The Port Authority of New York and New Jersey filed a lawsuit on Friday to stop a United Arab Emirates company from taking over management of its container terminal at Port Newark in New Jersey.
The authority, jointly owned by the states of New York and New Jersey, argued that the deal under which state-owned Dubai Ports World would take over management from the British company P&O violates the terms of P&O's lease.
The Port Authority said it has a right to review changes in port management under the existing lease agreement. The lawsuit, filed in the Superior Court in Newark, urged the court to declare that the purchase of P&O requires consent of the Port Authority under the lease, that the container terminal is in breach of its lease, and that the lease is terminated.
New Jersey Gov. Jon Corzine urged the other governors of states with ports affected by the DPW deal -- Louisiana, New York, Florida, Connecticut, Maryland and Pennsylvania -- to join the lawsuit.
Democrat Corzine issued the invitation in letters to each governor, saying the lawsuit "will seek to enjoin this sale of vital assets to a foreign nation without our states having had the opportunity to determine the extent of the threat to the safety of our citizens."
And now, my Insta-Legal-Analysis (you are duly warned that I have given this a grand total of about two minutes of thought so far, I have not read the complaint, and I don't practice law in all 50 states):
These lawsuits may be the least effective way to stop the port takeover.
The law generally limits "restraints on alienation." That means that the law generally makes it fairly easy for tenants to assign their leases or enter into subleases. The law generally limits the authority of landlords to withhold consent to such assignments.
According to reports, the lawsuit says that "The Port Authority has been deprived of its right to conduct a thorough review of the purchase ... of the identity, qualifications, experience and reputation of the purchasers ... and of the proposed impact that the change may have on the control and ownership."
I'm not sure that's enough of a reason to stop the transfer, purely from a standpoint of the law of commercial leases. How much more "thorough" a review does the lease allow the landlord to conduct? I'm sure that any legitimate "review" requests have already been complied with by the Dubai firm to the best of its ability, since it is motivated to conclude this transaction.
The real objection, of course, is that the proposed new occupant is a Middle Eastern company, and we are smack dab in the middle of a war on terror in which the ports are an obvious target. But I sincerely doubt that the lease prohibits assignment to a Middle Eastern company (and I'm not sure that such a restriction would be enforceable if it did exist).
That being said, there may be more to this lawsuit that initially meets the eye from second-hand news reports. More importantly, the lawsuit, combined with other developments like the delay in the transfer announced late yesterday, may together have a "snowball" effect and create momentum against the takeover by the Dubai firm. We shall see.
Previous Posts:
- UAE Firm Offers to Delay Port Takeover
- A "Phobia" Is Nothing to Be Afraid Of
- Port Security: The Issue That Won't Go Away
- Dick Meyer of CBS News Races to Defense of Arab Ports Deal
- Kiss of Death for Ports Deal: Jimmy Carter Supports It
- About the Ports . . .
_____________________
Update: All Things Beautiful has some interesting thoughts about the bigger picture on the ports, and rounds up other posts on the subject.
Comments