Courtroom Diary: NCIO Reports on OBOT v City of Oakland Trial
NCIO is providing informal reports on the trial in OBOT v. City of Oakland. The trial could put a final end to Phil Tagami’s ambitions to bring a coal export terminal to the City’s valuable West Oakland waterfront. You can get an overview of what’s expected at the trial by reading our Day One coverage of the opening statements (see “Trial Begins in Oakland Coal Case“). Phase one of the trial ended on August 31, 2023 and closing arguments are set for October 11, 2023, after which the judge will decide whether the City or the Developers breached the Ground Lease. If necessary, there will be a second phase of the trial to determine the appropriate remedy.
October 11 — Day 31
The liability phase of the trial came to a definitive end today with closing arguments by lawyers representing the group of developers (aka OBOT) led by Phil Tagami, and those representing the City of Oakland. At trial, 15 witnesses testified and the court admitted 321 exhibits into evidence. The two sides submitted a total 364 pages of briefs in the leadup to closing arguments.
Judge Noël Wise has plenty to sort out as she ponders the starkly different versions of the facts and the law summed up by opposing lawyers in today’s arguments.
Her decision, expected within weeks, will decide the near-term fate of the West Gateway coal terminal project. The City is asking for a swift eviction of the developers. OBOT is asking for a lengthy extension of time to get the project built, after missing the August 14, 2018 deadline to commence construction.
The City declared the lease terminated in 2018 after OBOT failed to meet the August 14 “Initial Milestone,” which required construction to be underway on a marine export terminal and at least one of five rail projects specified in the ground lease that the parties signed in February 2016. During the course of the trial, the City presented strong evidence that OBOT did virtually no work on developing the project during the 2 ½ years between execution of the ground lease and the “Initial Milestone” deadline.
The main factual dispute highlighted in the closing arguments is whether the City’s alleged foot-dragging and malfeasance caused OBOT to miss its deadlines; or, on the contrary, whether OBOT deliberately squandered the 2 ½ years because it preferred to keep collecting lucrative fees from coal entrepreneur John Siegel: at least $19.5 million over that 2 ½ year period, to keep Siegel’s option on the West Gateway sublease open. Whatever the reason or motive, OBOT postponed construction until a sublease was signed in September 2018.
The closing arguments began with hour-long presentations by Barry Lee for OBOT and Danielle Leonard for the City, who each presented the main points set forth in their briefs. A high school student from Oakland School for the Arts, attending today’s court session with her teacher and about 15 classmates in a course preparing for a Mock Trial competition, commented that Leonard’s presentation was much more rooted in facts. Lee made a poorly organized rebuttal to various points made in Leonard’s argument.
Daralyn Durie wrapped up the argument for the City with a sharp and dramatic rebuttal of OBOT’s theory of the case. Although OBOT alleges that the City undermined the developers’ efforts to build track for years, she pointed out that there was nothing in the record, not a single document, “no contemporaneous complaint,” showing that the developers ever told the City “we need something in order to build track.”
Stay tuned! No Coal in Oakland will spread the news as soon as the Court issues its statement of decision.
September 19 — Day 30
Judge Noël Wise reserved today’s hearing for argument relating to a series of briefs on the City’s contention that the legal doctrine of res judicata bars all claims or defenses predicated on the City’s actions that could have been or were addressed in the federal litigation. (Links to the briefs can be found here.)
Res judicata embodies the principle that litigants are entitled to only one bite at the apple and cannot split their cause into multiple lawsuits. A key issue in the state trial is how to apply this principle to the claims in the present case. OBOT has argued for a narrow application of the principle whereas the City contends that much of the case presented by OBOT falls within its scope. Both sides filed extensive briefs.
How Judge Wise resolves the res judicata issue will prove central to her decision on who broke the lease expected in October, but today’s hearing provided few clues as to which way she is leaning.
At the outset, the judge indicated that she had read the briefs, did not need the attorneys to rehash what they wrote in the briefs, and had only a couple of questions for each side. She asked OBOT’s counsel whether OBOT agreed with City of Oakland’s contention that the case is limited to “claims that actions of the City after May 15, 2018 breached the Ground Lease, and claims of excuse of performance predicated on actions of the City after the June 14, 2017 filing of the amended complaint in the federal action.”
Attorney Justin Jones Rodriguez responded that June 14, 2017 would be the correct date if res judicata were to apply, but OBOT does not concede that res judicata applies to any of its claims. Rodriguez asserted that the May 15, 2018 date is based on an alleged concession by OBOT earlier in the case and denied that any such concession had taken place.
Judge Wise asked the City to explain how interference by the City’s coal ban with OBOT’s development was ripe to be raised in the federal case when the judge might later have ruled in the City’s favor and implicitly determined that OBOT had no legal claim against the City for any harm caused by the City’s ban. In other words, how could there be a harm to litigate before the judge issued his decision on the coal ban?
Attorney Danielle Leonard answered that ripeness does not turn on whether a claim is meritorious or not. OBOT had to assert the harms the City’s ban would cause – including delays – in its federal lawsuit over the legality of the City’s ban. Harms it failed to address in its final amended complaint in June 2017 could not be revived in a later lawsuit.
