Mexican Museum revisiting S.F. lawsuit
After a city audit last month cast doubt over the Mexican Museum’s ability to raise the needed capital to build out its longplanned new downtown San Francisco location, the nonprofit museum is revisiting its previously dismissed lawsuit against the city.
Last month, the museum renewed a bid to sue the city, which is its landlord, for allegedly blocking off half of the museum’s currently unoccupied four-story facility — located at the base of a 45story luxury condo tower at 706 Mission St. — in early 2021.
The complaint, filed in San Francisco Superior Court on April 4, appears to be a continuation of a previous lawsuit filed by the museum in 2022, which alleged that the city breached several legally binding contracts when it locked the museum out of two floors at 706 Mission with the intention of subleasing them.
Andrico Penick, who heads the city’s Real Estate Department, at the time did not deny the potential sublease arrangement, and said that it was sparked by longstanding concerns over the museum’s finances.
But the 2022 lawsuit was dismissed last summer, after the museum and the city decided to work out their differences as an investigation into the museum’s funding and contracts by the city’s Controller’s Office began.
The parties last summer agreed to a “tolling period” that essentially put the 2022 lawsuit on hold, gave the museum full access to its space, and allowed for the claims to be refiled at a later date should the dispute not be fully resolved.
But release of the audit’s findings last month appears to have renewed the legal spat.
“The 2022 lawsuit was dismissed without prejudice subject to a tolling agreement,” said Alex Barnett-Shorter, deputy press secretary for the City Attorney’s Office. “Regarding the complaint filed this month, once we are served with the lawsuit, we will review the complaint and respond appropriately.”
The audit found, among other things, that the museum “has not demonstrated that it has the financial or organizational expertise” to complete the build out of its space at 706 Mission “without extended delays.” According to the audit, the lack of progress in regard to opening its
doors in the downtown location means that the museum is out of compliance with several requirements in its lease and facilities agreement for the space, and gives the city the right to find a different use for it.
The museum has unilaterally disputed the audit, which also found that the museum misused portions of a grant it received to help fund tenant improvements inside of its new space.
The contracts that are at the crux of the museum’s
lawsuit are its 2015 lease agreement with the city’s Real Estate Department and a facilities agreement that was forged more than a decade ago between the condo tower’s developer and the city, to which the museum is a third-party beneficiary. The latter contract requires the museum to complete its improvements of the space within 24 months of the issuance of a temporary certificate of occupancy for the core and shell of the space, which happened
in September 2020.
The museum argues in a memo attached to the new lawsuit that the city breached both contracts by “modifying the approved plans” for the museum’s space without its consent by directing the building’s developer, Westbrook Partners, to “block access from the second floor to the third/ fourth floors.”
The museum now has access to the full space, but is seeking damages in excess of $500,000. The museum’s attorneys did not respond to multiple inquiries from the Chronicle about the complaint.
The city’s audit, in turn, states that the museum is out of compliance with the lease and facilities contracts, because it has not built out its space in accordance with required timelines. The Controller’s Office recommended that the Real Estate division — which in 2015 leased the 40,000square-foot space to the museum for 66 years for just $1 — should give the museum 60 days to submit an action plan pertaining to how it will achieve compliance, before exploring alternate uses for the space.
Penick, of the city’s Real Estate division, told the Chronicle that the museum has met with the department and the Office of Community Investment and Infrastructure, which oversees $10.6 million grant provided to the museum for the construction of its space, multiple times in recent weeks to discuss the action plan for raising needed funding and constructing its space by July 2025.
“The Mexican Museum is working on this task,” he said.