A judge who was scheduled to decide whether LA Metro should be granted a preliminary injunction directing train manufacturer Talgo Inc. to allow the return of 10 Metro subway cars the transportation agency alleges are being wrongfully held in Talgo’s Milwaukee repair yard did not make a ruling because the parties reached an agreement.
Los Angeles Superior Court Judge Maurice A. Leiter had issued a tentative ruling denying Metro’s injunction request, but the issue became moot when the attorneys informed him during a hearing Friday that an accord was reached. The minute order prepared by the judge’s clerk does not state the details of the resolution. Leiter set a status conference for Dec. 8.
The litigation began Sept. 15 when Metro sued Talgo, calling the company a “defaulted train overhaul contractor” that breached its contract with Metro and was terminated for default. The suit alleges Talgo is holding the cars in order to create leverage against Metro for its demand that the transportation agency pay Talgo about $60 million.
According to Metro’s suit, the agency and Talgo in October 2016 entered into the “Heavy Rail Vehicle Overhaul and Critical Component Replacement Program” contract.
Metro operates the Metro B Line and D Line with its subway fleet consisting of 104 Z650 heavy rail vehicles, and Talgo’s primary responsibility was to overhaul and replace critical components on 74 cars, transporting the vehicles to its Milwaukee repair facility and subsequently returning them, all at an initial cost of $54.7 million, the Metro suit states.
Amendments later brought the total price to $90.5 million, the suit states. To date, Metro has paid Talgo about $41 million, according to the Metro suit.
However, Talgo failed to perform the work as required, which came to a head in 2020 when Metro representatives told their Talgo counterparts that the company’s work schedule reflected “an untimely completion of the project,” the suit states. The suit alleges that the company caused repeated and unexcused delays to the project, thus significantly breaching the contract in multiple ways.
Metro cited Talgo’s alleged testing failures, propulsion software issues, delays and staffing problems, the suit states. Metro gave Talgo multiple chances to comply with the contract before terminating it last May 6, the suit states.
Metro’s search for a replacement contractor to complete Talgo’s work is “significantly frustrated pending the return of Metro’s property,” the suit states.
But on Oct. 21, Talgo filed its own breach-of-contract countersuit, seeking $48.8 million, alleging that Metro, “knowing that it owed Talgo significant money for work Talgo did at great expense to Talgo,” nonetheless sued the company “in hopes that the false, unsupported allegations therein could shield it from paying Talgo what it is rightfully owed.”
According to the countersuit, the beginning of the coronavirus pandemic in March 2020 caused “widescale interference with rail transportation needs as well as massive disruption for the public, manufacturers, suppliers and vendors” worldwide.
“During these difficult times, Talgo, at all times, cooperated as a willing partner to work with Metro to adjust the project schedule and delivery requirements in light of the crippling effects of supply-chain and staff interruptions caused by shutdowns,” the countersuit states.
In May 2020, Metro faced a significant ridership and revenue loss because of the pandemic and sent Talgo a letter suggesting that work be suspended or that the contract be terminated “for convenience” at a reduced price, but did not express any dissatisfaction with Talgo’s work, according to the countersuit.
Together with its alleged slackening of the contract, Metro “initiated a campaign to manufacture the illusion that Talgo was failing to perform” and was in danger of breaching the contract, the countersuit alleges.