Judge Wise then asked the City about its argument that, in the Ground Lease, OBOT expressly assumed the risk that the City might enact regulations applicable to the project and OBOT might need to challenge them in court.
“Didn’t both sides assume risk?” asked the Judge, pointing to the risk that the City’s regulations might not hold up in court and the City might need to extend the construction deadlines, sit down with OBOT, and hash out how to advance the project as quickly as possible.
Leonard answered that such an extension might have been a subject for settlement negotiations, but nothing in the Ground Lease required the extension.
The parties will deliver their closing arguments at 9 a.m., October 11. A decision is expected shortly thereafter.
UPDATE: Due to limited seating, the court has announced public access to the closing arguments will not be in-person, but only via a video streamed to Department 1 at Rene C. Davidson Courthouse at 1225 Fallon Street. It appears that only attorneys, parties to the case, and credentialed media will be admitted to the courtroom in Hayward. Closing arguments will NOT be streamed online. Members of the public can watch the case’s closing arguments from the Rene C. Davidson Courthouse, Department 1, via video stream (see NCIO Event Calendar for a map).
August 31 — Day 29
See the separate post, Coal Trial Ends: Light at the End of the Tunnel?
August 29 — Day 28
The morning court session consisted entirely of cross-examination of Deputy City Administrator Elizabeth Lake by OBOT/OGRE/CCIG’s lead trial counsel Barry Lee.
At the end of the morning, the judge and counsel discussed the schedule for the remainder of the first phase of the trial, the liability phase. (At the outset of the trial, the judge decided to bifurcate the trial into two phases. In the first and current phase, the question at issue is who broke the lease, the City or the developers; the second phase, if necessary, will determine what remedy is appropriate.)
If the City is victorious in the first phase, there will be no need for a second phase, as the remedy the City is seeking is an order evicting the developers once and for all from the West Gateway at the former Oakland Army Base. If the developers are victorious in the first phase, they will put on a case in the second phase asking either for reinstatement of their lease with modifications and damages to date; or, in the alternative, for damages to date plus future lost profits in an amount exceeding $150 million.
Today Judge Wise elicited from both sides a statement of what else they needed in order to rest their cases in the liability (first) phase on Thursday, August 31, 2023. The City estimated it had about 15 minutes of redirect examination of Lake. This might be followed by a short amount of re-cross examination by the Plaintiffs. The City will offer video testimony by Adam Rosen. Aside from unanticipated rebuttals, both sides will then rest their cases.
The judge then set a tentative schedule for wrapping up phase one.
First, the court will hear arguments on the major issue of the effect of the prior federal litigation on what claims and evidence the court can consider in deciding this case. The court intends to schedule this hearing on September 18, 19, or 20, 2023.
Second, each side is to file a proposed statement of decision on the merits at the beginning of the day on September 25, 2023, followed by a response to other side’s proposed statement of decision to be filed by close of business on October 6, 2023. On October 11, 2023, each side will have one hour and twenty minutes for closing argument.
Judge Wise indicated that she will issue a tentative (non-binding) statement of decision shortly thereafter and she will move as quickly as court rules permit to render a decision and begin phase two of the trial, if necessary.
August 28 — Day 27
The City called Port of Oakland Executive Director Danny Wan to the stand this morning. Wan served as the Port’s general counsel from 2012 through 2018 and became the Port’s executive director in 2019. As general counsel, he was involved in negotiations between the City and the Port over a rail access agreement (RAA) that Plaintiffs allege the City failed to pursue diligently, thereby making it impossible (in their telling) for the developers to commence rail improvements by August 2018, as required by the lease.
The developers’ failure to get even the minimally-required one of five rail improvements underway by August 2018 is one of the grounds upon which the City terminated the lease in November 2018. Wan’s testimony refuted Plaintiffs’ theory that the City had sandbagged the negotiations over the RAA. He listed several issues that the City and Port had failed to resolve by 2018 despite good faith efforts by both sides.
On cross-examination, Wan resisted efforts by OBOT/OGRE’s attorney Barry Lee to suggest that the passage of the coal ordinance in 2016 ended efforts to negotiate the RAA. Wan testified that the City had no role in causing the Port to oppose an application for common carrier status filed by OGRE with the Surface Transportation Board. In fact, he said, in his discussions with the City, the City argued the benefits of OGRE’s getting common carrier status, including pension benefits for rail workers and easier coordination with City operations.
After Wan testified, the City resumed direct examination of Elizabeth Lake. The City’s co-lead trial counsel Daralyn Durie methodically walked Lake through the Plaintiffs’ new claims, first made on Friday, that it had actually met some of the construction deadlines set forth in the lease. Lake testified that, as assistant city administrator, she determined that none of the deadlines had been met, neither the commencement of construction of the bulk and oversized terminal nor any of the five rail improvements enumerated in the lease.
