A California appeals court rejected taxpayer John Gordon’s legal argument that San Diego’s property lease for the 101 Ash St. violated the state constitution and should be overturned.

But the opinion issued Friday by a three-judge panel of the 4th District Court of Appeal did not say the original 2016 settlement was legal.

Instead, the appeals court judges said the issue was no longer moot because Mayor Todd Gloria and a majority of the San Diego City Council decided to buy the lease and settle a civil lawsuit before going to trial.

Combined with ongoing bond payments and other costs, the lease purchase pushed the city’s investment in the 101 Ash St. property. over $200 million for a building that cannot yet be safely occupied.

District 4 judges said those costs had no bearing on their decision, which came a week after an appellate court hearing.

“On appeal, we independently conclude that the claims in Gordon’s operative complaint are moot because the lease ceased to exist under the settlement agreement,” the ruling said.

A message at the top of the 26-page opinion notes that the decision “should not be published in official reports.” The designation, which is discretionary on the part of appellate judges, means the ruling cannot be cited as precedent in future legal disputes.

Attorney Michael Aguirre, the former San Diego city attorney who represented Gordon in long processsaid he plans to take his case to the state’s highest court.

“We hope to persuade the court to issue its opinion that it is legal to use taxpayer funds to pay an illegal debt,” he said. “This will allow the California Supreme Court to decide the case.”

The city attorney’s office, which defended the appeal at a hearing last week, although the city attorney Mara Elliott opposed the lease purchase agreementdid not immediately respond to a request for comment.

Gordon, a restaurant consultant and longtime San Diego resident, sued the city in 2020, nearly four years after the City Council approved a recommendation by then-Mayor Kevin Faulconer to enter into a lease for property for 20 years. the former headquarters of Sempra Energy.

In court filings, the plaintiff argued that the lease was illegal because the city was receiving no direct benefit for its $128 million investment because of the asbestos exposure and other problems that plagued it. unsafe for city employees to occupy the 19-story building.

By September 2020, Faulconer had stopped making the $535,000 monthly payments under the legal theory that the deal violated the state constitution because the city was not benefiting from the lease.

Next month, Elliott brought his own lawsuit against owner Cisterra Development and lender CGA Capital of Maryland through trustee Wilmington Trust.

San Diego “may not occupy any portion of the premises as provided by the lease,” the city’s lawsuit stated. “As a result, the premises are unusable for their intended purposes and therefore add no value to the city.”

By 2022, however, as both the Gordon case and the city’s lawsuit headed toward trial, Gloria proposed an agreement with Cisterra and CGA Capital, which asked taxpayers to spend $132 million to buy the Ash Street lease and a similar deal for nearby Civic Center Plaza.

Over the objections of the city attorney and three council members, the settlement was approved.

The appeals court said that was all they needed to dismiss Gordon’s appeal.

“As a result of the settlement of the municipal lawsuit, the lease terminated and the city was not obligated to make any further payments,” the court wrote in its opinion. “Thus … there is no longer any controversy as to which ‘effective aid’ can be granted.”

The appeals judges said they never considered Gordon’s contention that buying an illegal lease is itself illegal, or whether the mayor and a majority of the council acted reasonably when they agreed to buy the lease.

“We find it unnecessary to address other issues raised by the parties, including whether the lease complied with Section 18(a) (of the California Constitution) and/or the city acted in ‘good faith,'” they ruled.

The 4th District judges also said the fact that San Diego real estate broker Jason Hughes collected $9.4 million for his work leasing Ash Street and Civic Center Plaza was not relevant to their decision.

Hughes pleaded guilty to a felony conflict-of-interest charge last year, the only criminal charge filed by District Attorney Summer Stephan related to the city’s purchase of the Ash Street property, which remains vacant.

The lender, the owner and the city are entitled to their respective costs of the appeal, the judges ruled, although the city’s 2022 settlement agreement included accepting liability for future legal costs.

It was not immediately clear Friday whether the city would seek to recover legal fees from Gordon.

Originally published: October 25, 2024 at 6:16 p.m