San Diegans for Open Gov't v. Pub. Facilities Fin. Auth. of San Diego, 16 Cal. App. 5th 1273

Background

In March–May 2015 the City of San Diego and the Public Facilities Financing Authority adopted measures authorizing 2015 Refunding Bonds to refinance outstanding bonds for Petco Park construction.
San Diegans For Open Government (SDFOG), a nonprofit taxpayer group with at least one city-resident member, sued to invalidate the refunding on multiple grounds, ultimately retaining only a claim that the bond transaction violated Government Code § 1090 (conflict-of-interest statute).
SDFOG alleged members of the financing team had a financial interest in the bond sale, creating a § 1090 violation that could void the contract.
Before trial on the merits, the trial court dismissed SDFOG’s complaint for lack of standing because SDFOG was not a party to the bond contract; judgment was entered for the city.
On appeal the court reviewed the standing issue de novo and considered whether § 1092 (allowing avoidance of contracts made in violation of § 1090 by “any party”) and related standing doctrines permit taxpayer challengers to assert § 1090 claims.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether taxpayers have standing to challenge a public contract under § 1090/§ 1092	SDFOG: taxpayers with an interest (city-resident member/taxpayer) may sue to avoid contracts tainted by § 1090 and § 1092’s “any party” should be read to allow such suits	City: § 1092’s “any party” means parties to the contract; nonparties lack standing; CCP § 526a and § 863 do not supply standing here	Court: taxpayers with a sufficient taxpayer interest have standing under § 1092; trial court dismissal reversed
Whether a strict construction limiting enforcement to contracting parties is consistent with § 1090 policy	SDFOG: enforcement limited to contracting parties would frustrate § 1090’s prophylactic purpose; third-party challenges preserve public interest	City: limiting challengers avoids collateral attacks on contracts; supports predictability	Court: broad standing better effectuates § 1090’s goals; prior validation judgments are an exception
Effect of prior validation judgments on later § 1090 challenges	SDFOG: not applicable here (no prior validation)	City: if a contract has been validated, challenges are barred	Court: validation judgments (Code Civ. Proc. § 870) preclude later attacks; San Bernardino was distinguishable on that basis
Whether Code of Civil Procedure taxpayer-standing doctrines inform § 1092 standing	SDFOG: CCP §§ 526a and 863 and cases interpreting them show taxpayers can have sufficient interest to sue	City: those statutes don’t automatically create § 1092 standing	Court: those doctrines are persuasive; alleging taxpayer/resident interest is sufficient to confer § 1092 standing in this context

Key Cases Cited

Thomson v. Call, 38 Cal.3d 633 (Cal. 1985) (describing § 1090’s strict prophylactic rule and allowing taxpayer challenge)
Stigall v. City of Taft, 58 Cal.2d 565 (Cal. 1962) (§ 1090 forbids interests that might impair officials’ loyalty even absent fraud)
United States v. Mississippi Valley Generating Co., 364 U.S. 520 (U.S. 1961) (prophylactic rationale for prohibiting conflicts to prevent temptation)
Davis v. Fresno Unified School Dist., 237 Cal.App.4th 261 (Cal. Ct. App. 2015) (assumed taxpayer standing for § 1090 challenges; dicta on “any party”)
San Bernardino County v. Superior Court, 239 Cal.App.4th 679 (Cal. Ct. App. 2015) (held taxpayers lacked standing where prior validation judgment and interpreted § 1092 narrowly)
McGee v. Balfour Beatty Construction, LLC, 247 Cal.App.4th 235 (Cal. Ct. App. 2016) (found taxpayer standing to challenge lease-leaseback § 1090 violation; distinguished San Bernardino)
California Taxpayers Action Network v. Taber Construction, Inc., 12 Cal.App.5th 115 (Cal. Ct. App. 2017) (followed Davis and McGee; allowed taxpayer § 1090 challenge)
Weatherford v. San Rafael, 2 Cal.5th 1241 (Cal. 2017) (interpreting CCP § 526a: taxpayer must allege payment or liability for local tax to have standing)