JUDGE AFFIRMS 101 ASH ST. SUIT
Order allows plaintiff to challenge legality of city’s lease-to-purchase deal
• Judge Joel R. Wohlfeil upholds his ruling allowing a lawsuit challenging the city’s acquisition of the former Sempra Energy headquarters to move ahead.
Judge Joel R. Wohlfeil has upheld his tentative ruling allowing a lawsuit challenging the city’s acquisition of the former Sempra Energy headquarters at 101 Ash St. to move forward.
The decision in the case filed by San Diego resident John Gordon means current and former city officials could be questioned under oath for the first time and internal documents not previously disclosed could be turned over to the plaintiff ’s attorneys.
“We are committed to uncovering the facts as to how this $200 million waste of public funds occurred,” said Maria Severson, one of the lawyers representing Gordon in the litigation.
The city’s total cost of the 101 Ash Street acquisition would exceed $200 million if the 20 years of $535,000 monthly lease payments in the deal are combined with tens of millions of dollars in renovations, upkeep and related costs for the building.
City Attorney Mara Elliott issued a statement Monday saying she disagreed with the judge’s decision.
“The Gordon plaintiff lacks standing yet seeks to dictate actions of the city while generating attorneys’ fees for his counsel at taxpayer expense,” she said. “We will continue to fight their interference and keep our focus on ensuring that no rent is paid for a building that cannot be occupied.”
Asked why she waited nearly four years to challenge the idea of paying millions of dollars to lease a vacant building, Elliott issued a follow-up statement defending the timing.
“The city sued within a year of the building being determined unsafe to occupy, and after outside counsel had perfected its legal strategy,” she said. “What matters is who wins in the end.”
The City Attorney’s Office signed off on the lease-to-own agreement days after Elliott was sworn into office in December 2016.
Former mayor Kevin Faulconer, a proponent of the deal, suspended the monthly lease payments in September 2020, weeks after Gordon filed his lawsuit.
So far, the lease-to-purchase deal has cost the city more than $53 million in rent payments and renovations to the 19-story office tower, which has been vacant for more than five years and was deemed unsafe by county regulators.
Gordon alleged in his lawsuit that the city’s leaseto-own agreement was illegal and should be voided because it indebted the city without voter approval.
The suit asks the court to throw out the lease and order the return of the $23 million the city paid to rent the empty building. Gordon is not seeking any personal damages, and his lawyers
only get paid if they win the case and are awarded fees.
While the city is a defendant in the case filed last August, Elliott filed a separate lawsuit in October against the seller, 101 Ash LLC, and Wilmington Trust, which financed the transaction. Both of those entities are also defendants in the Gordon case.
The city’s lawsuit does not seek to recover the tens of millions of dollars in lease payments made by the city. Instead it asks a judge to validate the city’s decision to stop making the payments as long as the building is unable to be occupied.
Elliott has said she may amend the case in the future in order to protect taxpayers.
In the meantime, her lawyers and attorneys for 101
Ash LLC and Wilmington Trust told Wohlfeil at a March 26 hearing that allowing a taxpayer to proceed with a case against a city would disrupt future decision-making by local government officials.
“If every taxpayer has a right to file a lawsuit in the name of the city ... you will have utter confusion,” testified the city’s private-sector lawyer, Dick Semerdjian. “You will have chaos.”
In his final order, Wohlfeil rejected the defendants’ assertions as not yet at issue.
The judge’s ruling means the case will proceed toward trial. In the run-up to that proceeding, both sides will participate in the process known as discovery, which allows plaintiffs to interview people involved in the case
and to examine records and other information related to the issues in dispute.
That means current and former city officials like Elliott, Mayor Todd Gloria, former mayor Faulconer and his senior aides may be deposed and forced to answer questions under oath.
The legal process also could yield emails and other internal communications that might explain why the city agreed to acquire the 50year-old high rise without performing an independent assessment on the condition of the property.
Faulconer proposed acquiring the building in 2016 as a way to consolidate hundreds of city workers assigned to other leased property downtown. Publicly released emails later showed
the city could have saved millions of dollars by buying the building outright rather paying rent in a lease-to-own deal.
The former mayor’s staff told the City Council that the high rise was in great condition and employees would be moved in by July 2017. He also said the lease would save the city $44 million over the 20-year agreement.
In fact, the building could not be occupied safely. The county Air Pollution Control District issued a series of asbestos violations in 2019, and city officials evacuated hundreds of workers in early 2020, just weeks after moving them in.
In addition to asbestos contaminations, the heating and air system was compromised, the fire-suppression system did not function properly and other mechanical problems vexed the building.
Under Faulconer and Elliott’s direction, the “as is” lease the city signed made the tenant responsible for all repairs, upgrades and other liabilities.
Besides the Gordon lawsuit and the city’s complaint against 101 Ash LLC and Wilmington Trust, the seller and financier have countersued the city. The city also is facing dozens of other legal complaints from employees and contractors who allege they were wrongly exposed to asbestos while performing work inside the building.