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In latest setback for taxpayer in Ash Street lawsuit, judge dismisses claims against city

In August, before declining to block San Diego from issuing bonds to pay off a $132 million settlement of the disputed 101 Ash St. and Civic Center Plaza leases, Judge Joel Wohlfeil suggested taxpayer John Gordon might win at trial.

“The court finds that, based on the record presented to date, there is a reasonable probability that plaintiff will prevail on the merits,” Wohlfeil wrote in a ruling in a case brought to void the city’s Ash Street lease.

But over the past four months, Wohlfeil has consistently ruled against Gordon and his lawyers, former elected city attorney Michael Aguirre and his law partner Maria Severson.

The latest setback came Wednesday, when the judge tentatively granted the city’s motion to dismiss the claims Gordon first filed in 2020.

The decision means the dispute is unlikely to be presented to a jury.

“This ruling completely disposes of this action as against these defendants and they are entitled to a judgment in their favor,” the judge wrote in a 2-page preliminary ruling on a motion that is scheduled to be heard in court Friday.

“Plaintiff appears to argue the settlement agreement is itself void and cannot serve to terminate the lease agreement which is the subject of this action,” Wohlfeil added. “However, there is no evidence supporting this contention.”

Unless the decision is reversed by the trial court judge or on appeal, the ruling all but closes a long and costly court fight brought by the San Diego taxpayer. One other defendant remains in the case, although that party has a dismissal motion pending.

Gordon, who works as a restaurant consultant, claimed the lease for the 19-story Ash Street office tower was illegal, and that it was improper for the city to pay off the contract with $175 million in bonds it will take 30 years to repay.

City Attorney Mara Elliott, who determined that the settlement negotiated by Mayor Todd Gloria was legal but had urged the city council reject it, declined to comment on the preliminary ruling Wednesday.

After the settlement was approved in July by the city council, lawyers for the city asked the judge to dismiss the city as a defendant because the deal made the complaint moot.

Aguirre said Wednesday he would present his case before Wohlfeil at the Friday hearing.

“We will argue (that) because the city admitted the $91 million Ash Street liability was an illegal debt, it was not lawful for the city to pay it,” he said in response to the tentative ruling.

Last week, Wohlfeil granted a motion to dismiss the case against Wilmington Trust, the representative for CGA Capital of Maryland.

Earlier this year, he refused to issue an injunction to stop the city from issuing bonds to pay off the disputed leases.

The original deal approved in 2016 called for CGA Capital to pay $91.8 million to Cisterra Development, the Ash Street landlord that had sold the Civic Center Plaza to the city in a similar 20-year lease-to-own agreement the prior year.

Both leases are now the subject of a criminal investigation by District Attorney Summer Stephan.

Cisterra has filed a similar motion to dismiss the civil claims filed by Gordon. That request is expected to be considered by Wohlfeil following a hearing scheduled for early next year.

For the Ash Street property, the city agreed to pay $128 million — $535,000 a month over two decades — even though the building had been appraised at $67 million and could not be occupied due to asbestos and other problems.

The city suspended its monthly lease payments weeks after the Gordon lawsuit was filed, with officials citing as justification the same allegation of a violation of the state constitution that the lawsuit did.

Both Gloria and Elliott said the city had been duped by Cisterra and real estate broker Jason Hughes, who had advised the city on a volunteer basis previously and helped negotiate the Ash Street and Civic Center Plaza leases.

Both Hughes and Cisterra said they had done nothing improper, although they both made millions of dollars off the transactions. Hughes said he told six city officials that he would seek to be paid for his consulting work.

In June, Gloria announced he had reached a settlement plan with Cisterra and CGA Capital that called for buying out both leases for $132 million.

The council agreed to the arrangement in July, and the companies were dropped from a pair of lawsuits that Elliott had previously filed. They were also indemnified against any further legal costs related to the buildings.

Hughes remains a defendant in the city’s two cases, which are scheduled to go to trial next year.

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