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Appeals Court Reverses Ruling In Timber Lawsuit

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MINNEAPOLIS (AP) — The Minnesota Court of Appeals decided Monday that a lower court erred when it ruled in favor of timber companies who claimed the state broke promises by capping payments under a forest management program.

The decision essentially dismisses a lawsuit filed last year by three large timber companies who argued the $100,000 annual cap put in place as lawmakers were trying to balance the budget was a breach of contract.

The appeals court ordered the case back to Ramsey County and said a judgment should be issued in the state’s favor.

Sarah Crippen, an attorney for Blandin Paper Co., Potlatch Corp., and Meriwether Land and Timber, said her clients were disappointed with the decision and were reviewing their options.

The case centers on the 2001 Sustainable Forest Incentive Act, which allows owners of forest land to receive annual payments for following certain requirements, such as following a forest management plan or avoiding residential or agricultural use. Enrolled land is required to be in the program for eight years, and there are penalties for early withdrawal or noncompliance.

In 2009, the incentive was about $16 an acre.

Then-GOP Gov. Tim Pawlenty tried to use his executive budget-cutting authority to cap the payments at $100,000 annually. The cap was part of a so-called unallotment package in which Pawlenty withheld spending the Legislature previously authorized. After a court struck down the Pawlenty cuts, the Legislature adopted many of them and the cap went into effect for 2010.

Most landowners in the program didn’t have enough acres to exceed the $100,000 cap, but the three companies claimed they were being discriminated against because of their large land holdings, getting as little as 38 cents an acre back.

The lawsuit claimed the companies missed out on nearly $8 million in payments related to a half-million acres of forest enrolled in the program — about 60 percent of the total land enrolled.

The appeals court said the negative effect on the companies was limited and “while the amount of money collectively at stake for respondents is large, it will not dictate whether respondents continue to exist.”

The court also found there was no evidence that participation in the program was detrimental to the companies, noting they also participate in private forest-management programs that have similar goals as the Sustainable Forest Incentive Act.

“While respondents may have lost some sense of nimbleness to their land, the respondents, being timber companies, ostensibly did not purchase the land in order to develop it into non-timber-producing land,” the justices wrote. “As such, the economic impact of these requirements on respondents appears to be minimal.”

The district court ruled last year that the cap violated a promise the state made under the act, but the appeals court disagreed, saying that as a matter of law, the act is not an enforceable promise.

The appeals court also found that if the state were bound by mandatory language in any statute, then its ability to amend statutes would be “severely constrained.”

Lawmakers made more changes to the act in 2011, amending the statute so payments would be made at a flat rate of $7 per acre, and subject to the $100,000 cap, which was made permanent.

(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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