Millennium Tower

San Francisco Judge Orders Transbay Transit Center to Pay for Millennium Tower's Legal Defense

In a strange twist, a judge has found that the Transbay Joint Powers Authority – the public agency responsible for the $2.2 billion Transbay Transit Center next to sinking Millennium Tower – has the “duty to defend” against hundreds of millions of dollars in construction defect claims over the troubled building.

The ruling by Superior Court Judge Curtis Karnow opens up the possibility that the public transit agency could have to pay some or all of the costs to fix the building itself – which could approach $500 million.

The ruling comes amidst the two year legal battle over who is responsible for fixing the building, which is now tilting 18 inches to the northwest. Millennium’s developers and officials from Transbay both blame each other for the plight of the building.

Millennium’s lawyers have long claimed that Transbay’s work destabilized the tower’s foundation when groundwater was drained out during excavation for the underground level of the transit project.

Karnow’s ruling focuses on the narrow issues surrounding an obscure easement agreement inked a decade ago between Transbay and Mission Street Development, the developer of the project.

The Transbay center had yet to be built alongside the 58-story high-rise at the time. The tower had just been completed and was already sinking.

Transbay got access rights to the Millennium site both to monitor its stability and for construction and assumed liability for its work in exchange.

The broadly worded agreement language requires Transbay to “indemnify, protect, defend and hold harmless” Millennium’s developers from “all claims, expenses…and liabilities of whatever kind or nature” related to Transbay construction.

But Transbay argued to Karnow that deal was fraudulent because Millennium hid the full extent of the sinking and negligently designed a building that was not secured to bedrock.

But the judge rejected that argument, noting that Transbay went along with a virtually identical easement agreement with Millennium’s developers in 2011, three years later, after the full extent of the sinking and tilting had become clear. That fact voided any challenged for fraud, he said.

Because that easement agreement is still binding, the judge ruled that “Transbay has a duty to defend” Millennium against the construction defect claims lodged by the homeowners association.

But, he said, Millennium will have to defend separate claims it defrauded homeowners by allegedly failing to tell them about the tilting and sinking problem until 2016.

He said there may be other claims that Transbay would have to defend, however, and left it to the legal parties to work out details, something he said they agreed was “best left to the future.”

In a statement issued Friday Millennium said:

We are pleased with the Court’s order holding the TJPA responsible for its legal obligations to the Millennium Tower, and to defend its developer, Mission Street Development, from claims arising from TJPA’s actions. There is increasing evidence that nearby construction activities were responsible for the Millennium Tower’s past movement.

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