Lake described a meeting in fall 2018 where she met John Siegel. Phil Tagami was present at the beginning of the meeting and introduced Siegel, principal of OBOT’s new sublessee Insight Terminal Solutions. Tagami left the meeting saying the terminal was “no longer my project,” a declaration that surprised Lake because it had “always been” Phil Tagami’s project. She described Siegel as seeming nervous and sweating profusely. Siegel showed her a video of his proposed project. She described it as a “cartoonish video that did not have a lot of substance to it.” [No Coal in Oakland covered the 2018 emergence of Insight Terminal Solutions and its 2019 filing for bankruptcy in an analysis posted on this website.]
Plaintiffs’ counsel began cross-examination of Lake which will continue tomorrow morning.
August 25 — Day 26
The testimony of Mark McClure, Phil Tagami’s business partner and president of Oakland Global Rail Enterprise (OGRE), wrapped up today with re-direct by Plaintiffs’ lead trial counsel Barry Lee and further cross-examination by City’s co-lead trial counsel Danielle Leonard.
On re-direct, Lee attempted to elicit testimony from McClure that OBOT timely commenced construction of the bulk and oversized terminal and at least one of the rail improvements as required by the Ground Lease on the West Gateway. The City terminated the developers’ lease in November 2018 due to “the developer’s failure to meet its obligations and perform the work it agreed to do,” as City Attorney Barbara Parker wrote in a statement at the time. OBOT failed to commence construction by August 14, 2018, a deadline set forth in the lease.
Up to this point in the trial, the developers appeared to concede that they did not meet the mandatory construction deadline, but blamed the delay on a laundry list of actions and failures to act by the City. Today, on the 26th day of the trial, attorney Lee walked his client through an interpretation of the lease to suggest that some rail work that was in place by August 14, 2018 met the definitions of what was required by the lease. Lee also led the witness to construe the definition of the bulk and oversized terminal in the lease to include the same rail improvements and thus met the Ground Lease’s requirement to commence construction of the terminal.
On cross-examination, Danielle Leonard took aim at what she referred to as “plaintiffs’ new theory.” She questioned McClure’s interpretation that the specified rail improvements would lie within the definition of the terminal itself. The ground lease required commencement of construction of the terminal and one of five specified rail improvements by the August 14, 2018 “initial milestone” deadline. This would make no sense if commencement of work on any of the rail improvements would automatically satisfy the requirement to commence construction of the terminal.
Attorney Leonard also attacked McClure’s testimony that the rail improvements met any of the definitions of rail components that would qualify as meeting the initial milestone for rail work. McClure conceded that no construction of rail was underway on August 14, 2018. Under the terms of the lease, commencement of construction requires “active and on-going construction.”
When asked about whether, in 2018 as the deadline to commence construction passed, there was any financing in place to build the terminal, McClure testified that the Community Impact Board in Utah committed $53 million at a meeting he attended in April 2015. Although he asserted that the money was committed to the project, he failed to note that the allocation was contingent on approval by the Utah attorney general, approval that never materialized. NCIO reported on the checkered history of the $53 million commitment in 2016 and 2019. As of 2018, a 2016 Utah law allocating the $53 million for infrastructure was in effect but the money was not specifically allocated to the West Gateway project or even a West Coast terminal. Further, it was conditioned on a determination by an impartial financial analyst that the investment would be prudent.
After McClure was excused from the witness stand, the City returned to presenting its case. The City recalled witness Elizabeth Lake to the stand. Ms. Lake has served as assistant city administrator since March 2018. Lake had previously been the City’s outside counsel dealing with aspects of the West Gateway project. She testified to the City’s concerns that it was unclear what was going on with OBOT’s sublessee who planned to build and operate the terminal. Correspondence from developers indicated that a new entity called Insight Terminal Solutions (ITS) was taking over the sublease. When the City requested information about ITS, they received an organization chart that consisted of three rectangular boxes with Sharon Siegel, the owner of 100% of the shares, in the top box, an entity called Insight Terminal Holdings in the middle box, and ITS in the bottom box. CCIG/OBOT provided no information on the management structure or employees of ITS. The sublease called for ITS to make a balloon payment of over $50 million to OBOT five years after the terminal becomes operational – a provision that Lake found quite surprising in an arms’-length commercial lease.
Danny Wan, the current Executive Director of the Port of Oakland, will testify on Monday morning at 9 a.m., after which Elizabeth Lake will return to the stand.
August 24 — Day 25
Cross-examination of OGRE President Mark McClure continued this morning. City’s counsel Danielle Leonard focused first on rail issues at the former Oakland Army Base, distinguishing between temporary access to the areas in question for construction purposes, vs. longer-term easements (access) for use / operation of the planned rail tracks. Next, questions focused on establishing that there were three parties to negotiation over rail issues: the City, the Port of Oakland, and CCIG/OBOT/OGRE; that the City and OGRE were “on the same side” of some issues where the Port took a different position; and that the City acted in multiple ways to promote and further the bulk terminal project. The underlying issue being explored was when, if at all, the fact that the Rail Access Agreement had not been finalized became an impediment to OGRE’s completion of its initial performance milestone under the terms of the Ground Lease. McClure did not identify a specific date.
