LEWIS BARBE WAS SELECTED AS THE FIRE CAUSE AND ORIGIN CONSULTANT BY THE U S

DEPARTMENT OF JUSTICE FOR THE COURT CASE U. S. A. VS UNION PACIFIC RAILROAD.

U.S. Department of Justice ,United States Attorney

Eastern District of California

McGregor W. Scott United States Attorney

501 I Street, Suite 10-100

Sacramento, California 95814

Fax 916/554-2900

April 15, 2005

Michael B. Murphy, Esq.,Susan M. Keeney, Esq.

SPvPrsnr & Werson,One Embarcadero Center.,gar.UA 54111

Re: United States v. Union Pacific Railroad Company United

States District Court (E.D. Cal.)

Dear Counsel:

THink you for meeting with us to discuss the United States' claims against Union Pacific Railroad

Company (Union Pacific). At your request, we provide this letter outlining briefly our liability and

damages contentions in the case.

As you know, the above-captioned matter has been referred to our office for initiation of

litigation. The United States intends to file a lawsuit against Union Pacific: in United States

District Court for the Eastern District of California. In the suil., the government will seek to

recover suppression costs, resource damages, administrative, investigative, accounting and

uuiiection expenses, and interest and penalty charges arising out of the August 17, 2000

"Storrie Fire." A copy of a proposed complaint in United States v. Union Pacific Railroad

Company is attached hereto as Exhibit 1.:

The Forest Service, the United States Department of Justice, the United States Department of

Agriculture, Office of General Counsel, and our consultants and experts have reviewed the facts

and law in this case. We believe Union Pacific's liability for the damages and costs incurred by the

United States is clear.

Pursuant to the President's Executive Order No. 12988 (February 1996) concerning civil justice

reform, the purpose of this letter is to attempt resolution of this matter before filing the This

letter and attachment have been prepared by caunsei for the United States for settlement

purposes only R. Evid. 408.

FACTS

The Storrie Fire ignited on August 17, 2000, in the middleof the dayin the middle of August,

when the temperature approached 100 degrees. The fire burned in steep and densely forested

terrain in the Feather River Canyon within the Plumas National Forest. Before the fire could be

extinguished, it burned over 56,000 acres and became one of the costliest wildfires in California

history.The Storrie Fire was completely preventable. Rather than having resulted from lightning

or other natural causes, the fire ignited from the negligence and violation of law of Union

Pacific's employees.

As you know, the government's investigation disclosed that the Storrie Fire was caused by track

repair work performed by a Union Pacific maintenance crew at the fire origin site. The crew used

a high-speed saw to cut through a segment of track: the employees admitted that a small fire

occurred during performance the work. The crew negligently failed to completely suppress the

fire, failed to advise authorities of the ignition, and failed to post a fire watch to ensure the

fire had been completely extinguished. After the crew left the area, wind turbulence from a

passing train caused the smoldering fire to reignite and spread.

The United States has witness statements, videos, photographs, and physical evidence

demonstrating the cause and ,)ligin of the Storrie Fire. As the evidence would demonstrate at

trial, Union Pacific's conduct in igniting the fire was both r.eqiigent and in violation of law:

Union Pacific negligently scheduled the track repair work on August 17, 2000, for shortly

after noon, during the middle of the fire season, when the weather was hot and dry and

especially conducive to fire ignition and escape. The track should have been repaired either

earlier in the morning, or later in the even

even if the work itself were not performed in an unreasonably dangerous way, Union Pacific

would be presumed negligent in its maintenance, operation, or use of the track repair

equipment. This is so because the fire originated from the repair work. See California Public

Resources Code § 4435.

Union Pacific employees negligently used only a shovel to hi(,nk sparks caused by the

maintenance crew's use of a hydraulic saw during the repair work. A spark shield tc protect

against ignition of uncleared adjacent vegetation should have been employed, as recommended

by the Railroad Fire Prevention Field Guide (1999). The Guide was developed by Union Pacific,

among tethers, in a cooperative effort with federal and state fire agencies. Use of the spark

shield, typically 36 inches by 48 inches, would have significantly reduced the risk of ignition.

in violation of law, Union Pacific failed to clear adjacent vegetation from the work

area before commencing the track repair. See California Public Resources Code § 4427

(requiring clearance of flammable vegetation within 10 feet); 14 1283(a) (requiring clearance

of 10 feet from outside ail;. Indeed, the burn permit received by Union Pacific for "grinding,

welding and cutting torch" applicable to the repair work specifically stated "other

requirements: see PRC 4427 attached." See Application for Permit to Burn, No. 708323,

dated 5/22/00 (attached as Exhibit 2).

