Legal dispute imperils hundreds of shipyard jobs

City and Port of San Francisco officials Thursday said they are trying to keep open a shipyard at Pier 70 that employs more than 200 people, despite a legal dispute between the former and current operators.

The shipyard, the oldest continuously operating private facility of its kind in the United States, was operated until late last year by BAE Systems on land leased from the port.

It employs 240 people and includes two dry docks, one with a 54,600 ton capacity that can handle cruise ships and larger vessels, and one with a 14,500 ton lift for smaller vessels, as well as 14 acres of land, 17 acres of land, pier space and cranes.

The facility faces possible closure now, however, due to litigation between BAE and Puglia Engineering, Inc., the Washington state-based company that took over operations in January.

BAE arranged to sell the property to Puglia last year because it was struggling to make a profit at the facility, where it was not eligible for some contracts reserved for smaller companies and held $38 million in pension liability.

Puglia, a smaller company, agreed to take over the operations and the pension liability, but filed suit on Feb. 15 in San Francisco Superior Court alleging BAE had badly misled it about the condition of the shipyard.

The company is seeking to rescind its purchase of the site, leaving the future of the shipyard in doubt. The suit states:

“When Puglia took over the operation, it was shocked to discover that BAE had failed to maintain and repair the dry docks and dredge the site, all in direct violation of the lease and contrary to BAE’s representation.”

The suit alleges that the facility needs $24 million in repairs and maintenance. Among other issues, the site needs dredging, at an estimated cost of $12 million, before it can be even be used.

BAE spokesman Brian Roehrkasse said the company denies misleading Puglia and will defend itself in court. BAE has filed its own lawsuit against Puglia in U.S. District Court in New York, alleging that Puglia conducted its own due diligence prior to the purchase and signed documents stating it was aware of the condition of the facility.

Roehrkasse said:

“BAE Systems acted fairly and in good faith throughout the sale process, and after completing its own due diligence, Puglia purchased the business on an as-is basis with a complete understanding of the yard’s condition. … On behalf of the dedicated men and women who work in the San Francisco shipyard, we are extremely disappointed that Puglia has contrived these unfounded claims to walk away from its commitments.”

Mayor Ed Lee Thursday said the city is working to try to prevent the facility’s closure:

“It has the ability to result in some disastrous impacts like losing some jobs. … So we are working with the port and our city attorney to try to prevent that.”

Renee Dunn Martin, a spokeswoman for the port, said they are in discussions with Puglia about keeping the shipyard open while the dispute is resolved:

“It is the Port’s primary goal to keep the shipyard operational through this litigation period.”