LNG DEVELOPMENT CO., LLC v. Port of Astoria
| Decision Date | 29 January 2010 |
| Docket Number | No. CV 09-847-JE.,CV 09-847-JE. |
| Parties | LNG DEVELOPMENT COMPANY, LLC, dba Oregon LNG, Plaintiff, v. PORT OF ASTORIA, an Oregon Port; Dan Hess, an individual; Larry Pfund, an individual; William Hunsinger, an individual; Jack Bland, an individual; and Floyd Holcom, an individual, Defendants. |
| Court | U.S. District Court — District of Oregon |
Gregory A. Chaimov, William D. Miner, Davis Wright Tremaine LLP, Portland, OR, for Plaintiff.
Thane W. Tienson, Jennifer L. Gates, Landye Bennett Blumstein, LLP, Portland, OR, for Defendant.
On November 17, 2009, Magistrate Judge Jelderks issued Findings and Recommendation ("F & R") (#89) in the above-captioned case recommending that I GRANT plaintiffs Motion for Partial Summary Judgment (#34). Defendants filed objections (# 94) to the F & R and plaintiff responded (# 97).
The magistrate judge makes only recommendations to the court, to which any party may file written objections. The court is not bound by the recommendations of the magistrate judge, but retains responsibility for making the final determination. The court is generally required to make a de novo determination of those portions of the report or specified findings or recommendation as to which an objection is made. 28 U.S.C. § 636(b)(1)(C). However, the court is not required to review, under a de novo or any other standard, the factual or legal conclusions of the magistrate judge as to those portions of the F & R to which no objections are addressed. See Thomas v. Arn, 474 U.S. 140, 149, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); United States v. Reyna-Tapia, 328 F.3d 1114, 1121 (9th Cir.2003). While the level of scrutiny under which I am required to review the F & R depends on whether or not objections have been filed, in either case, I am free to accept, reject, or modify any of the magistrate judge's F & R. 28 U.S.C. § 636(b)(1)(C).
Upon review, I agree with Judge Jelderks's recommendation, and I ADOPT the F & R(#89) as my own opinion. I write separately only to clarify one relatively minor point. To begin, I agree with Judge Jelderks's finding that plaintiff LNG properly renewed its option to extend the Sublease for thirty years. (F & R(#89) 1287-89.) Therefore, I similarly find that defendants' failure to comply with a material contractual term, the thirtyyear extension, creates a breach of the Sublease. Judge Jelderks's response to this breach is relatively simple, and one with which I agree—defendants are obligated to provide LNG with the thirty-year extension under the Sublease.1 Defendants make much of this obligation, contending that Judge Jelderks created it "out of whole cloth." (Defs.' Objections (# 94) 8.) They fail to understand that this obligation is nothing other than the effect of their breach, created by the plain language of the Sublease.
Defendants also raise numerous objections to the language Judge Jelderks used to convey this obligation, that the Port must "take the steps necessary" to exercise its own option to extend the Master Lease, so that it can, in turn, comply with the terms of the Sublease. (Id. at 19, 22, 26, 27, 29, 30, 34, 35, 38, 39, 46.) While Judge Jelderks's framing of the steps required by defendants presents the most practical interpretation of their obligation, there could exist alternative options, at least in theory. How defendants choose to provide the additional thirty-year term is up to them. They could attempt to buy the land at issue, they could try to negotiate a separate contract with DSL, or come up with any other imaginative solutions. The end result, however, is the same— defendants must provide LNG with the properly renewed option to extend the Sublease for thirty years in order to comply with the terms of the contract.
I agree with Judge Jelderks's reasoning on all other points to which defendants object. I therefore GRANT plaintiffs Motion for Partial Summary Judgment (# 34) as recommended.
IT IS SO ORDERED.
FINDINGS AND RECOMMENDATION
Plaintiff LNG Development Company, LLC (LNG), brings this action against defendants Port of Astoria (the Port) and Port Commissioners Dan Hess, Larry Pfund, William Hunsinger, Jack Bland, and Floyd Holcom (the Commissioners). Plaintiff seeks declaratory, injunctive, and monetary relief based upon defendants' refusal to seek renewal of the Port's lease of certain real property from the Oregon Department of State Lands (DSL).
Plaintiff LNG moves for a partial summary judgment establishing that it has renewed a sublease between LNG and the Port for a thirty-year period, and that the Port has breached its obligation to LNG by failing to renew a Master Lease between the Port and the DSL.
