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

But the opinion The agreement issued Friday by a three-judge panel of the 4th District Court of Appeal did not go so far as to say the original 2016 agreement was legal.

Instead, 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 out the lease and settle a civil suit before going to trial.

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

The 4th District judges said the fees had no bearing on their decision, issued a week later a hearing before the court of appeal.

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

A message at the top of the 26-page notice says the decision “should not be published in official reports.”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

Attorney Michael Aguirre, the former San Diego city attorney who represented Gordon in the long term trialsaid he intends to take his complaint to the state’s highest court.

“We hope to persuade the court to issue its opinion that it is legal to use taxpayers’ money 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, even though the city attorney Mara Elliott opposed lease buyout dealdid 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 from then-Mayor Kevin Faulconer to strike a deal 20-year lease-purchase agreement for the former Sempra Energy head office.

In court filings, the plaintiff argued the lease was illegal because the city received no direct benefit for its $128 million investment, due to asbestos exposure and other issues which made it difficult. dangerous for city employees to occupy the 19-story building.

In September 2020, Faulconer stopped making the $535,000 monthly payments under the legal theory that the deal violated the state constitution because the city did not benefit from the lease.

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

San Diego “is unable to occupy any portion of the premises as contemplated by the lease,” the city’s complaint alleges. “The premises are therefore unusable for the intended purposes and therefore bring no value to (the) city.”

However, in 2022, as Gordon’s case and the city’s lawsuit moved toward trial, Gloria proposed a settlement with Cisterra and CGA Capital calling on taxpayers to spend $132 million to buy out the Ash Street lease and a similar deal for the nearby Civic Center Plaza.

Over objections from the city attorney and three council members, the deal was approved.

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

“Following the settlement of the City’s lawsuit, the lease terminated and the City was no longer obligated to make any further payments,” the court wrote in its opinion. “Thus… there is no longer any controversy over whether “effective relief” can be granted. »

Appeal judges said they never considered Gordon’s contention that buying out an illegal lease was itself illegal, or whether the majority of mayor and council had acted reasonably when they agreed to buy out 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 whether the City acted in ‘good faith”,” they ruled.

The 4th District judges also said it was irrelevant that San Diego real estate broker Jason Hughes collected $9.4 million for his work on the Ash Street and Civic Center Plaza leases. for their decision.

Hugues pleaded guilty Following a misdemeanor conflict of interest charge last year, the only criminal charge filed by District Attorney Summer Stephan related to the city’s acquisition of the Ash Street property, which remains vacant.

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

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

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