Court: $14M award invalid

HOTEL WHARF: An abandoned structure at Hotel Wharf is shown in February. Hotel Wharf was supposed to be the site of an international fishing transshipment facility. The project never got off the ground and led to a years-long legal battle that resulted in a Supreme Court ruling yesterday in the Port's favor. David Castro/The Guam Daily Post

A Supreme Court of Guam ruling has lifted a $14 million financial cloud that for nearly a decade has hovered over the Port Authority of Guam and consumers who pay for more goods when port fees rise.

Supreme Court Justice F. Philip Carbullido, joined by Chief Justice Katherine Maraman and Justice Pro Tempore Maria Fitzpatrick, in a ruling Thursday concluded the Port Authority doesn't have to pay a $14 million arbitration award over a lease dispute involving government-owned Hotel Wharf.

Prior to the Supreme Court ruling, the Port Authority had been engaged in a legal fight for several years to stop the $14 million arbitration award from advancing toward the payment phase. The arbitration award, which was decided by a panel of private attorneys, was issued in favor of failed fisheries business Guam YTK.

Guam YTK had ceased renewing its business license. It was revived when purchased by attorney and businessman Eduardo "Champ" Calvo's business. The new Guam YTK owner had attempted to get the arbitration award paid by getting court approval to garnish the Port Authority's bank accounts and other assets.

Had that succeeded, the Port Authority has previously stated, it would have crippled its ability to pay for services and manpower to keep the seaport running.

In its ruling, the Supreme Court tossed out the arbitration award because it was based on a 45-year lease agreement on Hotel Wharf that was not valid. The Port had the authority to enter into a five-year lease, but beyond that, any government property lease requires legislative approval, which the Port Authority didn't have, court documents state.

"Absent legislative approval of the lease, any attempt by the Port Authority to transfer possession ... of land under these circumstances would be substantively illegal," the justices ruled.

"The arbitration panel therefore exceeded its authority by attempting to enforce a substantively illegal contract, and the amended arbitration award should have been vacated," under Guam law, the Supreme Court stated.

It was 'shady'

Attorney Mike Phillips, who represented the Port Authority and made arguments before the Superior and Supreme Courts, felt vindicated. The new Port Authority management recently decided not to retain him.

"The Port does not owe these guys one penny," Phillips said, reflecting a stance from then-Port General Manager Joanne Brown, previous Port Authority board members and some of the current members of the Port Authority board.

Phillips said it was clear from the beginning that the lease agreement was invalid because it didn't have the required approval by the Legislature. Somehow, an arbitration panel was convinced Guam YTK deserved $14 million, and with the penalties attached to the arbitration award, the Port Authority could have been on the hook for closer to $20 million, he said.

"Something really shady was going on," Phillips said. When asked what he meant, he said he wasn't referring to a particular person or group of people — he was referring to how wrong it was for the Port Authority to be told to pay a massive amount based on an invalid lease. Guam YTK had presented experts on the potential market value of the remainder of the 45-year lease deal, which was part of the basis for the award.

Guam YTK leased Hotel Wharf with the intent of developing Hotel Wharf as a fisheries transshipment port, but the project never got off the ground. When the project failed and rent payments were missed, the Port Authority evicted Guam YTK.

Under its new owner, Guam YTK asked the Port Authority several years ago under Gov. Eddie Calvo's administration to settle the company's claim for under $1 million. Under the leadership of former Port Authority board Chairman Daniel Tydingco, the Port refused to pay any settlement amount.

'Sheer gluttony'

Tydingco said, from the moment he saw Guam YTK's claim, he knew it had no validity.

"We protected island residents with our challenge from the beginning and throughout — against that outlandish claim — despite harsh criticism, attacks and pushback on some occasions," he said.

"The claim and arbitration award was sheer naked gluttony, which island residents would have paid for. The board and management and attorney Mike Phillips fought back vigorously against picking up this $14 million tab."

When the new Port Authority management took over earlier this year, Phillips said new General Manager Rory Respicio suggested the Port Authority may want to consider a settlement agreement.

"(Respicio's) initial position was let's pay them something and get this out of the way," Phillips said.

Phillips said not all lawmakers supported the Port Authority's legal challenge against the arbitration award, but two did go out of their way to stand with the Port Authority and submitted supporting court documents. They are former Sen. Frank Aguon Jr. and Sen. Therese Terlaje, he said.

'A great day'

Respicio said, after the ruling, "We are very pleased with the ruling by the Supreme Court of Guam as it removes the cloud of uncertainty placed over the Port for the past two decades."

"While we could not have predicted this outcome it is most certainly a great day for the Port and the people of Guam and we continue to focus on our plans to modernize and transform our facility into a safe, efficient and sustainable seaport for Guam and the Western Pacific Region," Respicio said.

The Guam Daily Post asked Respicio: Do you regret having taken a stance to try to settle?

Respicio said, "No, absolutely not. No one could have predicted the outcome with all certainty."

The arbitration panel comprised attorneys Cesar Cabot, Cynthia Ecube and Mitchell Thompson.