With the end apparently nigh for a lawsuit challenging the city’s troubled acquisition of the 101 Ash St. high-rise, lawyers for the plaintiff pleaded at a court hearing Friday for the case to proceed.
Plaintiff John Gordon would be wrongly denied his day in court if Judge Joel Wohlfeil does not reverse his tentative ruling earlier this week that dismissed the final defendant, attorney Michael Aguirre argued.
He said a jury should resolve disputes over key facts in the case.
“I do not want to be in front of the appellate court arguing these issues,” said Aguirre, the former elected San Diego city attorney now representing Gordon. “I beg you, please go through the normal steps when there is a dispute over material facts, and allow this to go to trial.”
Cisterra Development lawyer Michael Riney said the facts of the case have been thoroughly reviewed by all parties, including the judge, and do not merit being presented to a jury.
“The City Council exercised its discretion terminating the lease and then buying the building,” he told the judge. “Me standing here costs the city money because of the city indemnifying my client. This case should be over. It needs to end.”
Wohlfeil, who previously dismissed the city and lender CGA Capital of Maryland from the lawsuit, listened to both sides throughout the 40-minute proceeding.
But he did not immediately issue a final decision.
“The court is going to take the arguments under submission,” Wohlfeil said. “I’m going to reflect on the arguments, and I’ll get a minute order out as quickly as possible.”
Initially filed in 2020, the Gordon lawsuit alleges that city officials violated the state constitution when they approved a 20-year lease-to-own deal for the former Sempra Energy headquarters just north of City Hall at 101 Ash St.
Aguirre said the city is legally barred from agreeing to a 20-year lease-to-own arrangement without a public vote.
He also said Wohlfeil overlooked critical documents submitted to the court from 101 Ash LLC, the legal entity Cisterra created to close the lease in 2017.
Among those records were documents showing the transaction was more like a mortgage, indebting the city no matter the building’s condition, Aguirre said. They also included a promissory note ensuring that the city would make the $535,000 monthly payments, he said.
“As learned and as much effort that has gone into the tentative decision, the fact is it did not discuss a single one of the documents I am talking about,” Aguirre told the judge.
But Riney said the case was clear-cut and should be closed — especially because the settlement that was recommended by Mayor Todd Gloria and approved by the council last summer called for the city to pay Cisterra‘s and CGA Capital‘s legal fees.
“It’s perfectly acceptable for the city to lease something and then decide ‘We are not going to use it, we are going to remodel,’ and that’s what they did,” Riney said. “They messed up the remodel.”
The case had been scheduled for trial early this year. The city, CGA Capital and Cisterra all filed motions to dismiss the claims before trial.
The Gordon legal team, however, argued that the question over how the building came to be unsafe to occupy should be decided by a jury.
Aguirre reminded Wohlfeil that a Sempra executive had submitted sworn testimony to state utility regulators in 2014 that the building needed tens of millions of dollars in upgrades — more than it would have cost the company to move to a new building.
“He (Riney) says they (the city) screwed up the renovation. That’s a question of fact,” Aguirre said, meaning the dispute should be settled by a jury.
“The former building owner determined that the building was functionally obsolete,” he said.
In a 2016 report to the council, city real estate officials said the building was in good condition and needed only a $10,000 power wash before hundreds of employees could move in.
Constructed in the mid-1960s, the 19-story office tower has been uninhabitable due to repeated asbestos contamination and years of deferred maintenance.
A city consultant said the building needed more than $115 million in repairs before it could be safely occupied. The Mayor’s Office said the building is now worth “virtually zero” because the renovation costs exceed the property value.
Nonetheless, Gloria and the City Council agreed in July to buy out the lease for $86 million — far more than the $67 million an appraiser said it was worth in 2016.
The settlement also was approved after Gloria and other city officials learned that broker and former informal mayoral adviser Jason Hughes collected $4.4 million in fees from Cisterra when the Ash Street lease was formally signed in early 2017.
Both Cisterra and Hughes have said they did nothing improper and defended the lease as a good deal for San Diego taxpayers. Hughes said he informed at least six city officials that he planned to seek payment for his work, citing a letter he sent the city’s real estate director that she accepted and signed.
But District Attorney Summer Stephan has opened a criminal investigation into the transaction.