On Twtter, California Capital Investment Group Managing Director Phillip Tagami outlines what he called “key court findings” in the case of OBOT vs. City of Oakland. What he wrote is presented below, but edited for better readability.
Oakland (Special to ZennieReport.com) – After years of delay caused by the City of Oakland, on 1/23/24 Hon. Judge Noël Wise of the Superior Court entered judgment in favor of Oakland Bulk & Oversized Terminal (OBOT) & its railroad Oakland Global Rail Enterprise (OGRE), finding the City breached multiple contractual obligations.
Key Court Findings In OBOT V Oakland Case
OBOT V Oakland Judge Wise's 96-page Statement of Decision (SOD), wherein the Court made the following key findings:
The City of Oakland Consistently Undermined the Contract: The Court observed, “Almost immediately following the Federal Decision,” which in 2018 found that the City had breached its obligations to OBOT in passing an illegal resolution, “the City took steps toward terminating the Lease.”
The Court went on to explain, “What the City could not do was undermine or improperly terminate the contracts it had with OBOT—that was not a legal option. That, however, was the path the City selected.”
Project Delays and Feedback: Going back to 2015, the Court found that when OBOT and its subtenant submitted their preliminary drawings for the terminal project, “one of the things that was necessary for the Project to proceed was for the City to thoroughly review the [drawings] and provide OBOT with clear, specific, and timely feedback.”
Unfortunately, that never happened. Instead, the City has chosen a path of hinderance and delay in its attempt to kill the project and its many benefits for the community. Rail Access Agreement: Highlighting more delays, the Court found, “one of the things that was necessary to advance the Project was for the City to timely and diligently work to finalize the Rail Access Agreement. . . ,” an agreement that would allow the rail component of the project to move forward.
The Court criticized the City's unreasonable delays, stating, “due to the lack of any articulated, legitimate explanation for the delay, thirteen months for the City and the Port to review a ‘discussion draft' of a document that had reportedly been near completion for years does not constitute ‘commercially reasonable efforts'” in violation of the City's obligations under the lease.
This finding is important because the City obtained hundreds of millions of dollars in grant money from the State of California based on the representation that the project would be rail served.
And while OBOT and OGRE have eagerly awaited the ability to rehabilitate and operate the rail, the City has (i) interfered with the rail work and (ii) allowed other development of the project with no rail access. City's Cappio Memo: In 2015, the City—through its then Assistant City Administrator, Claudia Cappio—issued a memorandum to its building and planning departments stating that permits could not be issued to OBOT without invented approvals from City executives.
The Importance Of The Cappio Memo
This memo, known as the Cappio Memo, is unique to OBOT's project, with no other similar restrictions placed at any other project in the City. The Court found the City's explanations around the Cappio Memo dubious at best, stating it “strained credulity.” The Court also emphasized, “The Court finds the City's failure to rescind the Cappio memo by the summer of 2018, as well as the pretext for its issuance, demonstrate a lack of good faith by the City.”
City's Lack of Response & Improper Rejection of Force Majeure Notices: The Court commented on the City's failure to respond to OBOT's force majeure claims (notices saying that the City's conduct was interfering with the developer's ability to proceed with the project), stating it “demonstrates a lack of good faith and fair dealing by the City.”
The Court Defends OBOT Over City of Oakland
And while the City attempted to conjure up a justification for why the City's bad faith conduct did not make it impossible for OBOT to proceed with the project, the Court defended OBOT's stance, stating, “Interpreting the Lease's Force Majeure provision to require actual impossibility would . . . render its only remedy, meaningless.”
As such, the Court ruled that OBOT had properly issued notices of force majeure to the City, consistent with the provisions of the lease, which the City improperly rejected. Coercion and Lack of Justification: In rejecting OBOTs multiple force majeure claims without notice and without justification, the Court noted that the City appeared to be trying to force OBOT into a specific direction, emphasizing, “Considering the totality of the circumstances, the only reasonable inference is that the City believed it could coerce OBOT into agreeing to build a coal-free Project, or it would stop the Project altogether.”
This was yet another example of the City's breach of good faith and fair dealing under the lease. Developer's Ability to Ship Any Commodities One of the matters not addressed in the judgment was the commodities to be handled, stored and shipped at the marine terminal project. OBOT (and its subtenant, Insight Terminal Solutions, LLC [ITS]) maintain that from the beginning of the project, the City knew the project would handle any of the thousands of bulk commodities regularly shipped in the United States as requested by the Class I Railroads and beneficial cargo owners; the City's own 2013 Long Range Management Plan acknowledge that the project would ship bulk commodities such as “lumber, coal, [and] sulfur . . . .”
This is consistent with both the approved zoning for the project (seaport), as well as prior rulings from the Federal District and Appellate Courts: “Importantly, the Agreement did not limit the types of bulk goods that could be shipped through the terminal. And prior to its execution, Oakland had some indication that coal was one of the potential commodities that might be handled.” (Oakland Bulk & Oversized Terminal, LLC v. City of Oakland (9th Cir. 2020) 960 F.3d 603, 608.)