Kentucky Judge Dismisses “Billion Dollar” Suit Against Oakland
Bankruptcy Court Had No Authority To Issue Widely Reported Liability Finding
Ominous headlines appeared in The New York Times and other media last November. A Kentucky bankruptcy judge had issued a startling order holding the City of Oakland liable for up to $654 million in damages, before interest, for obstructing construction of a massive rail-to-ship coal export facility in West Oakland.
That all changed last Wednesday, September 30, as a federal judge in Kentucky dismissed the “billion dollar” lawsuit brought by Insight Terminal Solutions (ITS) against the City of Oakland.
“A Stand Against Coal Exports Could Push Oakland, California Toward Bankruptcy,” led The New York Times in a November 2025 story reposted widely, including on page one of the East Bay’s aspirational paper of record, the East Bay Times (“Coal project costs mounting”).
“The New York Times parlayed a recent rogue judgment issued by a handpicked bankruptcy judge in Kentucky into a tale of the wolf knocking at Oakland’s door,” No Coal in Oakland wrote at the time. The City’s attorneys protested, as they had from the outset of the Kentucky litigation, that the bankruptcy judge had no authority to hear the case, much less issue a judgment against the City.
But the tale of Oakland’s impending doom took hold, leaving City officials unwilling to voice opposition to coal. However shaky the legal grounds for the gargantuan lawsuit in Kentucky, the threat of a catastrophic defeat in a strange court left many in Oakland uneasy. Muckrakers slung muck on substack (see East Bay Insiders Oakland Newsletter and Oakland Report). Developer Phil Tagami’s PR flack, Zennie Abraham, posted a video confidently entitled “City Of Oakland Owes Insight Terminal Solutions $678 Million In OBOT Breach-Of-Contract Case.”
“We lost, lost, lost, and we continue to lose,” lamented Oakland city councilmember and developer ally Ken Houston, apparently convinced that the bankruptcy judge’s ruling would stand.
A dark cloud hung over City Hall.
The substance of the ITS lawsuit was the shell company’s sole asset, its sublease to develop a 19-acre corner of the shuttered Oakland Army Base as a marine export terminal. ITS claimed that the City of Oakland committed tortious interference with its effort to develop a coal export facility on the site, near the foot of the San Francisco Bay Bridge. According to its complaint, the City owed ITS “not less than $1 billion,” plus interest, punitive damages, fees, and expenses.
But last Wednesday, United States District Judge Benjamin Beaton ruled that the City’s attorneys, led by Danielle Leonard of Altshuler Berzon LLP, got it right when they argued that the Kentucky bankruptcy court lacked subject-matter jurisdiction to hear the case filed in early 2024. They insisted from the outset that the case involved California parties in a dispute governed entirely by California law and should be heard, if at all, in a California courtroom.
In his order of dismissal, Judge Beaton agreed, pointedly adding that “ITS’s decision to file an adversary proceeding in Kentucky, rather than to sue in the California courts, carries at least a whiff of forum shopping.” No Coal in Oakland made the same call nearly two years ago.
ITS chose the Kentucky forum to launch its “billion dollar” lawsuit after a California trial judge denied a $159.6 million claim brought by developer Phil Tagami in Alameda County. In 2018, the City terminated Tagami’s lease for failure to get terminal construction underway by deadlines set in the lease. This effectively rendered ITS’s sublease, executed weeks before the City’s termination of Tagami’s lease, worthless as well.
Although Alameda County Superior Court Judge Noël Wise ruled the City’s termination of the lease unlawful and reinstated the lease in early 2024, she rejected the mega damages sought by the developer as too speculative to be awarded under California law.
ITS, which had funded Tagami’s case in California, decided to take another shot at an unearned payday in front of the Kentucky bankruptcy court judge who had presided over ITS’s reorganization in 2021. ITS emerged from bankruptcy under new ownership by Autumn Wind Lending, a shell company owned by Los Angeles hedge fund operator Jon Brooks.
The bankruptcy case was fully resolved when Autumn Wind acquired ITS. The shell company’s attorneys nonetheless argued that ITS’s claim against the City was sufficiently “related to” the 2021 case to provide the Kentucky bankruptcy court with jurisdiction. Brooks’ lawyers tried but failed to bluster past the glaring fault in their argument that the issues they were trying to litigate could have been, but weren’t, raised by ITS or Autumn Wind Lending during the earlier proceeding.
After quoting the late Justice Antonin Scalia (“as many a curbstone philosopher has observed, everything is related to everything else”), Judge Beaton found no significant connection between the bankruptcy case and ITS’s 2024 lawsuit. He ruled that
the absence of any identifiable pre-confirmation claim or post-confirmation distribution dooms the jurisdictional basis for ITS to return to bankruptcy court. This litigation doesn’t involve application of the Bankruptcy Code, the interpretation of the reorganization plan, or any potential effects on creditors….The only relevant nexus between this case and ITS’s bankruptcy is the one linking its current owners to a potential future recovery. And that does not suffice…. Even the expansive reach of related-to bankruptcy jurisdiction doesn’t stretch this far.
The practical result of Beaton’s decision is that this litigation, after years in Kentucky federal courts, is almost certainly over in any forum that matters. ITS can refile its claims in California or appeal Judge Beaton’s decision to the Sixth Circuit, but neither approach is likely to lead to a different result.
California may provide a six-month window to refile in state court, but that window opens onto a limitations question ITS is unlikely to survive. The City cancelled Tagami’s lease and, effectively, rendered ITS’s sublease worthless in 2018. The business torts raised by ITS have a two-year statute of limitations so they became untimely long before ITS filed in Kentucky. Even if ITS could survive the limitations issue, the City has raised a number of other credible alternative grounds for summary judgment in its favor. The City need only win on one argument; ITS would have to prevail on all of them to survive a summary judgment motion in state court.
In the event of a successful appeal of last week’s ruling to the Sixth Circuit, the case would land back before Judge Beaton. He made it clear in his opinion that, if the appeals court were to overrule him on “related to” jurisdiction, he would nonetheless abstain from hearing the case, either dismissing it again or leaving it in limbo.
Abstention is a nonreviewable determination that a case is in the wrong court even though, technically speaking, the court has jurisdiction. Abstention is rarely invoked, but Judge Beaton included in his decision a detailed analysis, tallying up ten reasons no federal court in Kentucky should be handling the case.
“This case cried out for the exercise of discretionary abstention by the federal courts in favor of California litigation,” he concluded, sending a message to both ITS and the forum-shopped bankruptcy judge who hung on to the case for nearly two years.
ITS now faces an unappetizing choice between investing further resources in a California refiling that is likely to fail at the threshold or an appeal that leads nowhere. ITS may choose to plow ahead along one of these paths just for the nuisance value of holding formally unresolved claims over the City’s head, but the bell has rung and ITS has lost this round, if not the entire bout.
With victories in Alameda County and Kentucky, the City is now 2-0 against the developers’ suits for damages.
The decision is Insight Terminal Solutions, LLC v. City of Oakland, No. 3:25-cv-00023-BJB (W.D. Ky. Sept. 30, 2026) Opinion & Order of Dismissal.
Photo at top: Musicians Action Group bringing musical energy to kick off June 2016 No Coal rally outside Oakland City Hall. Credit: Brooke Anderson
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