Union Pacific negligently failed to report the initial fire to the United States Forest Service, the

CaliforniaForestry and Fire Protection, or any other fire ut Instead, the employees gave

minimal attention to the fire themselves, then departed before it was fully extinguished.

once the fire ignited, Union Pacific employees negligently failed to draw a line around the

fire to prevent its future spread.

the employees negligently failed to sup?ress the fire with a suitactant or other wetting agent

to prevent re-ignition.

the crew negligently failed to turn over the smoldering material repeatedly, and to do so while

applying water and a wetting agent, to ensure the fire was extinguished.

finally, the crew negligently failed to post a one-hour fire watch at the site of the

ignition, to ensure that the fire -dite. In failing to do so, Union Pacific once agail. failed to

adhere to standard railroad operating procedures and failed to comply with the Railroad

Fire Prevention Field Guide. Moreover, senior foreman Harry Powell, who was present

with the work crew when the fire ignited, had specifically received, and signed for, a prior

burn permit. The permit stated: "PRC 4427 - ADDITIONAL PRECAUTIONS IN EFFECT WHEN

WEATHER IS WINDY OR EXTREMELY DRY - FIRE WATCH AS PER RAILROAD

REGULATIONS." See Application for Permit to Burn, No. 719472, dated 7/20/00 (attached as

Exhibit 3). Had such a fire watch been posted, the Storrie Fire would have been prevented.

The last point is particularly troubling to the government, gecause evidence shows that Union

Pacific management specifically instructed the employees not to post a fire watch at the Storrie

site. Apparently in an effort to avoid paying overtime to Inc -rew, the employees were instructed

to move on to their next assignment, rather than comply with safety standards. A confidential

informant who advised a government employee of this fact also stated that Union Pacific had

acted in this fashion on previous occasions.

By allowing the fire to escape, Union Pacific violated federal law. See 36 C.F.R. § 261.5. Beyond

that, the company aemuLst_Lated a willingness to put federal employees and national torest

land at risk. Wildland fires are, of course, dangerous events. Every time a fire ignites and

escapes initial attack, fire fighters risk their lives to suppress it. Here, as in most fires of this

magnitude, Forest Service employees sustained significant injuries attempting to extinguish the

Storrie Fire. Those injuries included a fractured patella, a fractured ankle, ourns, lacerated

fingers, broken teeth, etc. A 46-year old firefighter was evacuated by air ambulance for

complaints of pca:LriS and shortness of breath.

the injuries to government personnel, the costs associated with those injuries, and the extensive

damage to government property could easily have been avoided if Union Pacific had complied

with the law and industry standards. The evidence suggesting that the company may have

consciously sacrificed safety for profits is not easy to overlook.

Indeed, should the case proceed, the United States may consider whether the evidence

supports a claim for punitive damages against Union Pacific. Under California law, such

damages may be assessed for "despicable conduct which is carried on by a defendant with a

willful and conscience disregard of the rights or safety of others." Cal. Civil Code § 3294(c)(1).

Putting aside that issue, the facts show that Union Pacific is liable for the damages and costs

incurred by the United States arising from the Storrie Fire.

LIABILITY

Under California Health and Safety Code:

Any person who ... negligently, or in violation of the law, sets a fire, allows a fire to be set, or

allows a fire kindled or attended by him or her to escape onto any public or private property, .. Is

liable for the fire suppression costs incurred in

fighting the fire ... and those costs shall be a charge against that person. The charge shall

constitute a debt ... collectible by the person, or by the federal, state, county, public, or private

agency, incurring those costs in the same manner as in the case of an obligation under a

contract, expressed or tmplied. California Health & Safety Code § 13009(a) (emphasis added).

The fire suppression costs sought in this action were spent in fighting the Storrie Fire, were

proximately caused by defendant's wrongful conduct, and were reasonably incurred. As such,

they are fully recoverable against defendant. People v. Southern California Edison Co., 56 Cal.

App. 3d 593, 605 (1976).

Furthermcre, c6se law is clear that prejudgment interest ac,-rues for the debt: [p]rejudgment

interest is recoverable under section 13009 from the date damages become capable of being

made certain by calculation, and demand is made.

Sothern Pacific Co., 139 Cal. App. 3d 627, 640 (1983).

