Federal lawsuit filed against Port of Cascade Locks

The Port of Cascade Locks is facing a federal civil rights claim for alleged racial discrimination against Puff Factory owner Jacqueline Alexander. That claim is currently under litigation in the U.S. District Court for the District of Oregon: No ruling has yet been made, as incorrectly reported in the Columbia Gorge News on Nov. 10.

The civil rights claim was filed Jan. 10, 2020, during and in response to a lawsuit brought against Alexander by the Port of Cascade Locks around Feb. 26, 2016.

Port vs. Puff Factory

The port’s lawsuit sought damages of $89,250 from the Puff Factory for alleged breach of contact and was argued before Judge Karen Ostrye in Hood River County Circuit Court for more than four days, Sept. 21-24, 2021. Ostrye ruled against the port, finding the port had shown “no right to relief,” and dismissed the case with prejudice on Oct. 4, 2021. A case dismissed with prejudice  can’t be brought back to court, but can be appealed.

Central to the port’s case is a 10-year lease agreement between the Port of Cascade Locks and the Puff Factory signed on May 18, 2015, for a port-owned building referred to as the “Flex” building.

At the time the lease was signed, the building was a flexible “shell” designed to be modified by the tenant, port attorney Casey M. Nokes testified in the trial. “It’s a shell, and can be modified with tenant improvements, (you can) move the walls to grow the space of the business. They could use the building to grow and then expand into the business park,” he explained.

The building is located adjacent to the business park.

According to a Port of Cascade Locks economic development report in May 2015, the port entered the lease agreement with Alexander to produce “Puff” freeze-dried fruit snacks in the light industrial hangar or “Flex” building on Herman Creek Lane in Cascade Locks. Alexander collaborated with the Oregon State University Extension Service and invested in research and development of fruit and vegetable preservation methodologies.

The terms of the lease were that Alexander would not be charged rent for the initial 21 months of the agreement, but was expected to make improvements on the facility such as installing bathrooms, an office, and sufficient sewer, water, and electrical utility connections needed to operate their business. In addition, Alexander was responsible for general liability and fire insurance, according to the lease agreement.

In Jan. 11, 2016, the lease was terminated and in February of that year the port  filed suit against the Puff Factory, alleging that by not taking occupancy or completing tenant improvement on the “rent commencement date” of Sept. 1, 2015, the Puff Factory violated the lease. Additional alleged violations included a failure to pay utility invoices or provide proof of general insurance or fire insurance.

Also under discussion during the trial was an option taken by the Puff Factory on a nearby parcel in the Port of Cascade Locks Business Park, which included a $9,000 fee that was not paid.

In the trial, Puff Factory’s attorney Julie Vacura countered that the Puff Factory was never told they had to occupy the building or begin tenant improvements by a particular date or they would be in breach of the lease. “The lease did not require anything by a certain date,” she testified.

Vacura explained that tenant improvements had to match up with equipment not yet purchased at the time, because drains, electricity and water needs and location had to be configured for the specific units purchased. “It could not be done until that equipment was chosen and could be laid out in the facility,” she explained. Some units, for example, have to be positioned directly over drains.

In addition, Vacura argued the Puff Factory received no notification regarding any breach of contract and was not given 30 days to rectify the breach, as required by the lease, with the exception of the proof of insurance. The letter sent to the Puff Factory, cited by the port as a notice of breach, stated the additional violations would, in the future, be considered a breach, Vacura said.

“The port reached a deal with the Puff Factory regarding the flex space, and then looked to get out before it even got started,” Vacura told the court. “The Puff Factory never terminated the lease. The port unilaterally and wrongfully terminated the lease and then it sued the Puff Factory for damages when it suffered absolutely no damages.”

In addition, the Puff Factory lawyers argued that the port had itself violated the lease agreement by showing the Flex building to a potential client while it was under lease by the Puff Factory, without giving the Puff Factory 48 hours notice as required under the lease.

At the conclusion of the trial, Judge Ostrye ruled against the port on all counts, finding no notice of breach except regarding insurance, and that breach not material. A breach is material if “it goes to the very substance of the contract and defeats the object of the parties in entering into the contract,” according to court documents.

The court also found that failure to give notice of alleged breaches, and time to cure those breaches, in combination with the termination of the lease after that failure, was a material breach of the lease agreement by the Port of Cascade Locks.

“I don’t find that the Puff Factory abandoned or vacated the property. I think the Puff Factory was in the process of doing the work required to begin the tenant improvements so they could take occupancy,” Judge Ostrye said in response to a question from the Port of Cascade Locks attorney.

In a statement regarding the Oct. 4 Hood River County Circuit Court decision, the Port of Cascade Locks said, “We are disappointed with the ruling and will continue to assess our options with our attorneys. We are committed to operating the port in a successful manner.”

Judge Ostrye then confirmed that if the Puff Factory is not found to be in material breach, the port is not entitled to damages.

The notice of decision, dated Oct. 4, 2021, stated the Port “has shown no right to relief, and this case is dismissed with prejudice.”

 Puff Factory vs. Port

On Jan. 10, 2020, the Puff Factory and Jacqueline Alexander filed suit against the Port of Cascade Locks, five port commissioners as individuals and two additional individuals in U.S. District Court, District of Oregon, for civil rights violations and race discrimination for allegedly “engaging in racially discriminatory contracting practices, namely, discriminating against Alexander and the Puff Factory because it is a Black-owned business and treating it less favorably than white-owned businesses.”

In the court filing, Alexander outlines actions by the Port of Cascade Locks during the same time period covered by the state lawsuit detailed above, many of those actions revealed during the course of litigation.

According to the filing, for example, “Through the course of the lawsuit, in depositions taken in October and November 2019, (the Puff Factory) also learned for the first time that several other businesses, owned and operated by white people, were in breach of their leases with the port ... but the port did not attempt to collect an early termination fee or any other damages from these businesses owned by white people.”

In addition to the Port of Cascade Locks, the suit names commissioners serving on the Port board at that time: Jess Groves, Brad Lorang, Joeinne Caldwell, Dave Lipps and John Stipan. Individuals named include Don Mann, economic development manager for the port; and Paul Koch, former general manager of the port.

On Nov. 6, 2020, a motion to dismiss the federal lawsuit was denied. On Aug. 9, 2021, the lawsuit was stayed pending resolution of the state litigation detailed above. A status conference in the lawsuit is scheduled for Jan. 14, 2022, regarding whether the stay should remain in place.