A document of particular interest was Mr. McClure’s contemporaneous notes of a conversation he had with Oakland’s then-Mayor Libby Schaaf on October 21, 2015. The text of McClure’s notes seemed to clearly indicate that, in the conversation with Schaaf, he was representing Terminal Logistics Solutions — OBOT’s sub-lessee, a wholly-owned subsidiary of coal company Bowie Resource Partners (now renamed Wolverine Fuels) — as a small, locally-owned, African-American owned business. There was a great deal of back and forth, repeated questions, and repeated objections to questions, on the issue of what McClure knew about TLS’s status as a wholly-owned subsidiary of a coal company vs. what he told (or didn’t tell) then-Mayor Schaaf. The issue of TLS ownership was explored in reporting by No Coal in Oakland in March 2016.
Another, related topic of particular focus: McClure’s role in securing “a deal” committing $50,000,000 of public funds from the Utah Community Impact Board (CIB) to the Oakland bulk terminal project (reported on by NCIO in the same March 2016 post). McClure acknowledged making a presentation to the Utah CIB in a meeting in that state that took place in April 2015 — nearly a year before the West Gateway “Ground Lease” was signed, and six months prior to his October 2015 discussion with then-Mayor Schaaf. Additional 2015 meetings with members of the Utah CIB were subsequently hosted by CCIG in Oakland.
Toward the end of the morning, McClure acknowledged that OBOT had not applied for a single permit for the terminal project as of August 14, 2018, the initial milestone deadline date. McClure was adamant in pointing out that OGRE had, shortly before that date, applied for a permit to construct a fence (see reporting of testimony on days 14 & 15 of the trial, below, in which the fence permit, submitted in July 2018, was a topic of CCIG/OBOT Project Manager Megan Morodomi’s testimony). In response to questions about the lack of financing for terminal construction, McClure demurred, saying he was not privy to all of the sub-lessee’s financial details.
City’s counsel concluded her cross-examination. Re-direct examination of Mr. McClure will begin tomorrow, August 25, 2023, at 9:00 am.
August 22 – Day 24
Cross-examination of developers’ witness Mark McClure, President of OGRE, continued this morning, taking up from where Mr. McClure’s testimony left off on August 11. Cross-examination will continue when the trial resumes on August 24 at 9:00 am.
August 21 — Day 23
Darin Ranelletti’s testimony concluded today, and the City presented two additional witnesses, Elizabeth Lake and Sabrina Landreth. Ms. Lake has been the Assistant City Administrator for the City of Oakland since March 2018, and prior to that represented the City as outside counsel. Ms. Landreth was City Administrator for the City of Oakland from July 2015 until March 2020. Tomorrow, Tuesday August 22, the postponed cross-examination of developers’ witness Mark McClure, President of OGRE, is expected to resume, beginning at 9:00 am.
August 18 — Day 22
In this morning session, Judge Wise watched video of the deposition of Douglas Cole, a project manager for the City of Oakland. In the afternoon, shortly before 2:00 pm, the developer’s (plaintiff’s) attorneys indicated that presentation of their case will conclude at the end of Mark McClure’s testimony, which has been continued until next week due to Mr. McClure’s availability. CCIG’s former General Counsel Skyler Sanders was then called back to the stand to continue cross-examination, followed by re-direct and re-cross-examination. Mr. Sanders was excused shortly after 3:00pm. After a short recess, plantiff’s counsel formally rested the developers’ case, subject to conclusion of Mr. McClure’s testimony and rebuttal.
The first witness called by attorneys for the City of Oakland was Darin Ranelletti. According to the City’s Witness List, “Mr. Ranelletti worked for the City’s Planning Department between 2002 and 2018, and for the City through 2023. He will testify regarding the City’s actions with respect to the West Gateway project.” Mr. Ranelletti testified for less than an hour before the trial recessed for the day; his testimony will resume on Monday August 21, 2023, at 9:00 am.
August 17 — Day 21
Cross-examination of CCIG’s former General Counsel, Skyler Sanders, continued this morning. Cross-examination will continue when the trial resumes on August 18 at 8:30 am.
August 16 — Day 20
After the court marked and admitted about two dozen documents into evidence, developers’ attorney Christopher Wanger called Skyler Sanders to the stand. Mr. Sanders was General Counsel for CCIG (parent company to OBOT & OGRE) from June 2015 to July 2022. The Plaintiffs’ witness list describes Sanders’ testimony as pertaining to “Interactions with City; Lease Disposition and Development Agreement; Development Agreement; Lease; City’s actions/inactions re West Gateway Project; development of West Gateway Project and public improvements; subleases; property management; financing; anticipated revenues.” Direct examination concerning various interactions between the City and CCIG took up most of the morning; the court recessed about twenty minutes into the City’s cross-examination of Mr. Sanders. Rather than admit them as evidence, Judge Wise instructed that plaintiff’s counsel provide the court with a list of pleadings in the 2018 Federal lawsuit OBOT v. City of Oakland (Case #16-cv-07014-VC) of which plaintiff wants the court to take Judicial Notice. The trial will continue tomorrow morning, Thursday August 17th, at 9:00 am.
