Duel over ground lease at planned Oakland port terminal to spill into October

OAKLAND, Calif. (CN) — Oakland’s duel with a developer over a planned port terminal contract will last into October, while a California judge evaluates how much evidence presented in a long-running trial she can use.

Alameda County Superior Court Judge Noël Wise set a new timeline Thursday for the remainder of the trial over developer Oakland Global Rail Enterprise’s claims. The developer says Oakland, under then-Mayor Libby Schaaf’s leadership, violated a 2013 deal to build an export terminal at Port of Oakland’s old West Oakland Army Base by banning coal.

The trial zeroes in on the claim that Oakland violated the ground lease agreement both parties signed by not surrendering full access to the terminal’s land — delaying railway development at the site and preventing completion of infrastructure improvements.

Oakland’s assistant city administrator Elizabeth Lake completed her testimony Thursday and disputed that claim. She said that Oakland's ground lease agreement actually held up the land where the terminal's railway was to be built as an exception — allowing the city to reserve the right to accessing it.

Lake focused on events that occurred in 2018 as she did not join the city’s staff until March 2018, amid the city’s battle in federal court with the developer. She recounted her visit to the land in question at the Port of Oakland in May 2018, saying she did not see any work being done either by the city’s contractor or the developers.

“Because it was providing the railroad easement with exclusive rights to us, the ground lease did not include that access to the developers,” Lake said. “The easement is an exception to (the) title, therefore the use rights were excluded.”

By August 2018 neither the developer nor its subcontractors had applied for permits to start construction of the terminal. In September that year, the city declared a default due to nonpayment of the lease, which subsequently ended in November 2018. Lake said that after the city told the developer it had defaulted on rent payment in October 2018, partner Phil Tagami said lack of access to certain land parcels entitled his company to a refund of rent payments.

Under the plaintiffs’ attorney Barry Lee’s questioning, Lake said she asked city staff about progress on completing work under the ground lease agreement after the federal litigation concluded. U.S District Judge Vince Chhabria ruled that the city could not enforce the ordinance banning coal at the terminal in question. 

“I was expecting to have an agreement (with the developer) at any moment,” she told Lee.

Judge Wise said she will next hear arguments on Sept. 19 to decide how the prior federal litigation affects what claims and evidence she can consider, given that the city already lost in the federal litigation. 

“It’s a very important issue that could determine whether much of the case presented by the developers will be relevant,” said retired attorney Ted Franklin, who is observing the proceedings on behalf of the interest group No Coal in Oakland.

Franklin said that because most of the evidence the plaintiffs presented is from events that happened before the federal litigation ended in May 2018, they could be presenting evidence that is irrelevant because it was or could have been tried in the earlier case. The city argues that claims of breach prior to May 15, 2018, are barred, but the plaintiffs want Oakland’s conduct from 2015 onward considered. 

“If the judge decides liability in favor of the city, that will be that. If the judge decides liability in favor of the developers, the trial goes to ‘Phase Two: Remedy,’” Franklin said. He said that the next phase, if it happens, would lead to the developer requesting either a reinstatement of their lease with modifications and damages to date, or getting damages to date plus future lost profits, totaling at least $150 million.

The trial has been ongoing since July, with Tagami and partner Mark McClure testifying that their company lost more than $148 million in profits after the city introduced an ordinance to ban coal at its terminals. Oakland, which countersued for breach of contract in 2020, says the developers hurt the project by missing construction milestones while scheming to close a lucrative coal export deal. It is seeking to evict the developers from the project site.

Both sides’ closing arguments are tentatively set to take place Oct. 11, and Wise is expected to file a tentative statement of decision afterward. Lee has not responded to requests for comment and Tagami declined to comment. 

Follow @nhanson_reports

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