The state of Oregon breached its contract with 13 rural counties and 151 local taxing districts by failing to maximize timber harvests on state forests and resulting payments to those counties during the last two decades, a jury in Linn County found on Wednesday after nearly a month-long trial.

The jury found that the state owed those counties $1.1 billion in damages, including $674 million the counties contend they lost since 2001 because the state didn’t cut enough trees. The verdict also includes $392 million in future damages, which assumes the state will continue to manage the state forests in the same fashion, and fail to maximize timber revenues for the next 50 years.

The verdict, delivered mere hours after deliberations began, is a blow to the state, its beleaguered Department of Forestry, and environmental and recreational groups around the state. But the decision was not entirely unexpected. Observers say the plaintiffs aggressively venue-shopped the case to find a sympathetic judge and jury, and the state had lost almost all the significant pre-trial rulings.

The state is likely to appeal the verdict, but the judgement will accrue interest at 9%, or $90 million a year, which ups the ante considerably to resolve the case quickly.

Charles Boyle, a spokesman for Gov. Kate Brown, said “the verdict was not an unexpected first step in what will be a lengthier legal process, and it would be premature at this point to make budget decisions based on the jury’s decision. ODF and the Department of Justice will be reviewing options for next steps” including appealing the decision.

If the decision is upheld, it could result in a massive wealth transfer to a limited number of counties. Tillamook County alone is looking at nearly $330 million in damages after legal fees -- nearly $13,000 per county resident. That money would be divided among the county and a number of local taxing districts where logging actually takes place, including schools, ports, the library and the soil and conservation district.

Washington and Linn Counties would also be big winners. It’s also a big victory for Davis Wright Tremaine, the Portland law firm representing the counties, which stands to earn 15 percent of the verdict.

“It is a lot of money,” said Linn County Commissioner Roger Nyquist. “It’s a lot of money for rural Oregon. Every one of these counties and taxing districts can use this money to improve the quality of life for residents. That’s money they didn’t get for the last 20 years, and didn’t get the benefit of.”

Clatsop County, which has the greatest harvest volume from state forests, opted out of the suit, which it considered “harmful” and “destructive.”

The $1.1 billion damage award is a whopper - $238 per person in Oregon - and if upheld, it’s unclear where the state would come up with the money, or what impact it will have on the financially troubled and managerially challenged forestry department. The agency is in the process of developing a new blueprint for how it will manage more than 600,000 acres of state forests in northwest Oregon. A draft of that plan is supposed to be ready before year end, and agency managers have already indicated that the plan does not include any big increases in harvest volumes.

The Department issued a statement Wednesday afternoon.

“The Oregon Department of Forestry believes that balanced and science-based public forest management produces the best long-term outcomes for all Oregonians, including the counties and taxing districts that receive revenue from state forests. We are disappointed that the jury did not agree...We will be reviewing options and next steps with attorneys from the Oregon Department of Justice."

As predicted, the nearly month-long trial in Linn County was a battle of histories. Its outcome hinged on the interpretation of more than a century of forest management practices in Oregon. The lynchpin question was what state and county officials intended when they cut a deal in 1941 that eventually resulted in the transfer of some 600,000 acres of logged over and burned forest lands to the state.

Those once-derelict lands now comprise the bulk Oregon’s state forests, and as a condition of their transfer, the state agreed to rehabilitate them, protect them from fire and share a portion of timber revenues with the counties when they became productive again.

The state’s formal mandate, codified in Forest Acquisition Act of 1941, was to manage the forests for the “greatest permanent value of such lands to the state.”

Both sides in the case agreed on that, but little else.

State's attorney Scott Kaplan talks about "greatest permanent value" in his closing arguments in the $1 billion class action lawsuit in Linn County Circuit Court. Fourteen counties and 151 taxing districts are suing the Oregon Department of Forestry for breaching a decades-old contract concerning the management of 700,000 acres of timberland.Albany Demcorat-Herald

The counties, which receive two thirds of the timbers sales off the state lands, contend that in 1941, greatest permanent value was understood to mean that the state would manage the lands to maximize timber production and resulting revenue transfers to the counties. They maintain, and the court agreed, that the 1941 Forest Acquisition Act constituted a contract between the state and the counties.