Plaintiffs motion should be granted.
Plaintiff LNG is a limited liability company organized under the laws of Delaware. Its principal place of business is in Vancouver, Washington, and it does business in Oregon as Oregon LNG.
Defendant the Port is an Oregon Port organized under the laws of Oregon. It is located in Astoria, Oregon. The Port is governed by a Board of Commissioners comprised of the individual defendants.
This action arises from the lease and sublease of approximately 94 acres of land (the premises) owned by the State of Oregon in Clatsop County, Oregon. On November 1, 2004, the State of Oregon, acting through the DSL, leased the premises to the Port through a document entitled "Upland Lease Agreement." (I will refer to that agreement as the "Master Lease Agreement" or as the "Master Lease" in this Findings and Recommendation.) Article 3.1 of the Master Lease provides for an initial lease period of five years, and Article 3.2 provides the Port with options to extend the lease for two additional thirty-year terms, if it is a tenant in good standing and "is not in material default of the lease" at the time of the renewal. Article 12.2 of the Master Lease Agreement provides that, with the State of Oregon's written consent, the Port may sublease, and extend or renew the sublease of the premises.
On November 5, 2004, the Port subleased the premises to Skipanon Natural Gas, LLC (Skipanon) through an agreement captioned "Sublease Agreement." Skipanon was a subsidiary of Calpine Corporation (Calpine). Acting through the DSL, the State of Oregon approved the sublease.
The Sublease Agreement includes terms very similar to the terms of the Master Lease Agreement. As with the Master Lease, Article 3.1 of the Sublease provides for an initial term of five years, and Article 3.2 provides that, as long as it is in good standing and is not in material default under the Sublease, the sublessee "shall have additional options to extend the sublease for two (2) additional terms of thirty (30) years each. . . ." The Master Lease and the Sublease include identical rental rates and identical terms providing for periodic redetermination of the annual rent payable by the Port and the sublessee. The Sublease Agreement requires the sublessee to give the Port written notice that it is exercising the option to extend the sublease period at least 180 days before the expiration of the current sublease period.
Calpine and Skipanon filed for bankruptcy protection in New York in 2006, and the Sublease was assigned to plaintiff LNG in bankruptcy proceedings on December 29, 2006. On that day, Leucadia National Corporation, which owns 80.1% of LNG, entered into an agreement with the Port guaranteeing timely payment of all taxes and rent due on the premises under the term of the Sublease Agreement through November 4, 2009, and the Port withdrew its objection to the Sublease assignment. In its Order authorizing assignment of the Sublease Agreement to plaintiff LNG, the bankruptcy court found that "no defaults (monetary or otherwise) exist under the Sublease, and . . . there are no monetary or non-monetary defaults under the Sublease that are required to be cured."
On April 24, 2009, plaintiff LNG gave timely notice to the Port that it was exercising its option to extend the sublease for an additional thirty-year term. The Port has not exercised its option to extend the Master Lease with the State of Oregon for an additional thirty-year term, and the original term of that lease expired on October 31, 2009. Instead, on August 18, 2009, the defendant Commissioners voted to extend the first term of the Master Lease for a two-year period, until October 31, 2011. On August 24, 2009, the Port and the DSL executed an amendment of the Master Lease extending the initial term of that lease until October 31, 2011. The Master Lease Amendment explicitly preserved the Port's option to renew the Master Lease for two additional thirty-year periods.
Defendants acknowledge that, on April 24, 2009, when plaintiff LNG exercised its option to extend the Sublease Agreement, "and thereafter," LNG "was in good standing as required by the Lease." They assert, however, that, though they have made "reasonable inquiry," they do not know whether plaintiff LNG was in "material default" of the lease "because the issue of whether or not the plaintiff was in material default cannot be determined with reasonable inquiry."
At a Port meeting conducted on January 20, 2009, Port Executive Director Jack Crider stated that plaintiff LNG had met its lease requirements, and that any issues concerning those requirements were "minor." The Port has never issued plaintiff LNG a notice of default, which is required under Article 13.2 of the Sublease Agreement before it may pursue any remedy under the terms of that agreement. The Port has not issued any notice of termination, or notice to cure any default under the Sublease Agreement. After plaintiff LNG exercised the option to extend the Sublease, the Port issued LNG an invoice for the rent, and cashed the rent check that LNG tendered.
Defendants assert that the initial lease period is now for a seven-year,...
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