<p>Roger Nance, the vice president of Westerlund Log Handlers, along with company President Dave Westerlund and attorney Gordon Carey, hope a jury trial for breach of contract by China National Building Materials Co. will be held in a local court because of the many Clatsop County residents working for the company.</p>

What began as a savior relationship for the Port of Astorias premier waterfront tenant has turned adversarial.

Westerlund Log Handlers is poised in the coming months to start a court battle with parts of China National Building Materials (CNBM) Co., a state-owned enterprise in 365th place on the global Fortune 500 list.

Gordon Carey, the attorney for Westerlund Log Handlers, LLC, its Vice President Roger Nance and President Dave Westerlund, filed the original complaint Jan. 31 in Clatsop County Circuit Court, demanding a jury trial against three parties: CNBM Forest Products Canada, CNBM & Equipment Import and Export Corporation and Alan K. Brunstad, a former Westerlund employee who was fired in January.

The case is in discovery, with a deadline of June 2. It will take months before a trial.

The complaint and demand for jury trial seeks more than $30 million from CNBM for breaches of a prepayment agreement signed between Westerlund and CNBM Aug. 10, 2012 and running through the end of 2013. Meanwhile, counterclaims from CNBMs lawyers seek more than $17 million from Westerlund and the dissolution of the company.

In its sixth claim for relief from tortious interference, Westerlund claims that CNBM and Brunstad interfered with their existing business relationships by disparaging the company, spreading malicious misinformation and threatening litigation.

This whole thing is one big mess, said Brunstad, who worked for Westerlund about four years before being fired. Hes now a consultant for multiple companies, including CNBM, adding that he didnt work for CNBM while with Westerlund. I dont know why Im involved in it.

Carey said Brunstad was named a defendant because Westerlund claims he was working for the other side while he was their employee.

One of CNBMs attorneys, Thomas Sand, filed answers to the complaint Feb. 4, denying most of the claims by Westerlunds attorneys. In the affirmative defense, Sand claims that Westerlund caused its own damage, provided false and fraudulent information to CNBM and have otherwise hindered its performance in the agreement. The answer says Westerlunds claims are barred by fraud statutes, its own unclean hands and by waiver and estoppel. CNBM also makes several counter claims.

Prepayment agreement

CNBM began its relationship with Westerlund as something of a savior, offering prepayment of a $3.1 million loan taken out from JP Morgan Chase to pay off Westerlunds former partner, Norfolk, Va.-based International Veneer Company.

The original 2012 agreement was in general for CNBM to prepay Westerlund for $3.1 million worth of future log purchases, which Westerlund used to buy out IVC. In exchange, Westerlund would prepare and load logs onto ships for CNBM, being credited a minimum $60,000 per shipment toward repayment of the $3.1 million.

The agreement stipulated a minimum $300,000 payment each fiscal quarter, along with Westerlund paying the interest costs on the prepayment. It included an agreement granting CNBM security interest in equipment and logs as collateral and an option for CNBM to purchase a 50 percent interest in Westerlund for $1 within a year of the agreements expiration.

The agreement has been amended multiple times and later added an additional $450,000 to the prepayment, which CNBM in court documents said was because of Westerlunds generally not paying its debts.

Westerlund shipped 18 loads of logs, or $1.08 million in what the agreement called pre-payment credits, during late 2012 and all of 2013.

Together, Westerlund and CNBM created a major revenue stream for the Port of Astoria, earning it more than $1.6 million from the 18 ships, in addition to Westerlunds ground leases.

But Nance sent a letter Jan. 15 to terminate the agreement, saying there were irrevocable breaches. CNBM sent a notice of default Jan. 17 seeking $17,482,199 in breach of agreement losses, residual prepayment and overdue capital cost payments.

People are happy to borrow money, said Brian Esler, CNBMs attorney, about trying to collect. Theyre not so happy to pay it back.

Prays for relief

Both parties have leveled claims that the other breached the prepayment agreement and owes tens of millions in damages. Westerlunds original complaint makes claims and demands relief on several fronts, including:

For damages and lost profits, an amount to be proven in trial but no less than $30 million, along with a full accounting of profits during the 15-month agreement.

That Westerlund be credited $60,000 per shipload of logs in addition to $751,000 it claims CNBM demanded.

The rescission of security, pledge and option to purchase agreements in the prepayment agreement.

Possible amendment of the complaint for legal costs and punitive damages of no less than $5 million, following discovery.

Were asking for an accounting of all the monies that have been spent and made so we can determine what profits have been made, said Carey, adding that it seems CNBM had no intention of ever living up to its side of the agreement.

Sand filed an answer and counterclaims Feb. 4, denying most of the allegations by Westerlunds attorneys and contending that Westerlund is in breach of the contract and insolvent or approaching insolvency. It made demands of its own, including:

The appointment of a receiver with respect to Westerlund, the collateral, the leases and any and all other assets of the company.

That CNBMs security interest be foreclosed on.

That an injunction be granted in favor of CNBM to keep Westerlund from selling such collateral as the more than $5 million worth of logs currently stacked on Pier 3 and earmarked for CNBM.

The dissolution of Westerlund Log Handlers.

The awarding of damages to be proven in trial, along with legal fees and any other relief the court deems just an equitable.

State or federal

We cant do anything until we figure out what court were in, said attorney Gordon Carey.

Federal judge Anna Brown, whos overseeing the case, is deciding on jurisdiction, which is currently federal, based on whether Nance and Westerlund are domiciled in Oregon or Washington.

Carey said its inconsequential to him where Nance and Westerlund are domiciled, but that Westerlund would like to have the case tried in a local court because of its importance to the Clatsop County residents who work for the company. He added that Brown could decide in the next 30 days whether the case is federal or state.

There are 100 people who work for Dave Westerlund and 100 families that depend on him, said Carey. I think theyd like a local jury to decide these questions.

Esler said he wants the case seen in federal court because federal judges have more resources to review cases, whereas county and state courts are grossly underfunded.

Murphy enters the picture

Westerlund recently signed a sublease agreement with Murphys Overseas, LLC, and owner Dennis Murphy, to continue exporting logs. Two log ships have been sent from Astoria with Murphys timber.

Esler said CNBM learned about the sublease agreement from The Daily Astorian and put Murphy on notice that it needed to abide by the prepayment agreement. Murphy later filed suit in Clatsop County Circuit Court saying that it doesnt have to pay CNBM because it doesnt owe Westerlund any money, Esler said.

On Pier 3, Westerlund has stockpiled more than 6.6 million board feet or $5 million worth of timber earmarked for CNBM as collateral and waiting for a ship to come take it.

My client, China National, would like to continue shipping logs from Astoria,, said Esler, keeping the possibility of the partner being Westerlund open. I think there would have to be some changes in Westerlund.