August 11 — Day 19
OGRE President Mark McClure was recalled to the witness stand, where he spent all day under (resumed) cross-examination by the City’s attorneys. Cross-examination focused on nearly two-dozen documents (emails, letters, and other documents), and parts of the witness’s deposition transcript. The trial will resume on Wednesday August 16th, at 9am.
August 10 — Day 18
Cross-examination of Claudio Cappio, Assistant City Administrator for the City from April 2015 to December 2017, continued this morning, followed by rounds of re-direct and re-cross examination. The trial will resume on the morning of August 11.
August 9 — Day 17
Direct examination resumed with Claudio Cappio, Assistant City Administrator for the City from April 2015 to December 2017, taking the stand at a few minutes before 9:00 am. Direct-examination concluded and cross-examination began mid-morning. Court adjourned for the day around half-past noon. Cross-examination of Ms. Cappio will resume on the morning of August 10.
August 8 — Day 16
Claudio Cappio, Assistant City Administrator for the City from April 2015 to December 2017, took the stand to resume direct examination by Plaintiff’s attorney Barry Lee. Direct examination continued throughout both morning and afternoon sessions, covering Ms. Cappio’s role and the City’s actions regarding the West Gateway project. Direct examination of Ms. Cappio will continue on the morning of August 9.
The court and counsel for both parties continued discussion of prospective testimony by Port of Oakland Executive Director Danny Wan, and scheduling availability of Mr. Wan and the Court.
August 7 — Day 15
Cross-examination of CCIG/OBOT Project Manager Megan Morodomi resumed in an afternoon session on this date, with a continued focus on permitting for a fence between Burma Road and the Rail Right-of-Way on the former Oakland Army Base. Two cycles of Re-Direct and Re-Cross examination followed, and Ms. Morodomi was excused just before 3:00 pm.
The developers’ attorney, Barry Lee, then called Claudio Cappio to the stand. The City (which also lists Ms. Cappio on its Witness List) identifies her role as “the Assistant City Administrator for the City from April 2015 to December 2017.”
At the end of the day, the Court and counsel for both parties begin discussion of testimony for Port of Oakland Executive Director Danny Wan, who did not appear on either party’s Witness List; however, the developers’/Plantiff’s Witness List names “Port of Oakland.”
In addition to testimony presented in court, both the Plaintiff and the City filed briefs with the court. Each party filed a brief regarding the relationship of the Port of Oakland to the City of Oakland. The Plantiff’s brief argues that, in the context of the contract at issue in this trial, the Port of Oakland is a department of the City; the City’s brief argues that the Port of Oakland is a separate entity, per the Charter of the City of Oakland, and as explicitly acknowledged in the language of the “Ground Lease,” the contract at issue in the current trial.
Also, the City of Oakland filed a brief on the Federal lawsuit heard and decided in 2018, and its implications about what evidence can and cannot be considered, and what claims can and cannot be made, under the judicial doctrine of Res Judicata. Quoting from the City’s brief, “As this Court has already recognized, and OBOT has conceded, having already sued the City in federal court, OBOT cannot now seek additional remedies for claims that it pursued or could have pursued in the first action.”
August 3 — Day 14
Cross-examination of CCIG partner and OGRE President Mark McClure concluded in less than thirty minutes this morning.
The next witness called by the Plaintiff’s (developers’) attorney, Barry Lee, was Megan Morodomi, a Project Manager for CCIG / OBOT.
Direct examination focused on permitting for a fence between Burma Road and the Rail Right-of-Way on the former Oakland Army Base. This fence was the only structure for which the developers submitted a permit application; its function was intended to protect public safety, shield OBOT for liability for injuries on the site, and to prevent dumping.
Cross-examination established that OBOT became responsible for the construction of the fence in question in June 2017. OGRE first submitted a permit request in July 2018. The “performance period” during which OBOT was responsible for reaching a “Minimum Project Initial Milestone” ended on August 14, 2018. This initial milestone included commencement of construction of one of five rail improvements about which Mark McClure testified earlier in the week; and commencement of construction of the terminal itself.
It is an undisputed fact that construction of the terminal has not commenced.
Further cross-examination of Morodomi will resume on Monday, August 7, 2023 at 1:30 pm.
August 2 — Day 13
As expected, cross-examination of CCIG partner and OGRE President Mark McClure was postponed until later in the morning to accommodate the testimony of Oakland’s former Mayor Libby Schaaf. The developers’ attorney, Barry Lee, called Schaaf to the witness stand at a few minutes before 9am.
Schaaf was Mayor of Oakland from January 2015 to January 2023. Among other prior roles, she served as a member of the Oakland City Council (2011-2015), and as Public Affairs Director for the Port of Oakland.
In her testimony, Schaaf expressed her longstanding, strong support for the bulk and oversize marine terminal project at the West Gateway, which she saw as a way to bring secure blue collar jobs and other economic benefit to the City. The former mayor also expressed confidence that Phil Tagami and his associates were capable of realizing the project. Schaaf testified she strongly believed that shipping coal through an Oakland terminal was “a fantastically bad idea” for a number of diverse reasons, including health and safety of workers and community members. On the other hand, Schaaf was confident that a “win-win” solution (involving shipment of other commodities) was achievable and economically viable, and believed that CCIG (Tagami and his partners) would come to the same conclusion as the project progressed.
