Oakland suffered a major setback in a court battle last week after a state judge ruled that the city breached its contract with a developer who had plans to build a coal export terminal near the port.
The decision is tentative, but it potentially paves the way for the construction of a bulk commodity export terminal on the contested land near the Bay Bridge, and Oakland taxpayers may be on the hook for millions of dollars in damages.
Alameda County Superior Court Judge Noël Wise issued a proposed decision on Friday that found in favor of developer Phil Tagami, who leads several affiliated companies, including Oakland Bulk and Oversized Terminal, or OBOT.
Wise’s 96-page decision caps an eight-week trial, the first phase of which started in July and ended in October. Tagami and OBOT claimed that Oakland blocked their plan to construct a coal export terminal at the West Oakland Army Base. Oakland countered that OBOT botched its own project by missing key construction deadlines, in part because the company and its partners wanted to finance the project by exporting Utah coal to foreign markets.
After hearing testimony from 15 witnesses, including former Oakland Mayor Libby Schaaf, and reviewing hundreds of exhibits, Wise sided with the developers, who argued that Oakland’s actions delayed and hindered the project.
The city has about two weeks to file comments before Wise’s decision becomes final. This phase of the trial was solely focused on liability.
On November 28, the court will hold a second trial phase to consider damages and other remedies. According to City Attorney Barbara Parker, the developers want possession of the land and monetary damages. Tagami and his associates haven’t publicly talked about how much money they’re seeking, but in previous court filings, they alleged that Oakland’s interference cost them up to $148 million in lost future profits.
Tagami told The Oaklandside that the judge’s tentative ruling “speaks for itself,” offering no further comment.
“We are disappointed that the trial court did not recognize what we strongly believe the evidence demonstrated and contract language required,” said Parker in the press statement. The statement also noted that Oakland can file an appeal after the remedy phase of the trial ends.
Wise offered myriad reasons for why Oakland was at fault. She said the city breached its agreement with the developers when it advanced a no-coal ordinance in 2016 that was “unsupported by substantial evidence,” that Oakland officials then applied to the project.
The developers sued Oakland in federal court over the coal ordinance and won a ruling in 2018 that prohibited the city from applying its coal ban to the terminal project. The city terminated the developers’ ground lease later that year.
Wise said Oakland could have appealed the federal court’s ruling or talked with OBOT about changing the terms of the ground lease or agreement. The city also could have tried to move a non-coal version of the project forward while trying again to ban the storage and handling of coal.
“What the city could not do was undermine or improperly terminate the contracts it had with OBOT—that was not a legal option,” Wise said in her decision. “That, however, was the path the city selected.”
Wise found that the city took repeated measures to terminate the lease and failed to clearly tell the developers what commodities it couldn’t bring through the terminal.
Wise also found that Oakland didn’t act in good faith when it demanded rent payments starting in February 2018, even though the city hadn’t completed necessary public improvements or turned over possession of a critical rail corridor. The court said the city’s actions delayed the project and made it functionally impossible for the developers to fulfill their lease obligations.
“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,” Wise wrote in her decision.
