which presents a dispositive legal question. We do not address—and our opinion should not be read to answer—the other potentially dispositive issues in this case, including the two mentioned in this footnote, because some of those other assignments may fail on the merits and because our resolution of the seventh assignment of error resolves those assignments that otherwise may have merit. Additionally, in a cross-appeal, plaintiffs seek reversal of the trial court’s ruling striking plaintiffs’ request for prejudgment interest and “entry of a judgment adjusted to reflect the prejudgment interest that the State should pay at the statutory rate.” In light of our disposition, we dismiss plaintiffs’ cross-appeal as moot,” the Court of Appeals wrote.

The circuit court’s money judgment against the state was bearing a 9% interest rate, about $250,000/day, creating a budgetary nightmare for the Legislature.

The appellate court dug into the initial legislation from 1916 and subsequent changes, as well as an abundant history of prior court decisions.

“Oregon counties and the state have a long history of cooperation in the management of Oregon’s forestlands”, the Court of Appeals said.

These various laws and the transfer of county lands to the state was in response to the enormous amount of privately owned timberland that were subject to property tax foreclosures during the Depression. Counties became the owner after the foreclosures, but did not have their own resources to actively manage the timberland and bring it back into timber production. The State did have the resources as well as the bonding authority to finance the reforestation of the Tillamook Burn.

The parties disagree about the meaning of a 1986 Oregon Supreme Court decision where Tillamook County sued the Board of Forestry. The counties argue that decision established the “greatest permanent value” as a contractual term, but today, the Court of Appeals stated that was not what the Supreme Court decision said.

In 1988, the State Board of Forestry adopted an administrative rule re-defining the “greatest permanent value”, which altered the revenue splitting formula. The counties believed they were getting shortchanged, and deserved a bigger slice of the timber revenue pie. These differing views of how that revenue is calculated and how the states should manage state timberland has been the source of extensive political wrangling and litigation ever since.

The politics of the Board of Forestry is Byzantine, with each of the interests in Oregon public timberland management, including counties, having their own seat on the board, which is appointed by the Governor. The politics appears to demand that Board of Forestry decisions be unanimous, which is often an elusive aspiration.

In Tillamook County, state timberland revenue is again split between the county general fund and local taxing districts, with a major chunk going to school districts.

Stay tuned for the certain appeal to the Oregon Supreme Court. There are big bucks involved, and the counties’ attorneys made an attorneys’ fees deal with the counties to be paid with a percentage of any money judgment against the state, and subsequent revenue increases.