On August 9, 2002, October 18, 2002, and April 12, 2004, the government formally billed

Union Pacific and demanded reimbursement for the damages and costs incurred in the

Storrie Fire. Interest charges thereafter accrued at a rate of 5%, determined by the

Department of the Treasury as published in the Federal Register. The bills for collection also

advised that payments not received by the due date were subject to a late

charge. Accordingly, pursuant to 31 U.S.C. § 3717, an additional 6% penalty is added to the

government's claims.

The United States' related administrative, investigative, n'ing 3nd collection expenses are also

recoverable.

Any person who ... negligently, or in violation of the law, sets a fire, allows a fire to be set, or

allows a fire kindled or attended by him or her to escape onto any public or private property ... is

liable for both of the following:

The cost of investigating and making any reports with respect to the fire.

(2) The costs relating to accounting for that fire and the collection of any funds pursuant to

Section 13009, including, but not limited to, the administrative costs of operating a fire

suppression cost recovery program.

health and Safety Code § 13009.1. Thus, indeed, the costs associated with preparing this

document are recoverable by the United States.

DAMAGES

The United States' fire suppression costs incurred from the use of employees, contractors and

equipment are detailed in the transaction registers. Those costs are organized generally by

oi payment, Forest Service regions and units, transaction codes and object classifications.

Resource damages were billed under the general categories of burned area emergency

rehabilitation work necessitated by the fire, lost timber values, and reforestation costs necessary

to bring the Plumas and Lassen forests to their pre-fire conditions.

In addition, the government's assessment of resource damages iipo-udes 'Lhe Impact in non-

timber forest services that resulted frr,m the Storrie Fire. These include wildlife habitat,

esthetics, scenic use, soils and sediment management, water quality, recreational use, and other

non-timber values generated by the national forests.

No part of the debt owed by Union Pacific to the United States has been paid. Obviously, as this

matter progresses in litidation, plaintiff's administrative and collection costs will 116,= markeoiy.

With or without those increased costs, the interest and penalty charges continue to

accrue.Putting aside for the moment the government's investigative, administrative, accounting

and collection expenses, the following depl.ts the United States' billed suppression costs ,

resource damages, interest and penalties from today through June 15, 2005:

Date Fire

Suppression

Costs

Resource

Damages

Days

Delinquent

6%

Penalty

Days

Delinquent 5% Interest Amount Due

$:,805,768 980 $2,411,976 $23,184,501

$5" 759 $5,348,202

S 7,186,369 339 $2,211,564 369 $2,006,064 $43,903,997

Total

Amount

Due

$72,436,700

Date Fire

Suppression

Costs

Resource

Damages

Days

Delinquent

-...—

6%

Penalty

Days

Delinquent 5% Interest Amount Due

Si ',966, ,57 1010 $2,982,974 1040 $2,559,648 $23,509,379

94L 1650,795 971 $560,387 $5,424,383

,685,369 399 $2,602,991 429 $2,332,254 $44,621,614

Total

Amount

Due

$73,555,376

Date Fire

Suppression

Costs

Resource

Damages

Days

Delinquent

6%

Penalty

Days

Delinquent 5% Interest Amount Due

9-_-_, $2,894,371 1010 $2,485,812 $23,346,940

,. 1-J,:911

910 $630,219 741 $543,0'3 $5,386,293

909 $2,167,159 $44,262,755

Total

Amuul.t_

Due

$72,995,988

We recognize that no case is without risks, and that you will need to challenge and assess the

contentions, costs and damages we allege. Nonetheless, as discussed during our meeting, the

United States believes it has a strong and supportable case

Hs7_ 1,:nli)n Pacific. As part of a cooperative effort, we are willing to share our case with you

before filing the complaint. In that regard, we offer to make witnesses informally available to

help you understand our claims and the evidence that supports them.

Similarly, we welcome your comments indicating a willingness w,:rk toward a resolution of the

case and look forward to your r-esprise to this letter setting forth your views of the case and

jetenses you assert.

CONCLUSION

We believe the United States will prevail in showing both the liability of Union Pacific and the

damages it caused in the Storrie Fire. The government remains willing to resolve the case before

filing a complaint, issuing a press release and engaging in costly litigation, but can do so only on

terms that would approximate what the United States would net after trial.

Thank you for your review of this matter. If you have any questions in regard to the case or this

letter, please call me.

McGREGOR W. SCOTT

United States Attorney

By:

MICHAEL A. HIRST

Assistant U.S. Attorney Chief, Affirmative Civil Litigation -affray Moulton, Esq. (USDA OGC)