Transmart v. San Francisco Bay Area Rapid Transit Dist. CA1/5

CourtCalifornia Court of Appeal
DecidedApril 29, 2022
DocketA159044
StatusUnpublished

This text of Transmart v. San Francisco Bay Area Rapid Transit Dist. CA1/5 (Transmart v. San Francisco Bay Area Rapid Transit Dist. CA1/5) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Transmart v. San Francisco Bay Area Rapid Transit Dist. CA1/5, (Cal. Ct. App. 2022).

Opinion

Filed 4/29/22 Transmart v. San Francisco Bay Area Rapid Transit Dist. CA1/5 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

TRANSMART, INC., Plaintiff and Appellant, A159044, A160511 v. SAN FRANCISCO BAY AREA (Alameda County RAPID TRANSIT DISTRICT, Super. Ct. No. RG17853926) Defendant and Respondent.

Plaintiff TransMart, Inc. (TransMart) entered into an option contract with defendant San Francisco Bay Area Rapid Transit System (BART) giving it the opportunity to lease space in BART’s train stations for the purpose of developing retail space. When the deal fell apart and BART rejected TransMart’s effort to exercise the option, TransMart brought this civil action for breach of contract. A monthlong jury trial was held after which the jury returned a special verdict in favor of BART. We affirm. I. BACKGROUND In 2008, real estate developer Alexis Wong (Wong) approached BART about a proposal to start a retail program in its train stations. The general concept was that Wong’s company, which eventually became TransMart, would lease space at

1 BART’s 43 stations, build kiosks, and sublease the kiosks to various retailers who would serve BART’s passengers. In 2011, BART and TransMart entered into an exclusive negotiating agreement. On June 11, 2013, BART and TransMart executed a Lease Option Agreement (LOA) giving TransMart the right to lease space at BART stations for a period of 30 years with options to extend if it met a number of conditions precedent. The LOA required that all conditions precedent be met before BART would be obligated to perform. The project included four phases, each with specific designated stations and with specified option exercise dates. The termination date of the LOA was June 10, 2016. Three of the conditions precedent are relevant to this appeal. First, TransMart needed to complete, and BART needed to approve, what the parties called Tier 1 and Tier 2 studies regarding the effect the proposed retail kiosks would have upon the stations. Tier 1 studies would examine the single issue of how passenger flow would affect the placement of the kiosks. Once the Tier 1 studies had been completed, Tier 2 would address the impact of the proposed kiosk locations on a wide variety of issues, including utilities, access improvements, station utility needs, security, wayfinding and existing retail and advertising. Second, the LOA conditioned TransMart’s exercise of the option on TransMart providing the necessary design documentation to obtain BART’s approval of the design of the kiosks. The LOA stated that BART had to approve

2 “documentation that describes the design scope” “including concept drawings and one hundred percent (100%) design development and engineering drawings (the ‘Design Documentation’).” Third, the LOA obligated TransMart to provide BART with proof of funding to show that it had enough money to complete the project. The proof of funding would show “TransMart’s ability to fund one hundred percent (100%) of the costs of constructing the Retail Facilities on the applicable Leased Site,” and provided that “[e]xamples of such evidence include binding written loan commitments . . . to fund construction of the applicable Retail Facilities in favor of TransMart.” TransMart submitted Phase 1/Tier 1 studies in October 2013, which were approved by BART the following month. TransMart did not, however, provide BART with Phase 1/Tier 2 studies until August 2015, almost two years later, when it submitted Tier 2 utility studies to BART.1 These studies were only utility studies that did not complete other aspects of the Tier 2 analysis. BART also considered them to be flawed because they called for electricity to be drawn from BART’s own supply, but because BART pays wholesale prices for electricity, it is limited as to who can use its electricity. Representatives of BART evaluated the studies and exchanged comments with TransMart, which submitted revised studies.

1 The studies were completed in August 2014, but were not given to BART until a year later.

3 On September 30, 2015, the parties signed the First Amendment to Lease Option Agreement (First Amendment), which set the option exercise deadlines at December 31, 2015 for Phase 1 and March 31, 2016 for Phase 2. On December 30, 2015, TransMart notified BART that it was exercising its option for Phase 1. At the time, the Tier 2 Studies and the design approval had been submitted to BART but had not been approved. On January 8, 2016, TransMart submitted its proof of funding for Phase 1: a cover letter from “blinq,” which is the marketing brand for the TransMart retail program, and an attached bank statement for Lucendro Investment Fund relating to its account with the Singapore branch of Westpac, an Australian bank. According to Wong, Lucendro was owned by TransMart’s major shareholder. BART rejected TransMart’s Phase 1 submission. The parties executed the Second Amendment to Lease Option Agreement (Second Amendment) which extended the deadline for Phase 1 to June 10, 2016 and the deadline for Phase 2 to August 31, 2016, and provided for no further extensions of the deadlines. TransMart continued to work on its Tier 2 studies in 2016, and despite back-and-forth regarding revisions, BART concluded they were inadequate because they did not include an analysis of wayfinding conflicts or safety and the proposed placement of the kiosks conflicted with BART’s existing advertising contracts. During the process of studying these issues, BART reduced the potential space for the kiosks, which TransMart considered significant (although the LOA did not guarantee TransMart any

4 particular space until the approvals for the option exercise were complete). The parties also continued to work on the design documents, with TransMart submitting its proposals to BART and getting feedback. In May 2016, TransMart hired an architectural firm, TEF, which reviewed the design work done to date and marked the drawings with suggested improvements. These design documents were rough schematic designs, and indeed, were marked “DRAFT SCHEMATIC DESIGNS.” On June 10, 2016, TransMart provided its option exercise submittal package for Phase 1 to BART. BART had not approved TransMart’s designs as of that date. BART formally rejected TransMart’s attempt to exercise its option for Phase 1, citing several provisions it claimed TransMart did not satisfy—section 1.8 and 7.1(e) of the LOA (requiring 100% design documentation);2 section 7.1(a) (requiring approval of Tier 1 and Tier 2 studies) and 7.1(d) (requiring sufficient proof of funds). TransMart had submitted the Phase 2/Tier 1 studies to BART in December 2015. It began the Tier 2 studies and design

2 In early 2014, TransMart had proposed a pilot program which would install temporary retail kiosks at some stations. The LOA did not contemplate a pilot program, and the parties set up the program through a separate permit to enter, which did not require approval from BART’s board. TransMart installed two pilot program kiosks in November 2015. In his closing argument, counsel for TransMart argued that because BART had approved the design of the kiosks in the pilot program, those standards applied to the LOA, and BART’s rejection of the design documents was unreasonable.

5 drawings for Phase 2 and continued to use TEF. Viral Vithalani was the architect with TEF who worked on Phase 2 beginning in June 2016.

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Bluebook (online)
Transmart v. San Francisco Bay Area Rapid Transit Dist. CA1/5, Counsel Stack Legal Research, https://law.counselstack.com/opinion/transmart-v-san-francisco-bay-area-rapid-transit-dist-ca15-calctapp-2022.