San Diegans for Open Gov't v. Pub. Facilities Fin. Auth. of San Diego
16 Cal. App. 5th 1273
| Cal. Ct. App. 5th | 2017Background
- 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)