The developers’ attorney referenced contemporaneous notes made by Mark McClure following a 2015 meeting with the then-Mayor, in which McClure wrote that Schaaf said she was prepared to put the whole multi-commodity marine terminal project in jeopardy if developers did not rule out shipment of coal. Schaaf denied making this statement to Mr. McClure; reasserted her steady commitment to the marine terminal, characterizing herself as “a fan” of OBOT; and testified that she did not ever oppose the project.
Mark McClure was recalled to the stand for cross-examination at about 11:15 am (direct examination concluded the previous day). The City’s cross-examination was conducted by attorney Danielle Leonard. Testimony focused on rail related aspects of the project, McClure’s area of responsibility. Five specific components of rail development were a particular focus; completion of any one of these five was required as part of an initial project milestone specified in the “Ground Lease,” the contract at issue in this lawsuit. Developers did not complete any of these five rail components by an August 2018 deadline, and claim this failure is somehow the fault of the City. After one protracted exchange between the City’s attorney and the witness, McClure affirmed that only one of the five specified rail components was sited on a portion of the former Oakland Army Base that was controlled by the City; the others were sited on land controlled by the Port of Oakland.
The court broke for lunch at 12:25 pm. Because of other court business before Judge Wise in the afternoon, cross-examination of Mr. McClure is scheduled to resume the following morning, August 3, 2023, at 9 am.
August 1 — Day 12
Direct examination of OGRE’s president, Mark McClure, concluded today. Exhibits introduced into evidence included correspondence regarding the Rail Access and Rail Operating Agreements. Cross examination of Mr. McClure will begin after the out-of-order testimony scheduled for tomorrow morning.
On the morning of August 2nd, former Mayor Libby Schaaf will be called by the plaintiffs (developers) to testify on topics listed in the Developers’ witness list as including: “Interactions with Plaintiffs; Lease Disposition and Development Agreement; Development Agreement; Lease; City’s actions/inactions re West Gateway Project; development of West Gateway Project and public improvements; City finances.” Former Mayor Schaaf is also included on the City of Oakland’s witness list.
July 31 — Day 11
Today Plaintiffs’ attorney Barry Lee conducted direct examination of Mark McClure.
The City’s witness list identified McClure as a partner of Phil Tagami’s in CCIG and president of OGRE.
The plaintiffs’ witness list identified McClure as being available to testify on the following subjects: “Interactions with City; Lease Disposition and Development Agreement; Development Agreement; Lease; City’s actions/inactions re West Gateway Project and public improvements; subleases; property.”
Week of July 24-28 — Days 7-10
The direct and cross-examination of Phil Tagami finally ended on Friday July 28. Despite the plaintiff’ attorney’s original projection that Tagami would spend approximately one day on the stand, Tagami wound up testifying on nine separate days over a three-week period. Tagami’s testimony was interrupted a couple of times so that other witnesses with particular scheduling issues could testify. On Tuesday July 25, James Wolff, the former chief financial officer at coal mining company Bowie Resource Partners, testified regarding the roles of Bowie, Terminal Logistics Solutions (TLS), and Tagami’s entities.
Under direct examination by his own attorneys, Tagami spun a tale of the City’s having sandbagged his earnest efforts to bring a “multi-commodity marine terminal” to the West Oakland shore of San Francisco Bay. Under cross examination by the City’s attorneys, he tried to avoid damaging acknowledgement of facts that contradict his claims.
During his testimony over the past few weeks, Tagami said there was nothing “ruled out” and nothing “ruled in.” When asked whether TLS, a wholly owned subsidiary of Bowie, belonged to the coal company, he answered, “In part.” He claimed that TLS was diligently considering alternative commodities–as if Bowie’s interest in exporting coal were not the entire reason for TLS’s creation.
Tagami denied the existence of any “commitment” to coal unless a final signed agreement to ship coal specifying origin, destination, rates, quantities, and rail carrier is in place. When asked on the witness stand about a June 2015 public statement that “[n]either CCIG [Tagami’s company] nor any prospective terminal operator has made any commitments … to any specific commodity,” Tagami responded, “There was no contract.” At the time he had an exclusive negotiating agreement—a.k.a. a contract—with a subsidiary of a coal mining company and CCIG was involved in creating preliminary drawings for a coal export terminal at the West Gateway.
An important element of Tagami’s case concerns a document—the Basis of Design (BoD)—that contained the preliminary drawings. The Basis of Design is not a permit application or other document required by the lease, but OBOT claims that the City’s failure to respond to its submission over a period of years constituted a breach of the lease.
The document initially showed a major portion of the proposed terminal dedicated to an unidentified “Commodity A.” It was described in the BoD as extremely abrasive, very dusty, having a maximum lump size of 3 inches, and exhibiting potentially explosive spontaneous combustion.
We learned this week that CCIG, Tagami’s company, had prepared the first draft of the BoD for TLS including language identifying “Project Objectives: Terminal for the receipt of coal and soda ash.” In July 2015, as Tagami assured Councilmember Dan Kalb in writing that “neither CCIG nor TLS has committed to the transport of any commodity,” the Basis of Design was submitted to the City, but with coal replaced by Commodity A and soda ash with Commodity B.
