OAKLAND, Calif. (CN) — A monthslong trial over whether it was Oakland or a developer that broke a ground lease agreement to build a new Port of Oakland terminal finally has an end in sight.
The city and Oakland Global Rail Enterprise rested their cases before Alameda Superior Court Judge Noël Wise in Hayward on Wednesday, in the long-running dispute over an export terminal at Port of Oakland’s old West Oakland Army Base.
According to the plaintiff development company, Oakland violated the 2016 ground lease agreement by terminating it after more than two years. But the city says the developer made no progress on construction, prompting an automatic lease termination.
The developer’s attorney Barry Lee said Oakland deliberately obstructed Oakland Bulk and Oversized Terminal LLC — a company known for the city's Fox Theater and Rotunda building — and that its declaratory relief claim fails because the developer didn't breach the ground lease agreement.
“This case is a landlord-tenant dispute. The city as landlord improperly terminated the lease of its tenant,” Lee said.
The plaintiff's claims rely on force majeure, which allows a party to argue that it couldn't meet a lease’s requirements due to unforeseen circumstances. Lee used examples including city officials deciding to review which commodities to allow at the terminal and not providing access to complete rail improvements.
Lee said the city deliberately delayed construction of the terminal.
“Once the terminal was built. the city could not legally ban handling of coal,” he said, and years of Oakland’s “self-created roadblocks” demonstrate “textbook bad faith.”
While he said the case was never about coal, he noted that “coal became politically untenable."
Oakland presents a different narrative. The city demands a declaration that the developer breached the lease by failing to meet minimum project requirements, and wants the land returned to the city during the trial's second phase.
When partner Phil Tagami left a pre-approval meeting with the city in March 2016 in frustration, said city attorney Danielle Leonard, his company proceeded to “sit on their hands” without working on the terminal until a sub-lessee agreed to financially back the project in September 2018. Because the developer was aware of what the city desired for the terminal, it cannot rely on force majeure, she argued.
“[Oakland Bulk and Oversized Terminal] did not follow through on its obligations and has invented a narrative to blame the city for what were its own choices,” Leonard said. “The evidence is conclusive that OBOT accomplished that delay all on its own with the singular reason of its own financial self interest.”
Leonard said the developer had admitted both that it didn't yet have rail access to areas of the terminal, and that it constructed rail there anyway until co-founder Mark McClure ordered rail progress to halt ahead of the 2018 deadline for completion. She added that the developer’s attempt at a new timeline, after the lease went into default and terminated, failed because it did not meet the goals within the ground lease agreement.
On rebuttal, Lee said the developer’s motivations were not financial; it had millions ready from a Utah company on the basis of preparing to ship coal. He claimed the developer could not have known that the city wouldn't turn over access to the land for rail construction — although he admitted some track was built there anyway.
“We are not seeking an excuse for performance,” Lee added. “It is simply seeking an extension of time to perform. A party cannot prevent performance and then seek a claim for nonperformance.”
Another attorney for Oakland, Daralyn Durie, said on rebuttal that the case is predicated on contradictions. She said the developer knew the city's policies for the project before signing the ground lease and could have challenged them. Instead, it never submitted basis of design documents that met ground lease requirements before 2018, nor any schematics for review or applications for permits.
“This lawsuit has delayed the ability the city’s ability to put that land to productive use,” Durie said. “OBOT sat around for two and a half years and did absolutely nothing while collecting a lot of money, waiting for the sublessee to get on board.”
Judge Wise may file a tentative statement of decision Friday stating whether the second trial phase will focus on returning the land to the city or determining remedies in favor of the developer.
Previously at trial, which has been ongoing since July, the development company testified it 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.
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