Since the trial began in late October, plaintiffs’ attorneys paraded a long line of former state foresters, expert witnesses and an amateur historian in front of the jury, reviewing 80 years of forest practices in Oregon to demonstrate that timber production was the Department’s prime objective in 1941, and remained so right up until the late 1990s.

At that point, they contend the state breached its contract with the counties, when the state Board of Forestry unilaterally changed the deal by adopting new administrative rules that included a broader definition of greatest permanent value.

Witnesses, including former state forester James Brown and Rep. Brad Witt, D-Clatskanie, a previous head of the forestry board, testified that the move came amid growing environmental and recreational demands on the forests, and under pressure from former Gov. John Kitzhaber.

The new rule for the state forests included an equal emphasis on clean air and water, recreation and wildlife habitat. The Department of Forestry managed the state forests accordingly, actively seeking to create complex forest structures that would deliver those other benefits.

“I did not want to leave here without us remembering how much evidence there is that supports that the deal required the state to maximize our timber production and our timber values and our timber revenues,” John DiLorenzo, the lead attorney for the counties, said Tuesday in his closing arguments.

“That was the deal," DiLorenzo said. “They have changed the deal. They have changed the rules.”

Attorney John DiLorenzo talks to the jury during closing arguments in the $1billion class action lawsuit in Linn County Circuit Court. Thirteen counties and 151 taxing districts sued the Oregon Department of Forestry for breaching a decades-old contract concerning the management of 700,000 acres of timberland.Albany Democrat-Herald

During the trial, the counties’ legal team made the case that the state should have been managing the state forests according to the same rules that apply to private forestlands, treating the trees as crops, and harvesting them on 50 year rotations. Instead, their experts testified that the state was going above and beyond what was required to protect endangered species and native wildlife by actively creating older forest tracts that would attract such species and put that timber off limits to future harvests.

Expert witnesses called by the counties lawyers testified that the state could have cut an additional 3.6 billion board feet of timber from the state forests since 2004. The counties asked the jury for some $1.1 billion in damages, including future lost revenue assuming the state continues to manage the forests in the same fashion.

State’s attorneys, meanwhile, offered jurors their own history lesson. In their telling, the Department of Forestry’s mandate was always to manage the forests for the greatest value to the entire state, as the statute says, not just for the benefit of 13 counties.

Moreover, they maintain that “greatest permanent value” always encompassed multiple uses, including watershed protection, wildlife, recreation, grazing and other uses – and that there was never any explicit mention of maximizing harvests or county revenues in statute.

The state’s attorneys argued that the Department of Forestry had maintained an active and intensive timber sale program that had generated an escalating amount of revenue for counties since the greatest permanent value rule was rewritten in 1998.

State’s attorneys also presented evidence that the counties suing the state were publicly supportive of the new rules and its resulting forest management plan, passing resolutions backing the balanced approach to forest management and writing letters of support to the Board of Forestry.

The counties, however, said their support for the plan was predicated on projected harvest numbers that the state included in the plan, but never came close to delivering.

Environmental groups are currently suing the Department of Forestry to enjoin 68 timbers sales under the endangered species act. One result of the lawsuit, some predict, could be an ongoing flow of such lawsuits as conservationists look to protect the state forests from any change in management plans. In the meantime, conservation advocates said they were disappointed by the verdict.

“Since Oregon acquired these logged over lands in the Great Depression, Oregonians have invested millions of our tax dollars in fixing them up to benefit all Oregonians,” said Ralph Bloemers, senior staff attorney for the Crag Law Center, a non-profit law center that works with local communities throughout Oregon. “While we all use and enjoy wood products, state law recognized that our forests provide us with clean drinking water, fish and wildlife. The State’s attorneys vigorously contested these legal questions being put to a jury, and I expect this verdict will be overturned on appeal.”