Judge Dismisses ReMet Lawsuit: No Breach of Contract Without a Contract

A judge has dismissed developer Republic Metropolitan’s (ReMet) 2022 lawsuit against Santa Clara. ReMet accused the City of breach of contract over an expired development agreement. The judge’s ruling came down to common sense: Without a contract, there can be no breach of contract, nor can anyone be held to obligations not specified in a contract, expired or otherwise. [remet judge ruling 2023]

ReMet filed the lawsuit after the City refused to consider extending a 2018 exclusive negotiating agreement (ENA) for a rent-by-the-bed housing project on City- and VTA-owned land next to Santa Clara University. The ENA expired in August 2020 and the City notified ReMet three months later that the project was dead.

ReMet charged that Santa Clara’s refusal to extend the ENA was a breach of contract, in addition to accusing the City of housing law violations, “malevolent objectives” and “negligent misrepresentation.”

After dismissing ReMet’s complaint in June, Judge Christopher Rudy allowed the developer to return to court with new arguments for two of its six complaints. New arguments fared no better. The judge described them as restatements that “provided no additional grounds of complaint.”

“Five of the [City’s] six alleged breaches of the agreement occurred after the ENA expired and a defendant cannot breach a contract where there is no contract in existence to breach,” Rudy wrote. “[Santa Clara had] no contractual obligation to enter into a third extension, and their ‘failure’ to do so does not qualify as an actionable breach.”

The judge also rejected developer Republic Metropolitan’s allegation that there was an implied agreement with the City to extend the ENA. ReMet argued that the City’s extensions to the first two ENAs, after those agreements had technically expired, constituted an implied commitment to enter into a third extension.

“Any extensions of the ENA were within the City’s discretion,” Rudy wrote.

“Plaintiff‘s claim for an implied extension is directly contrary to the express terms of the ENA as amended,” he continued. “It is a long-settled component of contract law that implied terms can never be read to vary the express terms of an agreement…the ENA provides that in the absence of a formally accepted extension, the ENA ‘shall terminate.’”

ReMet also argued that the City Council’s approval of a third ENA extension at an August council meeting constituted a “formal” agreement that had the weight of a contract. But, Judge Rudy wrote, “the allegations and exhibits it relies on in support of this assertion in fact undercut it. The exhibit cited as “approval” of the extension…is simply an agenda report in which City staff presented alternatives and recommendations for the City Council.”

Rudy concluded his dismissal of the case by saying, “Despite what Plaintiff argues will lead to an unfair result if further leave is not granted, the Court is not persuaded that Plaintiff has any further facts to add that would cure the deficiencies Court has identified.”

Surplus Land Act, All-Star Lobbyists

In 2018, the City and VTA entered into an ENA for developer Republic Metropolitan’s housing project, which was extended twice. ReMet returned to the City Council in the summer of 2020 asking for a third extension of the ENA. In August, the council approved an extension pending VTA approval — albeit after the contract had already expired.

While this was happening in public, behind the scenes at City Hall, then-city attorney Brian Doyle was making the case to council members that the project would expose the City to liability under the Surplus Land Act (SLA). Doyle advised them of this in a 2019 memo, but as of August 2020, it did not appear that any of the then-council members were aware of it.

In November, as the VTA continued its deliberations, the City wrote to the transit agency that it considered the project dead.

In early 2021, ReMet put on a full court press to persuade the City Council to re-open negotiations and enter into a third extension of the ENA. One likely reason for pushing to extend the existing agreement — which predated the SLA — was that a new agreement would definitely be subject to the SLA; requiring the City to get bids from affordable housing builders before accepting other proposals.

This campaign included an all-star lobbyist cast including Norm Mineta and Rod Diridon Sr., 2020 city council candidate Robert Mezzetti, 49ers lobbyist Ed McGovern, former SCU VP Chris Shay and former City Council Member Kevin Moore.

State Senator Bob Wieckowski proposed a stillborn bill explicitly designed to exclude the Santa Clara project from the Surplus Land Act. When these efforts failed to persuade the council, ReMet went to court.