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In tentative ruling, judge declines city’s request to consolidate Ash Street litigation

A Superior Court judge has refused to consolidate three lawsuits over San Diego city real estate deals, saying in a tentative ruling Wednesday that such a move would “not be in the interests of justice” and would create more problems than it would solve.

The preliminary ruling from Judge Timothy Taylor comes as the City Council is scheduled to decide on Tuesday whether to pay $132 million to settle two of those cases with two defendants.

The settlement pitched by Mayor Todd Gloria was introduced June 20 and presented to the council a week later. Minutes before the start of the June 27 meeting, however, the matter was withdrawn to allow people more time to study the proposal.

The proposed resolution was sharply criticized by the city attorney, who publicly urged the council to reject the deal, saying it would let defendants keep “ill-gotten gains” and wrongly indemnify them against future litigation.

The tentative ruling also came as lawyers for a San Diego taxpayer suing the city over its lease-to-own deal for the 101 Ash St. high-rise filed a request asking a different judge to stop the council from considering the settlement next week.

A hearing on the restraining-order request is scheduled before Judge Joel Wohlfeil at 8:30 a.m. Tuesday — hours before the council is set to convene its afternoon session to discuss the proposed settlement.

In his three-page tentative ruling, Judge Timothy Taylor said the cases before him already date back nearly two years. He also said his colleague has invested a huge amount of time and energy in the related taxpayer case.

“While it is true that some of the issues overlap, not all of them do, and the court fears consolidation will create more case management problems than it solves,” he wrote.

Taylor will hold a hearing Friday before issuing a final ruling on the city’s motion, which seeks to combine the taxpayer lawsuit with two cases the city brought against its landlord at Ash Street and the nearby Civic Center Plaza at 1200 Third Ave.

San Diego lawyer Maria Severson, who represents Gordon, said she was gratified by the initial decision from Taylor, who is not overseeing the case she filed on behalf of her client.

“We have faith the judiciary will make the 101 Ash case decision based on law and fact,” she said. “This decision reaffirms that faith.”

City Attorney Mara Elliott declined to comment on the tentative ruling. Her office is the plaintiff in cases against Cisterra and its lender, CGA Capital of Maryland, and is also a defendant in the lawsuit filed by taxpayer John Gordon.

But in court papers, city lawyers argued that combining the cases would save time and allow a single judge to oversee the complex litigation.

“The claims still necessarily involve the same questions of law and fact, the same witnesses, the same documents and other than the representative Gordon himself, the same parties,” they wrote.

Taylor said he is skeptical that consolidating the lawsuits would hasten a resolution. He noted that neither the defendants or the issues alleged in the Ash Street lawsuit directly match those in the Civic Center Plaza case.

“The court foresees lengthy delays resolving the asbestos and construction issues if the court follows the path suggested by the city,” he wrote.

The judge also appeared reluctant to take a case away from a colleague.

“There is something unseemly about one judge poaching a challenging and interesting case from a highly respected colleague after he has done all this work,” Taylor added.

The city sued its Ash Street landlord in 2020, two months after Gordon filed his lawsuit against the city, the landlord and its lender.

Weeks later, then-Mayor Kevin Faulconer stopped making the $535,000 monthly payments required under a 20-year lease-to-own contract, citing the same argument Gordon put forward — that the contract allegedly violated a state constitutional ban on paying for assets that cannot be used.

The 19-story office tower has been unsafe to occupy since 2016, when the council approved the lease, due to asbestos and other issues.

A consultant hired by the city later said the building needs hazardous-materials remediation and a host of other repairs that would collectively cost more than $115 million before city workers could move in.

In October 2020, the City Attorney’s Office filed its own case against Cisterra affiliate 101 Ash LLC and the trust that represents lender CGA Capital.

By 2021, city lawyers learned that real estate broker Jason Hughes, who had previously acted as a volunteer adviser to Faulconer, collected $9.4 million from Cisterra principal Steven Black for his work on the Ash Street and Civic Center Plaza leases.

Hughes has said he told at least six city officials, including Faulconer, that he intended to seek compensation for his consulting work and provided as evidence a 2014 letter he sent to then-real estate director Cybele Thompson, which she accepted.

The city added him as a defendant to the Ash Street case and filed a new claim over the Civic Center Plaza.

The city’s cases ask a judge to void both leases under state anti-corruption laws.

All three lawsuits are scheduled for trial early next year.

The Gordon legal team’s request for a restraining order argues the settlement must be prohibited because it would steer more tax money to a project that violated the California constitution when first approved.

In a notice informing the other parties of a hearing on that request, Gordon’s legal team said Gloria’s settlement offer also breaks a pledge the Faulconer administration made when it suspended the Ash Street payments in 2020 and runs contrary to the city attorney’s legal opinion.

“This ex parte is needed,” Severson wrote. “The 101 Ash indebtedness was incurred contrary to (the state constitution) and under law ‘shall be void.’”

The filing also seeks to delay the approval of any settlement at least until Sept. 22, when Wohlfeil already is scheduled to consider a motion for summary judgment in the Ash Street case brought by Gordon.

Neither the Mayor’s Office nor the City Attorney’s Office immediately responded to a request for comment on the restraining order request.

The judge may rule from the bench or take the matter under submission.

If the City Council approves the Gloria settlement plan, the city’s cases would not be resolved entirely. Hughes would remain a defendant in both suits, as would several contractors.

Cisterra declined to comment on the tentative ruling Wednesday. Last month, the company issued a statement saying it was disappointed that the deal had been delayed.

A lawyer for Hughes similarly declined to respond to the ruling.



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