LOCKPORT, N.Y. (WIVB) – The Town of Lockport Industrial Development Agency has accused Yahoo! Inc. and an affiliate of breach of contract in a lawsuit filed Friday that involves a dispute over the deed for an undeveloped 16-acre parcel in the town’s industrial park.
In 2014, Yahoo!, which had already got almost a half-billion in subsidies to build a data and call center, bought an adjacent 18-acre parcel from the IDA for $271,800.
The contract included clawback language, which allowed the IDA to repurchase the property for the contracted sale price if Yahoo or any affiliated business failed to construct a facility there within seven years.
At some unknown point after Yahoo! had title to the property, the IDA states the company assigned its interest in the property to a successor corporation by merger, Oath Holdings Inc. But in May 2023, Oath Holdings filed an amendment with the Department of State changing its name to Yahoo Holdings Inc.
That seven-year deadline on Sept. 19, 2021, passed without any facility constructed, the IDA states in its lawsuit.
As a result, the IDA notified Yahoo on Nov. 23, 2021, that it wanted to exercise the clawback option to repurchase the property.
On March 4, 2022, Yahoo delivered a deed that the IDA said “purported” to transfer the property back to the IDA.
But the IDA states the deed Yahoo returned included drastic deviations from the original that rendered the property “unmarketable.”
For example, the deed now included restrictions that prohibited using the property in any way that would “diminish the air flow or quality” of the adjacent property on which Yahoo! built its data center.
The deed prohibited any use that would create noxious odors, dust, or smoke in the air beyond normal levels, and any other use that Oath Holdings Inc. deems would interfere with the data center.
Yahoo!’s Lockport facility is different from other data centers, by relying on the outside air for cooling rather than using massive chillers.
But the restrictions render the property practically useless based on its current zoning, the IDA said.
As a result, the IDA on March 10, 2022, rejected the deed and let Yahoo! know that the added restrictions do not comply with its contractual obligations.
But there has been no resolution, prompting the IDA to file the lawsuit Friday in Niagara County Supreme Court.
Yahoo! representatives and attorneys who assisted the company with the land purchase did not respond to requests for comment. Apollo Global Management Inc. owns Yahoo!.
Yahoo! built the data center in Lockport in 2010 and expanded it with a customer-care center in 2013.
According to Good Jobs First, a nonprofit that tracks economic development incentives, Yahoo! got a “megadeal” valued at almost half-billion dollars in subsidies for the projects.
The subsidies, which Good Jobs First considered among the largest in state history, include property tax breaks, discounted hydro power and tax credits.