Metro sues train repairer, alleges $90 million contract breach

The Los Angeles Metropolitan Transit Authority on Thursday sued train manufacturer Talgo Inc., alleging the company is wrongfully holding 10 Metro subway cars in its Milwaukee repair yard after the transportation agency canceled its overhauling contract with the company in May for alleged breach of their contract, including delays in completing the project.

“This case is about a defaulted train overhaul contractor, Talgo, that breached its contract with Metro and was terminated for default,” the Los Angeles Superior Court suit states.

Talgo 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,” according to the suit.

A Talgo representative could not be immediately reached.

In October 2016, LA County’s rail service provider and Talgo entered into the “Heavy Rail Vehicle Overhaul and Critical Component Replacement Program” contract, the suit states.

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 and transport the vehicles to its Milwaukee repair facility and subsequently return them, all at an initial cost of $54.7 million, the suit states.

Contract 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 by the contract, 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. Instead, the company caused repeated and unexcused delays to the project, thus significantly breaching the contract in multiple ways, the suit alleges.

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 the train repairer has told Metro representatives that the company will not release the agency’s 10 cars unless Metro pays more than $60 million, the suit states.

Metro alleges Talgo has “refused to release Metro’s property, has refused to provide Metro with adequate access to inspect its property and has refused to cooperate with Metro during the termination transition period.”

“Talgo is wrongfully holding Metro’s property in an effort to create leverage against Metro,” the suit states.

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.

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