Oakland Bulk & Oversized Terminal, LLC v. City of Oakland

• Decision Date: 17 September 2020
• Docket Number: A157330
• Citation: 54 Cal.App.5th 738,269 Cal.Rptr.3d 170
• Parties: OAKLAND BULK AND OVERSIZED TERMINAL, LLC, et al., Plaintiffs and Respondents, v. CITY OF OAKLAND, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

54 Cal.App.5th 738

269 Cal.Rptr.3d 170

OAKLAND BULK AND OVERSIZED TERMINAL, LLC, et al., Plaintiffs and Respondents,

v.CITY OF OAKLAND, Defendant and Appellant.

A157330

Court of Appeal, First District, Division 2, California.

Filed September 17, 2020

Manatt, Phelps & Phillips, LLP, Benjamin G. Shatz, Los Angeles, Barry W. Lee, Christopher L. Wanger, Ana G. Guardado, San Francisco; for Plaintiffs and Respondents Oakland Bulk and Oversized Terminal, LLC et al.

Altshuler Berzon, James M. Finberg ; Oakland City Attorney, Barbara J. Parker, Oakland, Maria S. Bee, Jamilah A. Jefferson, for Defendant and Appellant City of Oakland

Richman, Acting P.J.

The City of Oakland (City) entered into a series of agreements with Oakland Bulk and Oversized Terminal, LLC (OBOT) for the development of the land at the site of the former Oakland Army Base. It was to be a huge project, to include a bulk commodity shipping terminal for transfer of commodities, including coal, to foreign countries. When the subject of coal became public, it activated interest groups, ultimately leading to a City ordinance banning coal handling and storage in the City and a resolution applying the ordinance to the terminal. OBOT filed suit in federal court, which ruled for OBOT, holding that the resolution was a breach of the City's agreement with OBOT, and enjoining the City from relying on the resolution. Despite that ruling, friction between OBOT and the City continued.

OBOT (along with an affiliate) filed suit against the City, alleging 12 causes of action, including three for breach of contract and seven for tort. The City filed a demurrer and a standard motion to strike, followed weeks later by a special motion to strike (SLAPP motion) that sought to strike "in part" the complaint—a motion that thus recognized the case would proceed. The court advanced the SLAPP motion so it came on for hearing with the other two matters, which hearing began with the court making early mention of the SLAPP motion, observing that it "might be premature." The hearing dealt primarily with the demurrer, which the trial court had addressed in a tentative ruling, overruling it in most part, and sustaining it in part with leave to amend. Days later, the trial court entered an order on the SLAPP motion, that it was "denied without prejudice," going on to describe it as "premature" in light of the amended complaint to come. The City did not wait for the amended complaint, and appealed.

The City's appeal argues at length that the trial court erred in allowing amendment, but then goes on to ask us to decide the SLAPP motion. We do that, and decide that it has no merit, that plaintiffs’ complaint is not based on protected activity. We thus remand with instructions to the trial court to enter an order denying the SLAPP motion, with some observations about the state of anti-SLAPP law in those instances where the case will proceed—and whether something should be done about it.

BACKGROUND

The General Setting and the Agreements

Beginning in 2010, the City entered into the first of a series of agreements with OBOT governing the development of the land at the site of the former Oakland Army Base in general, and in particular the "West Gateway" portion of the base. The purpose was to build a bulk commodity shipping terminal and associated railway improvements (terminal), which was envisioned as a facility for unloading bulk goods from railcars and transferring those goods onto ships for export to other countries. The agreements came to include a lease disposition and development agreement (LDDA), a development agreement (development agreement), and ultimately a ground lease (lease) under which OBOT ground-leased the West Gateway property and the existing rail right of way (rail R/O/W). Some pertinent terms of the documents will be described as appropriate below. Suffice to say here that the agreements granted OBOT the right to develop, build, and operate the terminal, according to specific required timeframes, on a parcel of land adjacent to San Francisco Bay called the West Gateway.

The Ordinance and the Resolution

As part of the development process—and in furtherance of its obligations under the agreements—OBOT began to search for a company to construct and operate the terminal, and in the spring of 2014 began negotiations with Terminal Logistics Solutions (TLS). The negotiations were successful, and in November 2014, OBOT entered into an exclusive negotiation agreement and sublease option (sublease option) under which TLS was granted an exclusive option to sublease and operate the terminal for 66 years.

