San Diegans for Open Gov. v. Public Facilities Financing etc.
D069751
| Cal. Ct. App. | Nov 9, 2017

Background

  • In March–May 2015 the City of San Diego and the Public Facilities Financing Authority adopted an ordinance/resolution authorizing 2015 Refunding Bonds to refinance obligations from bonds issued for Petco Park.
  • San Diegans For Open Government (SDFOG), a nonprofit taxpayer organization with at least one city-resident member, sued to challenge the 2015 Bonds, alleging participants in the financing had financial interests creating conflicts under Gov. Code § 1090.
  • SDFOG dismissed other claims and proceeded solely on the § 1090 conflict-of-interest claim; before trial the court considered whether SDFOG had standing to bring the § 1090 claim.
  • The trial court dismissed the complaint, holding SDFOG lacked standing because it was not a party to the bond transaction; judgment entered for the city.
  • On appeal the Court of Appeal reviewed standing de novo and considered whether § 1092 or other doctrines permit a taxpayer/nonparty to challenge alleged § 1090 violations affecting a public contract.
  • The Court reversed, holding SDFOG alleged interests sufficient to have standing to challenge the ordinance and bonds under § 1092 (with guidance from CCP §§ 526a and 863 jurisprudence).

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether a taxpayer/nonparty has standing to challenge a public contract as violating Gov. Code § 1090 SDFOG: taxpayers with city-resident members and those eligible to bring reverse-validation or taxpayer suits have standing; § 1092’s “any party” should be read broadly City: § 1092 limits challenges to parties to the contract; taxpayer nonparties lack standing; CCP § 526a doesn’t compel suit by taxpayers Court held taxpayers with the alleged interests (as here) have standing; § 1092’s “any party” includes litigants with sufficient interest; trial court erred in dismissal
Effect of prior validation judgments on standing to challenge § 1090 violations SDFOG: not applicable here (no prior validation) so challenge timely City: relies on San Bernardino to argue narrow § 1092 reading Court distinguished San Bernardino: a prior validation judgment can bar late challenges, but none applied here; reverse-validation context preserves standing
Whether § 1090 violation enforcement should be limited to public entities or contract parties SDFOG: public policy favors allowing private taxpayer enforcement to vindicate § 1090’s strict conflict rules City: enforcement should be left to public entities or parties to the contract Court sided with broad enforcement: public policy and precedent support taxpayer standing to vindicate § 1090 in appropriate circumstances
Whether allegations here met the interest requirements drawn from CCP §§ 526a and 863 SDFOG: pleaded taxpayer/residency/taxpayer organization interests sufficient for standing under 526a/863 and § 1092 City: argued narrower reading would be required Court found SDFOG alleged the requisite taxpayer interests and the city conceded sufficiency for reverse-validation standing, so standing exists

Key Cases Cited

  • Thomson v. Call, 38 Cal.3d 633 (discusses strict enforcement of § 1090 and remedies even where official acted in good faith)
  • Stigall v. City of Taft, 58 Cal.2d 565 (§ 1090 forbids interests that could impair officials’ undivided loyalty)
  • Davis v. Fresno Unified School Dist., 237 Cal.App.4th 261 (recognizes taxpayer ability to challenge § 1090 violations; discusses § 1092’s “any party”)
  • San Bernardino County v. Superior Court, 239 Cal.App.4th 679 (held plaintiffs lacked standing to challenge a fully validated settlement; distinguishes validation-judgment context)
  • McGee v. Balfour Beatty Construction, LLC, 247 Cal.App.4th 235 (permits taxpayer standing to challenge lease-leaseback § 1090 issues; aligns with Davis/Thomson)
  • California Taxpayers Action Network v. Taber Construction, Inc., 12 Cal.App.5th 115 (supports taxpayer standing in reverse-validation § 1090 claims)
  • Gilbane Building Co. v. Superior Court, 223 Cal.App.4th 1527 (assumed taxpayer standing; discussed CCP § 526a standing in school-district context)
  • Finnegan v. Shrader, 91 Cal.App.4th 572 (assumes taxpayer capability to challenge contracts under § 1090)
  • Terry v. Bender, 143 Cal.App.2d 198 (early case permitting taxpayer § 1090 challenges)
  • Weatherford v. San Rafael, 2 Cal.5th 1241 (clarifies taxpayer pleading requirement under CCP § 526a — tax payment or liability allegation required)
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