Our Litigator of the Week award goes to Davis Wright Tremaine's John DiLorenzo Jr., who scored a $1 billion jury verdict on behalf of rural counties and local taxing districts in Oregon.

In a class action against the state, DiLorenzo's clients claimed that Oregon mismanaged state forests by failing to harvest enough timber, in violation of a longstanding statutory contract.

After an 18-day trial, a jury in Linn County, Oregon circuit court promptly delivered a $1.066 billion verdict for the plaintiffs, which includes $392 million in future damages. If the award is upheld, 525-lawyer Davis Wright Tremaine stands to collect a $160 million contingency fee. 

DiLorenzo discussed the case with Lit Daily.

Lit Daily:   Who are your clients and what were they seeking?

John Di Lorenzo: We represent Linn County, and a class consisting of approximately 160 counties and local taxing districts in western Oregon. The districts include schools, community colleges, hospitals, public safety districts, fire districts, park and recreation districts, and many others.  

The class was seeking damages for breach of a statutory contract they entered into when their counties conveyed over 600,000 acres of forest land to the state to be managed. The class sought past damages from 2004 and future damages for the state's failure to maximize timber harvest while adhering to the state's forest practices act and federal laws.

Tell us about the roots of the dispute, which I understand stretch back 80 years.

During the Great Depression, many western Oregon counties gained titles, through property tax foreclosures of cut over and younger growth timber lands. By the early 1930s, close to 1 million acres reverted to the counties because landowners could not afford to pay their taxes. 

But the counties had no funds for management either and once they owned the lands, no one was available to pay the property taxes. Due to lack of management, hundreds of thousands of acres went up in flames in a series of fires.  

In 1939, Governor Charles Sprague came up with a plan to save these forests and devote them to guaranteeing "a permanent forest economy" for our state. Back then more than 45% of Oregon's workers were in the timber industry. Gov. Sprague's plan permitted the counties to deed their timber lands to the state. The state would manage the land and then split the proceeds to provide the counties and their local taxing districts permanent revenues for financing their government services and produce timber sales for our mills to keep our workers employed.  

The arrangement permitted the state to establish its state forests (these acres comprise only 3% of Oregon's total forest lands—most are owned by the federal government, private parties and tribes). The 1941 act also provided that Oregon would manage the lands so as to produce "the greatest permanent value of the lands to the state."  

In consideration of the deeds to the lands, the counties and local districts were entitled to approximately 2/3 of the timber sale revenues from the lands and Oregon could keep 1/3 to run its forestry department. Evidence produced at trial from historical documents, expert historians, deposition testimony in a similar case in the 1980's and testimony from 3 previous state foresters and other witnesses showed that for 57 years, Oregon's course of performance meant maximizing timber harvest and revenues for these counties and local governments.  

However, in 1998, the Board of Forestry adopted an administrative rule which sought to define the management standard. It removed the assumed primacy of timber production and added many other "values" which were non-monetary including environmental, wildlife preservation, aesthetic and others. In 2001, in response to the rule, Oregon adopted a forest management plan which was designed to grow endangered species habitat to accommodate the spotted owl and other potential listed species.  That placed the forests on a trajectory for major reservations of its forest land to non-income producing uses.

What was your overarching theme in litigating the case? 

Based on prior cases, the trial court ruled that the arrangement constituted a contract between the counties and the state. The taxing districts were third party beneficiaries of the contract. It was up to the finder of fact (in this case the jury) to consider evidence from 1939 through 1941 and then course of performance evidence to determine what the parties meant by "greatest permanent value of the lands to the state" as that phrase would have been understood to mean in 1941.  

Our overarching theme was "A deal is a deal and a deal can't be changed unless both parties agree."  The 1998 rule and 2001 forest management plan was a unilateral change to the deal that required the agreement of the counties. Because the agreement was never obtained, the change in management policy was a breach that resulted in damages.

How unusual is it to try a statutory contract case before a jury?

As far as I know, this is the first statutory contract case in Oregon that has been tried to a jury.

When and how did you become involved?

