By BILL HETHERMAN
LOS ANGELES – A month after LA Metro sued train manufacturer Talgo Inc., alleging the company is wrongfully holding 10 Metro subway cars in its Milwaukee repair yard after Metro canceled its contract with the business for alleged breach of contract, the agency has been countersued for nearly $50 million.
In its suit brought Sept. 15, Metro called Talgo a “defaulted train overhaul contractor” that breached its contract with Metro and was terminated for default, but is “now holding Metro’s trains and other public property hostage in its repair facility in Milwaukee in an effort to create leverage against Metro for purposes of Talgo’s improper and unsubstantiated demand that Metro pay Talgo approximately $60 million, which Talgo is not entitled to be paid.”
But Talgo tells a different story in its own breach-of-contract countersuit filed Friday, seeking $48.8 million.
“Knowing that it owed Talgo significant money for work Talgo did at great expense to Talgo, Metro filed the present complaint in hopes that the false, unsupported allegations therein could shield it from paying Talgo what it is rightfully owed,” the countersuit states.
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.
Metro then dropped the termination “for convenience” option and instead engineered a deceleration of Talgo’s performance and related payments by, among other things, slowing down dynamic testing and the approval of vendor changes requested by Talgo and delaying some payments, 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.
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 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 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 on May 6, the suit states.
However Talgo has told Metro representatives that the company will not release the agency’s 10 cars unless Metro pays more than $60 million, according to the suit.
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.
The suit seeks unspecified compensatory and punitive damages, plus a court order directing Talgo to return the 10 cars. The complaint also asks a judge to find that Metro was justified in ending the Talgo contract.