An ongoing legal battle over whether Oakland will play host to a coal export terminal reached another milestone Wednesday as an Alameda County Superior Court judge heard closing arguments in a trial pitting the city against the marine terminal’s developer.
Phil Tagami and his company Oakland bulk and Oversized Terminal, or OBOT, sued the city for allegedly blocking OBOT’s plan to build the coal terminal at the West Oakland Army Base.
Oakland has countered, claiming OBOT botched its own project by missing construction deadlines, in part because the company and its partners wanted to finance the project with a lucrative deal to export Utah coal to foreign markets.
If Oakland loses the case, it could have significant consequences for the city. The court may give the developer a greenlight to build the terminal. Oakland could also be on the hook for substantial damages and attorney’s fees. Tagami and his associates have alleged that Oakland’s actions have cost them up to $148 million in lost future profits.
On the other hand, the judge who has overseen the trial, Noël Wise, could rule that OBOT breached the lease by failing to make progress on the project, in which case the developer will most likely lose control of the city-owned property. Oakland would then have free rein to use the real estate that has been tied up in litigation until now.
It’s likely that whichever party loses will appeal the decision.
The trial started in July and over 8 weeks the two sides have presented reams of documents and witness testimony to support their arguments. Judge Wise will issue a ruling soon, but it’s unclear when that will happen.
The trial was focused on liability, and the judge may order a second trial to determine appropriate remedies for the winning party.
A controversial fossil fuel plan, protests, and lawsuits
The roots of this court battle go back a decade. In 2013, the city agreed to let Tagami’s company build a marine terminal on city-owned land near the Port of Oakland. The city didn’t limit what commodities Tagami could transport through the terminal, but officials said they had an understanding that coal wouldn’t be included. The city also reserved the right to protect public health and safety.
Oaklanders learned in 2015 that Tagami was negotiating a deal with a coal mining company to ship the fossil fuel from Utah through his proposed terminal to overseas markets. Mayor Libby Schaaf, who went to high school with Tagami, testified during the trial that she was willing to put the whole project in jeopardy to stop his plan.
In 2016, the Oakland City Council approved an ordinance banning the handling and storage of coal within Oakland. The developers sued in federal court and won a ruling in 2018 that barred the city from applying its coal ban to the terminal project.
During those two years, the two parties continued to work together on the development of the terminal. But in the fall of 2018, Oakland terminated Tagami’s lease to the property. The city said he had failed to meet construction milestones laid out in the development agreement. Tagami filed another lawsuit in state court that blamed Oakland for the delays. Oakland countersued for breach of contract in 2020.
The parties appeared on the brink of a settlement last summer that would have allowed for the construction of a marine terminal that wouldn’t transport coal. But that ended when the developer accused Oakland officials of stalling and interfering with a labor agreement.
On Wednesday, attorney Barry Lee, who represents Tagami and his associates, argued that city officials were politically motivated because of their opposition to coal to breach the ground lease and kill the developers’ project. But he argued the core of the case was a landlord-tenant contract dispute.
“All along the way what the evidence showed in this case was that the city intentionally did everything it could to deny plaintiffs the benefits of its contracts,” Lee said.
According to Lee, Oakland officials failed to deliver a binder of regulations to help guide the developers’ plans. The city also did not grant permits or access to build necessary railway infrastructure and organized hearings to pass a coal ordinance targeting the project, among other interference.
Lee described some of these incidents as “force majeure” events—incidents that are broadly defined as unforeseen actions that OBOT wasn’t at fault for. Lee argued that under the terms of the contract, these incidents should have given the developers the right to push back the deadline for completing some of the initial construction.
He disputed the city’s argument that the developers did nothing to move the construction project forward for over two years.
“The city has repeatedly failed to honor its contractual efforts and will undoubtedly continue that pattern whenever political expediency requires,” Lee said.
Danielle Leonard, an attorney with Altshuler Berzon who represents Oakland, argued that Oakland did not block or kill the project. Instead, the city worked in good faith with Tagami and his companies, even when the parties were fighting over the coal ban in federal court.
“There is not a single piece of evidence that any actual decision or actual action taken by the city with respect to this contract, including a decision to call default and terminate, was influenced by politics or the city’s opposition to coal,” Leonard said.
She argued that OBOT has only itself to blame for failing to advance the project after entering into the ground lease in 2016.
According to Leonard, OBOT instead pursued a potentially lucrative agreement with Insight Terminal Solutions, a company owned by John Siegel, a Kentucky coal executive. Leonard said OBOT hoped to secure this company as a tenant to help finance the project, even though they could have funded it themselves. Leonard added that OBOT granted 10 extensions on the negotiating agreement with Siegel’s company without successfully reaching a deal.
“OBOT got paid at least $19 million while it didn’t move this project forward,” Leonard said, referring to payments Siegel made to Tagami’s company to keep the potential of a coal shipment deal alive. “And none of that money went to design or construction.”
Leonard claimed there’s no legal basis for the developers to demand an extension on their construction deadlines because of the alleged force majeure events. She argued that the incidents cited by the developers were all things that they knew about or should have anticipated.
Leonard said she looked forward to the judge’s ruling and moving onto the remedy phase, “where we can discuss finally getting this land back in the hands of its rightful owner for the benefit of the people of Oakland.”