I was aware of a prior Oregon Supreme Case from the late 1980s that permitted the counties (in their proprietary and corporate capacities) to sue the state for relief with respect to this arrangement. The state Supreme Court did not reach the issue of whether the arrangement was a contract but held that the counties had a "protectable interest" in assuring that these lands were devoted to their intended purpose. I felt the arrangement was a contract and that a trial court would likely conclude that to be the case. 

Who were the other members of your team?

My partner John McGrory and colleagues Aaron Stuckey, Chris Swift, Chris McCracken, Greg Chaimov and Alicia LeDuc handled our years of motion practice, class certification issues and the like. The trial court ruled on over 50 motions during the course of the case.  

Our trial team was assisted by paralegals Erika Buck and David MacKenzie, and assistants Malinda Quirante and Allison Bainter. The team also included our jury consultant, Dr. Laurie Kuslansky of New York City, and graphics consultant, Vince Plunket (Persuasium Consulting) from Portland.

According to news reports, the firm took the case on a 15% contingency—which would work out to $160 million payday if the judgment stands. Is it common for DWT to litigate on contingency? Was there much internal debate about using an alternative fee arrangement for this case?

We don't commonly litigate on contingency but we generally have a small number of contingency cases open at any given time. We have a committee that follows an intake and monitoring process for contingency cases.

What was the role of the timber industry in the proceedings?

I formulated the basic theory of this case with Aaron Stuckey's assistance back in 2013.  After several of my colleagues concluded that it had promise, I gave a number of speeches to an industry group proposing this type of litigation as a way of addressing the urban/rural divide in our state.  

Several timber companies advanced some initial seed funding to allow my firm to engage in further research and development. The companies were willing to help because their facilities are located in counties that are struggling with funding for basic services like public safety, police and fire. Also, they have long term interests in an educated workforce and were concerned about the continuing viability of education providers in their areas. 

The state argued that there was no term in the statutory contract that required defendants to maximize revenues for plaintiffs' benefit. What was your response?

The historic evidence and evidence of course of performance of the contract over the ensuing 57 years showed that "greatest" meant "the most."  "Permanent" meant "forever." And "value" meant "money" or "revenue."

How should the state balance other interests, such as recreation, clean air and drinking water and preserving habitat for native species with maximizing revenue by logging?

The state is welcome to balance other interests any way it wishes. Oregon law is clear: The state has an absolute right to breach its contracts with other parties. Specific performance is not available as a remedy in these circumstances.  

However our constitutional doctrine of eminent domain requires the state to compensate a party who suffers a breach.  

What were some high (or low) points at trial?

Our entire team consisted of happy warriors. There were no low points because we had been at this so long and trusted one another to do the best job each person could possibly do. The entire team was all in.  

I recall one late night (into the early am hours) when John McGrory and I looked at one another and agreed "We just love this case." Frankly, the lawyers on my team are most self-actualized when we are in a courtroom. We just love this stuff.

Did you make any unconventional strategic decisions in court?

We decided to use the state's own computer models for our expert testimony instead of creating our own. This placed the state in a position of having to disclaim the accuracy of predictive models that they use to make their own important decisions if they wanted to challenge our experts.

What do you think you'll remember most about this case? What do you hope will be its legacy?

This journey is far from over. But I think there is a big idea associated with the case. This is a damages case. It does not seek injunctive or declaratory relief. Oregon law is clear that damages are our only alternative.  

In this case, the state determined that times have changed since the 1940s and that the public's desires and demands for use of the state forests have changed. That may well be true. But Oregon has a substantial urban/rural divide. The urban areas elect the greatest number of members to our legislature, so it is no surprise that state policy will likely reflect "urban values" to at least some extent.  

In this instance, those urban values demand more from these forests—like aesthetics, environmental values, and preservation. Because recent policy purports to benefit all of Oregon, including the urban dwellers, why should 100% of the consequences of the change in policy (the burdens) be shouldered by only rural communities?  

A damages award against the state is an equalizer. It is a means of matching the burdens with the benefits in a more equitable way. Were that concept to catch on, it could be a model for addressing other instances of urban/rural conflict.