Court rules for uprooted nonprofit dance school

The state Supreme Court has cleared the way for a nonprofit dance school at the San Francisco Presidio to seek damages for the losses it incurred by having to relocate when Caltrans demolished its building to make way for restructuring the Doyle Drive approach to the Golden Gate Bridge.

The state Department of Transportation paid the Presidio Performing Arts Foundation $107,000 in 2011 for the property loss it sustained when the department seized and destroyed the building the foundation had leased from the Presidio Trust since 2003. But the foundation said it suffered additional, uncompensated losses in student enrollment and public appeal by having to move to a less-desirable location.

A Superior Court judge refused to send the foundation’s claim of lost “business goodwill” to a jury. Although an economic analyst estimated that the foundation lost $781,000, the judge found that it had failed to establish the worth of its goodwill before the relocation. A state appeals court overturned that ruling in November, and on Wednesday, the state’s high court unanimously denied review of Caltrans’ appeal, allowing jurors to decide the value of the foundation’s losses.

Although for-profit companies have been compensated for losses to their reputation and customer appeal caused by damage to their property, this is the first ruling in California to set standards to measure the loss by a nonprofit, said the foundation’s lawyer, Martin Fineman.

The foundation, established in 1998, teaches dance courses, mostly to low-income youths, and presents performances. Foundation officials said they had to cancel their 2010 summer program, including a fundraising benefit, because of the impending demolition, and lost about half of their usual enrollment of 400 students.

They leased another Presidio building, on Arguello Boulevard, in September 2011, but said it was smaller and more expensive, had less parking and was less accessible to transit.

Economist Justin Regus testified that the foundation typically spent more than it took in each year, but had an additional $62,500 shortfall in 2010-11, which he attributed entirely to lost goodwill created by the move to its new headquarters. Overall, Regus said, the foundation had lost $781,000 worth of goodwill.

Caltrans countered with an economist, Ricardo Goñi, who said there was no evidence that the foundation had any measurable goodwill before the relocation or that anyone would pay money for a company that suffered losses every year. Superior Court Judge Lynn O’Malley Taylor agreed with Goñi and rejected the foundation’s claim for damages.

But the First District Court of Appeal said the foundation had “indicators of goodwill” before the demolition, including “its favorable location and its sterling reputation for quality and stability.”

All those were affected by the relocation, and a jury should decide whether they affected the foundation’s economic value, and if so by how much, Justice Henry Needham said in the 3-0 ruling, issued Nov. 3. The ruling became final when the state Supreme Court denied review.

The case is People (Caltrans) vs. Presidio Performing Arts Foundation, S238914.