Watson ranch developer files lawsuit against American Canyon
The developer of Watson Ranch, the subdivision under construction east of Broadway/Highway 29, has filed a lawsuit against the city of American Canyon over money, road access and other issues, according to court records.
Developer Terrence “Terry” McGrath reported spending $48.5 million to install infrastructure to develop more than 300 acres at Watson Ranch, according to city reports. The approved plans for the entire Watson Ranch development includes 57 acres owned by Newell family members.
The lawsuit alleges American Canyon has failed to collect nearly $2 million from Newell family members for their portion of “state and federal permit costs.” The money would have reimbursed the developer who had advanced the funds to develop the entire Watson Ranch development, according to the complaint filed Wednesday in Napa County Superior Court.
The city has approved plans to build more than 200 houses on the 57 acres the Newell family members control east of Newell Drive. So far, however, no houses have been built.
McGrath, in the meantime, has continued to develop the other 250-plus acres. As of mid-October, more than 200 houses have been constructed at Watson Ranch, according to the city records. In addition, 187 apartments have opened at Lemos Pointe, an affordable housing project.
Altogether, the city has approved nearly 900 housing units at Watson Ranch.
The project also includes a 200-room hotel, although McGrath on Oct 21 told the City Council he first wanted to build more affordable bungalows, given the economic climate. The bungalows’ rates would also be cheaper to build and rent than hotel rooms, he said.
Watson Ranch also includes the ruins of a cement and basalt plant first opened in the early 1900s. The ruins, a popular site for graffiti artists over the years, are now known as “Napa Valley Ruins & Gardens.” The site has become a well-attended venue for a series of well-attended concerts this year.
The development plans for the ruins also includes amphitheaters, a sculpture garden and retail.
The complaint also alleges the plaintiff was forced to dedicate land for a road the city “is not intending to construct,” according to the lawsuit.
The lawsuit alleges the developer recently learned the city does not have the money or plans to extend Newell Drive. Extending Newell Drive would give northern access to Watson Ranch.
The city then refused the developer’s request to transfer back land that had been set aside for the road extension, according to the complaint. The plaintiffs listed on the complaint are “American Canyon I LLC” and “Napa Valley Ruins & Gardens LLC” — the areas McGrath is developing.
“The lack of northern access to [Watson Ranch] detrimentally impacts” the plaintiffs’ ability to develop the property according to the approved plans, according to the complaint.
McGrath, whose offices are in Oakland, told the council on Oct. 21 during an update on the development that Watson Ranch needed better access to Highway 29. The development lies east of a railroad lines.
Drivers now reach Highway 29 via Vintage Ranch, the subdivision south of Watson Ranch.
McGrath told the City Council he cannot sell lots in the northernmost areas of Watson Ranch without better access to Highway 29. About 600 houses are slated to be built in that phase of the development.
The city has approved plans to extend Newell Drive north, to South Kelly Road, and to extend Rio Del Mar East, all in an effort to alleviate traffic congestion, a top issue in American Canyon. The extension of Newell Drive has been evaluated for years as an alternative route to Highway 29.
Rio Del Mar East, once extended eastward, could allow drivers leaving Watson Ranch to reach Highway 29, according to the plans. They would then follow a traffic circle to cross the state highway and access neighborhoods on the other side of Highway 29.
However, both the Newell and Rio Del Mar East options require permits to cross the railroad lines. McGrath, who estimated the Newell extension could cost $70 million, told the City Council on Oct. 21 he cannot wait “10 years” for these roads to be built.
McGrath and a civil engineer on Oct. 21 presented the City Council with alternative options, including allowing traffic to reach Highway 29 via Watson Lane and Napa Junction Road. Both Napa Junction Road and Watson Lane feature at-grade railroad crossings. American Canyon City Council members did not comment on these options.
The lawsuit, which seeks unspecified damages and attorney fees, also alleges that unnamed “third parties” have discharged stormwater into the private lake at the ruins, according to the complaint, which names the city and its city council as defendants.
Between January and Aug. 19 , 2025, the developer and city officials have tried to resolve their differences included in the complaint along with “many other issues,” according to the court filing. However, the parties could not resolve their differences, according to the complaint.
So far the city has not filed a response to the lawsuit.
“Unfortunately, [McGrath’s] actions have now triggered an unnecessary waste of time and money — resources that should be spent improving the lives of American Canyon residents instead,” City Manager Jason Holley said on Friday in an email. “Our highly experienced attorneys with the law firm Colantuono, Highsmith & Whatley, PC are reviewing the documents and will respond to the litigation at the appropriate time,” Holley said. “For now, we have no other comments.”
