San Antonio Express-News (Sunday)
Feud over Port S.A. rail deal goes to trial
Rail Link International Inc. is credited with infusing life into the largely dormant East Kelly Railport at Port San Antonio as the first major rail cargo provider nearly two decades ago.
Taking the railport to the “next level,” though, required a company with deep pockets, according to a lawyer for Rail Link. So, in 2014, it sold its assets — including its lease at the port — to Fort Worth logistics company Continental Intermodal Logistics-South Texas LLC for $18 million.
That transaction now is at the center of a trial — nearly a decade in the making — that got underway with opening statements Wednesday in state District Court in San Antonio.
Harris County businessman Nolan Richardson, owner of more than a dozen logisticsrelated businesses under the Richardson Cos. umbrella, filed a lawsuit in 2013 alleging he had a “binding partnership agreement” with Rail Link that entitled him to half of the proceeds from the $18 million sale to Continental Intermodal. He also sued for punitive damages and attorneys’ fees.
Rail Link principal Eloy Garcia “breached his responsibilities by taking a partnership opportunity and keeping it entirely for himself to the detriment of his own partner,” Chris Payne, a lawyer for Richardson, said during opening statements in the trial.
But the two sides didn’t have a partnership, Steve Chiscano, attorney for Rail Link, later told jurors.
“Nolan Richardson filed the lawsuit with the hopes that you the jury will finalize a contract that was never finalized,” Chiscano said.
Richardson died at 78 in July 2021, so his heirs are pursing his claims. Various appeals and the coronavirus pandemic contributed to delaying the trial.
In his sixth amended complaint
filed in 2017, Richardson alleged that before 2010 the parties entered into discussions about installing a rail line at the 350-acre port. The plan was to conduct “joint business operations” to unload railcars transporting frac sand and other cargo. The sand is used in fracking to extract oil and gas from shale rock.
Richardson provided conveyors and other equipment to the venture, he said.
‘Joint venture’
A joint venture entity to lease land for a “trans-load facility” at East Kelly Railport had not been created, so Garcia told the port in 2011 to put Rail Link as the tenant without Richardson’s consent, the latter alleged in his suit. Garcia assured Rail Link was acting only as a “spot holder” until the partnership was memorialized, Richardson said.
Richardson signed a guarantee on the lease agreement, he said. So he would have been personally liable for more than $1 million if Rail Link hadn’t performed its lease obligations.
The port and Garcia asked Richardson to contact Watco Companies LLC, a Kansasbased short-line operator he had a relationship with, to handle the railcars within the port.
Richardson’s introduction of Watco represented a “significant contribution to the joint venture
partnership” because it provided the funding to expand the partnerships’ operations and the port’s business, he said.
At the end of 2011, Watco gave East Kelly a big boost by agreeing to double the railport’s track to 8 from 4 miles. That led to a new spur for handling so-called unit trains, which are about 100 cars carrying the same type of cargo. The additions expanded the railport’s capacity from
5,000 to 20,000 railcars, according to reports.
Watco also launched San Antonio Central Railroad to provide better connections between Union Pacific and BNSF Railway lines and the warehouse, distribution and manufacturing sites in the railport for the transfer of freight between rail and trucks.
In 2012, Garcia informed Richardson he had a deal to sell Rail Link’s assets — which included the lease at the port. It was then, Richardson said in his lawsuit, that he learned “he would receive nothing from the sale because the lease was solely in Rail Link’s name and the new entity was never formed.”
That deal never happened, but Rail Link eventually agreed to sell its assets to Continental Intermodal. Nearly a year before the deal closed, however, Richardson and his Maconori Enterprises Ltd. filed suit.
Richardson provided equipment for the port operations and guaranteed the lease based on Garcia’s representations, Payne told jurors.
“Think about this for a second,” he said. “How many would obligate themselves for millions of dollars for zero return? That simply doesn’t make sense.”
‘Real partnership?’
Richardson has no evidence that the material terms of any agreement were ever finalized, Chiscano said in his opening statement.
“He wants you to believe that RLI, with a 20-year history, could only have realized the tremendous success because of Nolan Richardson,” Chiscano said.
Chiscano credited Garcia’s “entrepreneurial vision” for putting together a business strategy designed to make Richardson more than $1 million for signing a lease guarantee “while not having to invest a single penny or having to show up for a single day of work.”
Garcia paid Richardson about $1.5 million for leasing the equipment, Chiscano said.
“Does that sound like a real partnership to you?” he added.
Richardson later demanded transfer of the lease to a new entity in which he would hold 51 percent control, Chiscano said.
Garcia also didn’t have any authority “to give away” half of Rail Link to Richardson, Chiscano told jurors.
Rail Link was started in 1985 by Garcia’s mother and stepfather, Sophia and Carlos Ibarra. Garcia joined the company in 1994 and didn’t become president until 2011 — six years after his “handshake” deal with Richardson, Chiscano said. Garcia only owned 10 percent of Rail Link at the time; his mother and her husband owned the rest.
Sophia Ibarra died of pancreatic cancer at 71 in January 2014, about seven months after Richardson sued Rail Link. She was described in an obituary as a “pioneer for women in the rail and transportation industry.” Rail Link now goes by the name Balcones Muster Inc.
The legal battle has been a “nightmare” for the family Chiscano said.
‘Arm’s length’ deal
Continental Intermodal also has been sued in the case for interfering in the deal between Richardson and Rail Link. Richardson alleged Continental became an “active participant in the scheme” to “defraud” him.
“They allowed Mr. Garcia to get away from paying the just compensation — a fair compensation — that was due Mr. Richardson,” said attorney Gavin McInnis, who also represents Richardson. “This is the company that allowed that to happen.”
Continental Intermodal doesn’t belong in the case, said its attorney Ricardo Cedillo. It had a right to pursue a deal with Rail Link.
“We didn’t interfere with anything,” he said. “It was an arm’s length transaction. We didn’t conspire with anyone. … There’s going to be no evidence … that we were doing something to try to defraud anybody.”
At the time Continental agreed to buy the assets, Rail Link and Garcia agreed to indemnify and hold it harmless from liability relating to Richardson’s lawsuit.
Separately, Continental had sued Rail Link and Garcia for fraud less than three months after the deal closed in Dallas for providing “deceptive and misleading financial statements.” It sought damages amounting to the difference between the $18 million it paid for Rail Link and its “true value.”
Rail Link and Garcia countersued for defamation and breach of contract.
In 2016, a jury rejected Continental’s claims and awarded
Rail Link and Garcia $451,571 in actual damages, interest and $450,000 in attorney fees.