The court has ruled that Tagami can only rely on the City’s alleged breaches of the lease after the May 15, 2018 decision in the federal lawsuit. This is because plaintiffs could have, but failed to, raise claims based on events prior to that date in the earlier lawsuit.
Nevertheless, the plaintiffs’ strategy is to attempt to paint everything the City allegedly did after May 15, 2018 as a continuing breach of the ground lease that began before that date. They are bringing all of the prior history into the mix as background necessary to interpret the City’s later actions.
While the developers’ theory of the case is that the City did everything it could to frustrate Tagami from succeeding in starting work on a multi-commodity terminal, the City is making a case that Tagami foolishly got in bed with an erratic, unfunded, and ultimately unsuccessful coal entrepreneur and never made a serious effort to pursue an alternative.
On the final day of Tagami’s testimony, attorneys for both sides pursued clarifications. The defense spent a good deal of time hammering home all of the financial challenges with John Siegel’s companies in 2018. Tagami clearly was very frustrated with Siegel during this time and did not consider him reliable or trustworthy. Tagami and his lawyers tried to build a narrative that Siegel and the City were equally unreliable partners during this time.
Tagami argued that by banning coal, the City had changed the project from a “market-rate terminal” to a “ban-compliant terminal,” which would be less valuable/profitable than other bulk terminals on the West Coast. This is both because of the loss of potential money shipping coal but also because of the uncertainty due to the idea that the City could suddenly ban any commodity at any time. Of course, the City could only validly exercise its police powers to ban a particular commodity if it could document health and safety dangers from that commodity. This is not a move a city would take lightly, and not a power any city could lawfully agree to surrender as the California Court of Appeal held last month in Discovery Builders, Inc. v. City of Oakland.
July 17, 2023 — Day 6
Interrupting the ongoing cross-examination of Phil Tagami, the morning session consisted mostly of direct testimony and cross-examination of Chris Stotka. Stotka is the managing partner of Industrial Railways Company, a company that lays rails; and owner of West Oakland Pacific Railroad (WOPR), a company that operates a small railroad over about 10 miles of track near the port, moving rail cars around the Port of Oakland’s rail yard. OGRE’s website fancies him as OGRE’s “director of rail operations,” but Stotka testified that he is only a contractor, not an employee, of OGRE. Stotka’s testimony established that he failed to complete rail projects that were contemplated to serve OBOT, but not that the City played a significant role in blocking construction.
After the City’s counsel Danielle Leonard finished cross-examining Stotka, Phil Tagami returned to the witness stand so the City’s counsel, Daralyn Durie, could resume her cross-examination. Time and again, Tagami answered direct questions with equivocations, only to be caught in a trap when Durie brought forward a document that showed directly what Tagami’s positions were in his own contemporaneous correspondence. The City made a strong case that Tagami misled the City and the public about his secret dealings with a coal company in 2014 and, when news of a possible coal terminal on Oakland public land became public in 2015, continued to mislead the City and the public about the depth of his commitment to coal.
Cross-examination of Tagam will continue at 1 p.m. on July 24.
July 14, 2023 — Day 5
Plaintiffs’ counsel Barry Lee finished his direct examination of lead witness Phil Tagami. Tagami portrayed himself as a victim of defendant City of Oakland’s unrelenting obstruction of his effort to build a multi-commodity export terminal in West Oakland. Tagami claimed the City failed to respond to a conceptual “Basis of Design” document that the Developers submitted in 2015. Tagami also complained that the City “slow-walked” him on efforts to construct a fence needed to prevent dumping on the West Gateway property. At the end of his testimony, he tried to get off a diatribe accusing city officials of fomenting a campaign of vilification and even targeting his children, but the judge upheld defense objections that Tagami’s charges were irrelevant to the proceeding.
The City’s trial lawyer, Daralyn Durie, began Tagami’s cross-examination. Where OBOT’s attorney Lee had solicited from the witness a shaggy dog story of alleged dilatory actions by the City, Durie worked very precisely to establish key points of the defense case. She established that Tagami knew at the time he signed the Ground Lease in February 2016 that the City had not responded to the “Basis of Design” and was fully contemplating a potential ban on coal. In the Ground Lease and another document signed on the same day, the City reserved its right to enact appropriate health and safety regulations and Tagami reserved his right to challenge them.
In a particularly interesting exchange, Durie pointed out that OBOT had sent a letter in May 2016 to the City stating that the Basis of Design was just a conceptual drawing and that any review of that document in connection with the City’s ongoing investigation of the risks to health and safety would be “at best, premature, and, at worst, unsubstantiated, speculative, and a waste of taxpayer’s money.” Plaintiffs will have a difficult time explaining how this document was not worthy of any reliance in the City Council’s health and safety analysis, yet urgently required a response from the City to facilitate the development of the West Gateway. Tagami, too cleverly for his own good, referred to the letter disparaging the Basis of Design as having been written by some lawyer, not by himself. Don’t we all wish we had lawyers through whom we could talk out of the other side of our mouths?
