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The city and its Tourism Marketing District failed to persuade a judge to throw out a three-year-old lawsuit challenging a hotel fee used to promote San Diego’s tourism industry.
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The hotel assessment being challenged is expected to generate more than $1 billion over 40 years.
Superior Court Judge Joel Wohlfeil ruled that the nonprofit group San Diegans for Open Government has the right to sue over City Council’s 2012 renewal of a 2 percent assessment levied on hotel owners. Wohlfeil’s decision is dated Jan. 27, the day the issue was argued in his court, but the ruling became public over the weekend.
In the 32-page decision, the judge concluded that San Diegans for Open Government has legal “standing to pursue this lawsuit,” in part because one of the group’s members paid the hotel fee in question. Wohlfeil also disagreed with the argument made by the city and the Tourism Marketing District that the lawsuit should be tossed because the nonprofit is merely the alter ego of its well-known attorney, Cory Briggs.
The ruling is a blow to the city and the marketing district. Both had hoped the judge would dismiss the lawsuit against the hotel assessment, which has been collected without interruption since the renewal was approved and is expected to generate more than $1 billion over 40 years.
San Diegans for Open Government filed its lawsuit in late 2012. The nonprofit argued that the fee, which can be passed along to hotel guests, was invalid because it was approved by hoteliers — not by voters.
Before the two parties had a chance to debate that issue before a judge, the city and the marketing district sought to get the lawsuit thrown out. In a motion to dismiss the suit, they contended that San Diegans for Open Government didn’t have legal standing to sue over the tax.
To file a claim, people or organizations must prove they have a stake in the outcome of a case.
During arguments on Jan. 27, Briggs argued that his client, San Diegans for Open Government, has standing to sue partly because one of its members — former city official Linda Perine — paid the hotel tax.
“Ms. Perine is a member” of San Diegans for Open Government, Briggs said in court. And even if she wasn’t, “it doesn’t matter” because all of the nonprofit’s members have a right to challenge the tax as San Diego voters.
“My client has standing,” Briggs said, “with or without Ms. Perine.”
Marketing district attorney Michael Colantuono disputed those statements. He argued that the nonprofit failed to prove that Perine was a member of the group.
Colantuono also took aim at the relationship between San Diegans for Open Government and Briggs, who has been the subject of a months-long investigation by inewsource. He told the judge that the nonprofit is merely the alter ego of Briggs — and that Briggs uses the nonprofit to sue agencies and collect attorney fees.
“This organization has never filed a case in which they weren’t seeking fees,” Colantuono said. “There is no evidence that Linda Perine or anyone like her ever had any meaningful role in deciding how to chase money for this firm and its putative clients.”
Briggs called that argument “nonsense.” He said his role as the group’s attorney was similar to that of in-house counsel.
Wohlfeil sided with San Diegans for Open Government on the argument over Perine’s membership status and the debate over Briggs’ relationship with San Diegans for Open Government.
Addressing the latter, the judge wrote that “there is no persuasive reason … for the Court to conclude that Plaintiff’s [lawsuit] is a ‘sham’ … or that Plaintiff should be deprived of standing to pursue this lawsuit because [of] its alleged status as Briggs’ alter ego.”
Briggs did not immediately respond to a request for comment about the judge’s decision. During arguments last week, he stressed how important it is for the court to rule on the hotel assessment.
“We’ve got to go deal with whether it is a tax” that should have been approved by voters, he said.
A spokesman for the City Attorney’s Office said the city plans to carefully review the judge’s decision.
William Evans, chairman of the Tourism Marketing District, issued a written statement in response to the ruling. “This case is vital to our industry and to our city,” he wrote. “As a result, we have pursued every legal avenue available to keep this case from going to trial.
“It is a complex case, but our fundamental and singular focus has always been to defend our position on the merits. That is what we will now do.”
The parties are scheduled to meet in early March to discuss further trial dates.