Trial Begins in Oakland Coal Case
After four and a half years of preliminary skirmishes, lawyers today delivered opening statements in developer Phil Tagami’s legal battle to avoid eviction from the West Gateway, a 19-acre piece of West Oakland waterfront owned by the City of Oakland. Phil Tagami and associates plotted to build and operate an export terminal that would bring coal by rail from Utah for shipment overseas.
The trial will hinge on the question of who broke the lease Tagami signed with the City in February 2016.
The City of Oakland terminated Tagami’s lease in November 2018 after the developer failed to meet the August 2018 deadline to begin construction of a terminal, as set forth in lease. Tagami blames the City for his inability to get construction underway. He claims force majeure, a legal doctrine that excuses parties from meeting contractual obligation if unforeseeable circumstances beyond the control of a contracting party render performance impossible. For example, a tornado that destroys a hall the night before a performance would excuse a band from showing up to play.
Opening statements are a preview of the evidence each side will present at trial. Although attorneys are not supposed to use opening statements to argue their case, lawyers do their best to win hearts and minds by how they frame the story. In this case, they are trying to win the heart and mind of Judge Noël Wise, because the parties stipulated last week to do without a jury.
Barry Lee of Manatt Phelps, representing Tagami and his corporate entities OBOT and OGRE, led off the morning by painting a picture of a City determined to derail the project, starting from the moment in April 2015 when Tagami’s agreement with Bowie Resource Partners, now Wolverine Fuels, became public. Lee insisted that the City’s actions were politically driven, citing a statement he attributed to former mayor Libby Schaaf that she would do everything within her power to keep coal out of Oakland, even if it meant killing the project.
Lee apparently hoped to portray the City as a bad actor, obstructing Tagami’s efforts at every turn by failing to respond to set of conceptual design papers submitted in July 2015, issuing a memorandum requiring senior City officials to be informed about any permit requests, failing to adequately pursue agreements with the Port of Oakland over rail access, and a litany of other complaints.
Lee showed clips from interviews with Phil Tagami and his partner Mark McClure talking about how their project would bring jobs and economic development while meeting high environmental standards. Lee presented high-budget fantasy animation depicting a clean coal terminal in operation and drone footage of the pathway for rail to the West Gateway.
The razzle-dazzle of Tagami’s high-tech imagery contrasted with the crisp, no nonsense charts presented by the City’s attorneys, Daralyn Durie of Morrison Foerster and Danielle Leonard of Altshuler Berzon. The City projected timelines on the courtroom’s big screen focusing on what actually happened between Tagami’s signing of the lease on February 16, 2016 and the August 14, 2018 deadline to begin construction of the promised multi-commodity terminal.
Durie said the evidence would show Tagami had done nothing to get construction underway: there were no construction documents prepared, no construction contracts signed, no permit applications filed, no foundation laid, and no terminal built. Leonard previewed evidence that would undermine each of Tagami’s claims that the City obstructed development of the terminal.
If Tagami’s case rests on portraying the City as peevishly interfering with Tagami’s efforts to bring the project to fruition, the City’s goal is to show that Tagami’s failure to construct a terminal by August 2018 stemmed from other causes, including, most notably, his single-minded commitment to a potentially lucrative deal with a coal industry partner. According to the City, Tagami admitted in a recent deposition that, in 2017, he had other commercially feasible options that he and his investors could have pursued, but didn’t.
Based on Day One opening statements, it appears that the trial may turn on how much patience Judge Wise will have for Tagami’s theory of the City’s hostility for political reasons. Perhaps not much. Last week, she made it clear that she wanted each side to pinpoint the dates of any alleged breaches of the lease, how the breach occurred, what the lease required the non-breaching party to do and what the non-breaching party did in response to the breach. This suggests Judge Wise is less interested in tales of bad faith than in traditional contract issues. The City’s presentation seemed better attuned to Judge Wise’s approach to the case.
Although attorney Lee included the City Council’s 2016 legislation banning coal handling and storage in Oakland as an example of the City’s obstruction, that action was the subject of federal litigation and Judge Wise’s predecessor on this case has ruled already that it cannot be raised again here. Leonard also highlighted agreements earlier in 2016 recognizing that the City might enact regulations pursuant to its police powers to protect public health and safety and preserving Tagami’s right to challenge them in court. “Eyes wide open,” as the City’s attorney put it, the experienced developer negotiated and signed a contract binding the future of the project to milestone deadlines set forth in the 2016 “Ground Lease” – but then failed to meet those requirements.
Today’s moment of zen: Tagami claims that, because it would be served by rail, the export terminal project would reduce truck traffic, thus reducing pollution. Win win! But there are no trucks hauling coal to Oakland. What truck traffic would be replaced by rail?
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The case is Oakland Bulk and Oversized Terminal, LLC v. City of Oakland (Alameda County Sup. Ct. #RG18930929). You can access Tagami’s trial brief outlining his case here and the City’s Brief in Advance of Bench Trial Regarding Important Legal Issues here.