Meanwhile, more has yet to come out in the trial about the Basis of Design. As No Coal in Oakland reported years ago, the Basis of Design inadvertently revealed coal was the main product the developers planned to ship through the Oakland terminal. Though it was disguised in the Basis of Design as “Commodity A,” it was described as a black, dusty, approximately 3-inch long, irregularly shaped, bulk commodity.
Tagami testified that, when he signed the lease, no commodity had been ruled in and no commodity had been ruled out by his prospective tenant, who was doing “due diligence,” investigating numerous possible anchor commodities. At the time, it was not publicly known that the prospective tenant, Terminal Logistics Solution, which presented itself as an Oakland-based startup that would build and operate a multi-commodity terminal, was actually a 100%-owned subsidiary of a coal company mining in Utah. No Coal in Oakland broke the story of TLS’s ownership in April 2016 after reviewing documents produced through a public records request.
As Durie returns Monday to further dissect Tagami’s claims, the irony of the coal company’s supposedly unbiased search for commodities to ship through its “multi-commodity” terminal may emerge more fully. The most amusing moment Friday was Tagami’s testimony about how a coal company executive, the late John Siegel, who pulled the strings of TLS, complained of having paid Tagami millions of dollars that seemed to be at risk. Tagami reported that Siegel was so upset that he slammed the phone down repeatedly and might call back five times to continue his tirades.
July 13, 2023 — Day 4
Plaintiffs’ attorney Barry Lee led Phil Tagami through another 3-1/2 hours of testimony with uncertain relevance to the contract issues at the heart of OBOT v City of Oakland.
July 12, 2023 — Day 3
Although OBOT lead attorney Barry Lee estimated that his first witness, Phil Tagami, would likely be on the stand for a total of one day including direct and cross examination, he questioned Mr. Tagami for a half day yesterday and a full day today and may not be half-way through his direct examination.
Mr. Lee led Mr. Tagami through 6 hours of a roughly chronological account of extensive work that Tagami’s companies did and ways the City allegedly obstructed his progress — leading up to February 2016, when the City and OBOT signed the West Gateway Ground Lease.
The City had argued in its Brief that no City actions before the Ground Lease was signed can qualify as force majeure — i.e., City acts that could legally excuse OBOT’s failure to meet its construction deadlines, because among other things force majeure events “cannot have been anticipated or foreseeable by the contracting parties at the time they entered the contract.”
Tagami asserted that it was impossible to attract potential customers because the City was questioning the terminal’s authority to handle coal, refused to assure OBOT authority to handle all non-coal commodities, and failed to delineate a process for approving other commodities. He complained of the City’s not supporting applications for permits from other agencies. He discussed a memo from deputy city administrator Claudia Cappio, which alerted employees involved in receiving and processing permit requests to notify high-level city officials when requests come in.
Of note, Tagami testified twice about covered coal cars, and said that TLS’s sublease required them. Coal car covers are still not commercially available in 2023, despite the fact that BNSF Railway settled a lawsuit over pollution of the Columbia River from coal cars in 2016 by committing to a two-year study of covers for coal and pet coke cars. Results of the study have yet to be released.
Also, Tagami testified twice today that coal was already being shipped through Oakland to the Levin-Richmond terminal. Coal trains to Richmond come from the north, not the longer route through Oakland, with possible very rare exceptions when the usual route is blocked.
July 11, 2023 – Day Two
The developer plaintiffs (Tagami’s OBOT and OGRE) called their first witness today. Phil Tagami testified for about two and a half hours answering questions about the history of the development of the former Oakland Army Base, which was decommissioned by the Army in 1999 and turned over to the City in 2003. Reviewing organization charts, Tagami identified names and faces of a few dozen city officials and employees he had dealt with over the years.
Although most of Tagami’s testimony appeared to be background (“like watching paint dry”), plaintiffs’ counsel asked questions about a rail access agreement (RAA) between the Port of Oakland and the City of Oakland. The City’s alleged failure to exercise sufficient effort to get such a deal in place promises to be a central theme of the developers’ case.
The City terminated Tagami’s lease in November 2018 after the developers failed to meet an initial construction deadline set forth in the lease. The developers blame their failure on the City’s obstruction and failure to meet its own obligations, including the duty to engage in commercially reasonable efforts to negotiate the RAA with the Port. Tagami testified that the developers couldn’t proceed with rail construction without the RAA in place, and wouldn’t be able to have a viable terminal without rail service
The City argued in a brief that the RAA issue is an irrelevant distraction. The City didn’t declare the West Gateway lease terminated because of the developers’ failure to initiate rail improvements outside the West Gateway, but for failure to begin construction of the terminal at the West Gateway — an independent requirement under the lease.
Although Tagami testified that he had raised the issue of the RAA in weekly meetings with City staff, the only document presented Tuesday to demonstrate the developers’ concern was a letter to the City dated April 2018 when the developers were a scant four months away from the construction deadline.
Judge Noël Wise has not yet made clear whether she agrees with the City’s legal argument that the rail issue is irrelevant.