According to OBOT, at all relevant times it communicated to the City the development plans for the West Gateway, and the City was aware that coal (and petcoke) were bulk commodities to be transported through the terminal.

Indeed, OBOT asserts it would not have agreed to develop the project, committing tens of millions of dollars to do so, if coal were excluded from the commodities that could be shipped.

But whatever the City knew, in 2014, shortly after OBOT began negotiations with TLS, word spread that coal was one of the commodities to be handled at the terminal. This in turn generated significant public concern, and interest groups began focusing on the matter. This led to a June 2014 resolution expressing the City's general opposition to transporting fossil fuels through the City, and ultimately to the 2016 enactment of an ordinance banning coal handling and storage in the City (ordinance) and a resolution applying the ordinance to the terminal (resolution).¹

The Federal Action

In December 2016, OBOT filed a lawsuit in federal court: Oakland Bulk & Oversized Terminal, LLC v. City of Oakland (N.D. Cal. 2018) 321 F.Supp.3d 986 (federal action). The federal action asserted that the City breached the development agreement by applying the coal ban to the terminal. Following a court trial, on May 15, 2018, the district court judge issued his findings of fact and conclusions, framing the question at issue as "whether the record before the City Council when it made this decision [adopting the resolution] contained substantial evidence that the proposed coal operations would pose a substantial health or safety danger." And he answered "no," holding as follows: "Even under the deferential standard of review in the development agreement, the record before the City Council does not contain enough evidence to support the City Council's conclusion that the proposed coal operations would pose a substantial danger to the people in Oakland. In fact, the record is riddled with inaccuracies, major evidentiary gaps, erroneous assumptions, and faulty analyses, to the point that no reliable conclusion about health or safety dangers could be drawn from it. Perhaps a more thorough investigation could result in a lawful determination that coal operations may be restricted at the facility, but in this case, the record was inadequate. Because the resolution adopted by the City Council applying the coal Ordinance to this shipping facility constitutes a breach of the development agreement, it is invalid, and the City may not rely on it to restrict operations there." ( Id. at pp. 988–989.)

In light of the above, the district court held that "The City is therefore enjoined from relying on the Resolution either to apply the Ordinance to OBOT or to restrict future coal operations at the facility. As a practical matter, this renders the coal Ordinance a nullity, because the only reason the City adopted it was to restrict OBOT's operations, and OBOT is the only facility in Oakland to which it could conceivably apply. But as a strictly technical matter, there's no reason to strike down the Ordinance once it has been determined that Oakland may not presently apply it to OBOT. The City remains free, of course, to pursue future regulation of the project so long as it complies with its legal obligations, including any legitimate contractual obligations to the project developers. Because OBOT prevails on its breach of contract claim, the Court enters judgment for OBOT without reaching the constitutional and statutory claims raised at summary judgment." ( Oakland Bulk & Oversized Terminal, LLC v. City of Oakland, supra , 321 F.Supp.3d at pp. 1010–1011.)

On May 15, the district court entered judgment for OBOT, enjoining the City from applying the Ordinance to OBOT or restricting future coal operations to the terminal.²

Despite this ruling, the differences between the parties continued.

The Default Claim

The Lease defines "Force Majeure" as "events which result in delays in Party's performance of its obligations hereunder due to causes beyond such Party's control, including, but not restricted to, acts of God or of the public enemy, acts of the government, acts of the other Party, ... and, in the case of Tenant, any delay resulting from a defect in Landlord's title to the Premises other than Permitted Exception. The delay caused by Force Majeure includes not only the period of time during which performance of an act is hindered, but also such additional time thereafter as may reasonably be required to complete performance of the hindered act."

On March 11, 2016, OBOT provided a notice of force majeure delay that was caused by the City's inability to inform OBOT of the construction codes and standards and applicable city regulations that apply to the premises and project improvements, as those terms are defined in the lease and the development agreement. The notice claimed the City admitted it was unable to provide the foundational information set forth in the applicable codes and standards and applicable regulations as required under section 3.4.4 of the development agreement, and OBOT was thus prevented from continuing work on the design of the project improvements.

According to OBOT, due to the City's act of force majeure, OBOT was entitled to an extension of over two years of the commencement date as defined in the lease, with...