JOHN DAY, Ore. — A coalition of businesses, including the Prairie Wood Products sawmill, logging contractors and ranchers, has filed an antitrust lawsuit in federal court against John Day-based logging company Iron Triangle.
In court documents, attorneys for the companies, called the Malheur Forest Fairness Coalition, argue that the 10-year stewardship contract between the Malheur National Forest and Iron Triangle was intended to spread economic opportunities around. The contract is set to expire in early 2023.
Instead, the attorneys argue, Iron Triangle has orchestrated a series of maneuvers to consolidate all of the benefits of the contract into a monopoly on four separate fronts — timber sales, contract logging, the saw-log market and stewardship services.
The lawsuit was filed Sept. 15 in U.S. District Court in Pendleton.
In a response to the lawsuit, lawyers for Iron Triangle argue that the plaintiffs failed to adequately investigate their ability to source timber for the Prairie Wood mill.
“Rather than understanding the marketplace, or simply contest the results of the competitive bidding process for timber, plaintiffs ask the court to commandeer the Forest Service contracting process,” the response states.
Lawyers for the coalition — which also includes Rude Logging, Brett Morris of Morris Forestry, Engle Contracting, brothers Doug and Darrell Emmel of Emmel Brothers Ranch and Pat and Hedy Voigt of the Ricco Ranch — claim in court filings that to understand the “iron grip” that Iron Triangle has on the Malheur National Forest, one first has to understand how the stewardship contract was awarded to the company.
Stewardship contracts are fundamentally different from timber sale contracts, the coalition's lawyers wrote. Typically, the Forest Service awards timber contracts by identifying an area with commercially marketable trees, marking the boundaries of the proposed timber sale and estimating the amount of merchantable wood within it.
Then the agency evaluates the fair market value of the timber and opens up a bidding process to companies that can meet bonding and other requirements.
As the Forest Service expanded its forest restoration, fuels reduction and thinning activities, it melded forest management work, which often lacks commercial value, with timber sales.
Stewardship brings the two together, allowing the Forest Service to award the commercial value that loggers would ordinarily bid on to finance restoration work.
In 2013, faced with the imminent closure of Malheur Lumber, Grant County’s lone sawmill and largest private employer, due to an inconsistent and unreliable timber supply, Malheur National Forest officials decided to award a 10-year, $69 million contract to Iron Triangle in an effort to stabilize the situation.
The contract, which was significantly more long-term and broader in scope than most stewardship deals, accelerated timber sales and increased the pace of restoration work on the Malheur.
The plaintiffs argue Iron Triangle was awarded the contract based on its promises to maximize the economic benefits within the contractually defined “local community” of Grant and Harney counties. Not only that, Iron Triangle was to use local loggers, including Rude Logging, Morris Forestry and Engle Contracting, to perform thinning and other stewardship services.
“Put simply,” the lawyers write, “Iron Triangle won the stewardship contract by assuring the Forest Service in its written proposal that it would administer the contract in a manner that diversified the local economy and promoted the public interest. Once the contract was secured, however, Iron Triangle did the exact opposite.”
In the fall of 2013, after the 10-year stewardship contract award, the lawsuit claims Iron Triangle subcontracted logging services to some of the loggers identified in its bid, including plaintiffs Rude Logging and Engle Contracting. The contracts established logging service rates of $24 per ton for all logging services from “stump to truck,” which included falling, bucking, skidding and decking of logs, plus loading them on log trucks. The contracts also specified log trucking rates per ton for deliveries to the mills purchasing the logs.
A year later, the lawyers argue, Iron Triangle presented contracts to Rude Logging and Engle Contracting, but at reduced rates that also targeted timber stands where logging was less efficient and thus more costly due to lower log quality and lower harvest volume per acre.
While Engle Contracting declined the work at such an uneconomic rate, Rude Logging accepted the reduced rate in 2015 and part of 2016 but barely covered its costs and made little to no profit. From then on, Rude Logging did not accept contract proposals from Iron Triangle, the plaintiffs' lawyers wrote.
Lawyers for the plaintiffs argue that by presenting uneconomic forest stewardship and logging service contracts to purchase and contract loggers in 2014 and 2015, Iron Triangle was pursuing a deliberate anti-competitive strategy to eliminate these logging companies from competing with Iron Triangle in the Malheur Forest Market Area.
Prairie Wood Products, Malheur Lumber
When the Prairie Wood Products sawmill reopened in July and hired more than 40 employees, the mill anticipated that Iron Triangle would sell Douglas and white fir logs to its mill in Prairie City, the lawyers contend. Instead, the court documents claim Iron Triangle has refused to sell Prairie Wood Products any Douglas or white fir logs — the two primary species the mill is able to manufacture into lumber — opting instead to truck those logs upward of 140 miles to other sawmills with the intent of putting Prairie Wood Products out of business, the plaintiffs allege.
Meanwhile, the stewardship contract’s stipulation that forces Malheur Lumber to accept pine logs exclusively from Iron Triangle has created a situation in which not only do smaller logging companies like Rude Logging and Morris Forestry have to truck their logs to Elgin or La Grande, but local landowners like the Ricco Ranch or Emmel Brothers cannot do forest restoration projects on their land, according to the coalition’s attorneys.
Michael Haglund, an attorney for the plaintiffs, said the statistics show that timber harvests on private land in Grant County fell to zero last year because of the arrangement.
Iron Triangle’s attorneys fired back, alleging that Prairie Wood Products opened a lumber mill without conducting due diligence and now wants the court to bail it out.
Since Prairie Wood closed its mill in 2009, Iron Triangle’s lawyers argue, the process for obtaining timber from the Forest Service has changed substantially, especially on the Malheur National Forest. In 2013, they write, the government advertised and awarded a 10-year sole-source contract for at least 70% of the timber program on the forest. The 10-year contract, they argue, has resulted in beneficial outcomes for the community, the economy, and the environment.
According to court documents, the plaintiffs have suffered an estimated $39.04 million in losses and damages, which are trebled under the antitrust laws to $117 million.
The defendants won a partial victory on Sept. 19, when a federal judge denied a request by the plaintiffs for a temporary injunction to halt two Malheur National Forest timber sales totaling 20 million board-feet to Iron Triangle.
No trial date has been set in the case.