Suit over Port of L.A. cargo terminal can proceed

Retreating from his own dismissal order, a federal judge has granted a harbor-area activist the chance to reopen a lawsuit alleging that the Port of Los Angeles misappropriated $1.2 billion in government funds to build a giant cargo terminal.

U.S. District Judge S. James Otero ruled this month that Stanley D. Mosler of Rancho Palos Verdes can resume his false-claims case if he withdraws an appeal and hires an attorney for the rest of the litigation.

Otero threw out the lawsuit in August, noting that Mosler had represented himself for months and saying he was unqualified as a layman to handle a case in which the U.S. government had an interest in potential monetary damages.

A few weeks after the dismissal, Mosler hired an attorney, but Otero said it was too late and refused to reinstate the case. Mosler appealed the ruling.

“I’m delighted the court has indicated it will reopen the case and permit me to obtain an attorney,” said Mosler, who was notified of the ruling Thursday.

The Los Angeles city attorney’s office, which represents the port, contends that Otero does not have jurisdiction in the case because it is still at the U.S. 9th Circuit Court of Appeals.

“We believe the case should be resolved at the 9th Circuit,” said Jonathan Diamond, a spokesman for the city attorney. “We are challenging the appeal, and we remain confident that we will prevail on the merits as well. The judge got it right the first time.”

Filed in March 2002, Mosler’s lawsuit alleged that port officials engaged in a “bait and switch” maneuver when they abruptly changed long-standing plans to relocate petroleum terminals and the handling of other hazardous shipments to a man-made “energy island” that would be built away from populated areas of the harbor.

Mosler said in his suit that port officials decided to turn the island into a massive container facility for Maersk Inc., the world’s largest shipping line, leaving only 15 acres -- instead of hundreds of acres -- for petroleum and chemical terminals.

At issue is whether the port violated federal agreements to build the energy island project and misappropriated $108.6 million in federal grants and nearly $1.1 billion in harbor revenue to construct what is called Pier 400, which was finished in 2004.

The plan changed, port officials said, because there was no market for oil and petroleum terminals at the time. Tenants resisted the idea as too costly while crude oil and other hazardous shipments were declining.

Port officials said 15 of the island’s more than 500 acres are still available for hazardous shipments. They also said the Army Corps of Engineers, which participated in the project, was told of the changes and signed modifications to the original plans.

A former corps commander in Los Angeles at the time has said, however, that he was unaware of the changes to the energy island project. A corps official also said the agency has not been able to find records showing that the port notified the corps of the shift in uses or that the corps approved the changes.

In giving Mosler a second chance, Otero said in his written decision that he had not provided Mosler enough notice that his case would be dismissed if he did not hire an attorney.

Court transcripts show that the judge repeatedly told Mosler about the benefits of having counsel but Otero noted that Mosler still had the right to represent himself. More significant, the judge said that “there is a good chance” Mosler would win his appeal to reinstate the suit.

dan.weikel@latimes.com