SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO MINUTE ORDER DATE: 02/20/2020 TIME: 10:15:00 AM JUDICIAL OFFICER PRESIDING: Richard S. Whitney CLERK: Richard Cersosimo REPORTER/ERM: Not Reported BAILIFF/COURT ATTENDANT: DEPT: CASE NO: 37-2017-00007369-CU-MC-CTL CASE INIT.DATE: 03/01/2017 CASE TITLE: San Diegans for Open Government vs Fonseca [IMAGED] CASE TYPE: Misc Complaints - Other CASE CATEGORY: Civil - Unlimited APPEARANCES This matter came before the Court on February 10, 2020 for argument on the issue of whether plaintiff, San Diegans for Open Government (SDOG) has standing to pursue this litigation against former school superintendent, Julio Fonseca, who has been named as a defendant in this action. The parties presented briefs, supplemental briefs and live testimony, exhibits and argument which was conducted in the format of an evidentiary hearing. The Court issued the below tentative ruling on February 14, 2020, after having taken the matter under submission. -------------------Plaintiffs argue that under CCP section 526a "An action to obtain a judgment, restraining and preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a local agency may be maintained against any officer thereof, or any agent, or other person, acting in its behalf, either by a resident therein, or a corporation, who is assessed for and is liable to pay, or, within one year before the commencement of the action, has paid, a tax that funds the defendant local agency, including ... (1) [a]n income tax ... (2) [a] sales and use tax or transaction and use tax initially paid by a consumer to a retailer ... (3) [a] property tax .... "Section 526a was amended by the Legislature in 2018 with the express purpose of specifying which tax payments are sufficient to establish taxpayer standing." It is the further position of Plaintiff as argued by Mr. Briggs, Page 9 of transcript Line 1, through page 12 Line 2. "Returning back to the elements. Either you need a corporation that pays some sort of tax -- it can be a property tax, an income tax, or a sales tax – SDOG is a nonprofit, so it obviously doesn't pay an income tax. But you will hear that it pays sales tax because it holds meetings, sometimes it holds meetings at a restaurant, it orders food, the food is subject to a sales tax. So it does pay a sales tax. You will also hear that members of SDOG, including board members like Mr. Quiroz, pay income tax, they pay property tax, they pay sales tax. All of those things to some extent or another go to the State, and I believe that we stipulated yesterday that the State is the primary funder of San Ysidro School DATE: 02/20/2020 DEPT: MINUTE ORDER Page 1 Calendar No. CASE TITLE: San Diegans for Open Government vs Fonseca [IMAGED] District. CASE NO: 37-2017-00007369-CU-MC-CTL So if we know that we have members of SDOG who are paying money to the State in the form of taxes, we then have the Fistes decision where the Court held that a corporation that wasn't even a nonprofit in that case, Your Honor, it wasn't even a watchdog. It was an organization wanting to do business with that particular school district. It was held to have standing under 526a because it paid taxes to the State, and the school district in that case received funding from the State. So it's not difficult at all for the plaintiff to show that it has standing. In addition to what its directors and officers pay, you will see, as you have seen in prior motions, you will see the membership forms, some of which were redacted because those members asked for confidentiality and nobody has moved to have their names disclosed. And some of them are unredacted, but as the Court knows, he just mentioned to the declarations on the MSJ, those particular members came forward, they testified. Nobody has taken their depositions to disprove what they said, and they turned in membership forms in the ordinary course of business. In that respect, SDOG is no different from, let's say, the Auto Club except on a much smaller scale. The Auto Club represents tens, if not hundreds, of thousands of drivers. The officers and directors of Auto Club don't have to know every member in order to say, yeah, these are the people who submitted their membership applications. And we go to court to advocate on behalf of safer roads and better auto insurance and things of that sort. So you will hear today that people who actually run SDOG pay taxes, you will hear that they have members who live in the district for whose benefit this case is being done, you will see the names of some of them. You will -- we have already stipulated that the school district is funded. And then when you look at the authorities, it's a very low threshold in California for watchdog organizations to try to remedy the sort of wrongs that you have in this case. It's not a heavy lift. You will see a bunch of dirt kicked up, but it's not a heavy lift." Defense opening remarks: "MR. WINET: Thank you. There are four issues that we referenced in our supplemental brief that address the issue of standing, and the first issue -- that Mr. Briggs also received our brief yesterday -- has to do with the language of the statute restrain and prevent. The second issue on standing -- and I am going to go through each one of these -- is the limited class of persons who are taxpayers and allowed to sue. The third provision is that the plaintiff needs to show that they made a demand in cure and that demand was refused. And then the fourth is 526a only applies if the government body had a duty to act and not if it's exercising its discretion and entering into a settlement as part of that discretion." The Defendant argues that the new holding in San Diegans for Open Government vs. Public Facilities Financing Authority of the City of San Diego (2019) 8 Cal.5th 733 that the ultimate question is whether the Legislature has clearly manifested an intent to create a private cause of action based upon the facts asserted in the litigation. "The Supreme Court in that case concluded the Plaintiff lacked standing to void a government contract pursuant to Government Code § 1092, and remanded the case to the Court of DATE: 02/20/2020 DEPT: MINUTE ORDER Page 2 Calendar No. CASE TITLE: San Diegans for Open Government vs CASE NO: 37-2017-00007369-CU-MC-CTL Fonseca [IMAGED] Appeal with this guidance on standing, stating "the question of what particular form of relief plaintiff is seeking and whether such relief is available under Code of Civil Procedure, § 526a, should be answered first by the Court of Appeal." The California Supreme Court left intact its decision from 2 ½ years earlier in Weatherford v. City of San Rafael (2017) 2 Cal.5th 1241 "under Code of Civil Procedure § 526a, certain individuals and corporations also have a right to pursue legal actions enjoining wasteful or illegal expenditures by government entities. Whether someone can use this provision to begin a lawsuit depends on whether the person has standing to do so." Id., at page 1245. The Supreme Court said that CCP § 526a begins by describing the type of action and relief available, before then listing how a defendant may be liable. Id. at page 1247. The passage of CCP § 526a narrowed the category of taxpayers that are eligible to commence actions relative to what the common law allowed. Id., at page 1250. With this guidance, the plain language of the statute states that an action under 526a is to obtain a judgment "restraining and preventing any illegal expenditure..." The statute does not provide the basis for a plaintiff to challenge a completed settlement between a government entity and a third party, because such a settlement is in the discretion of a governing board and it is not an action "restraining and preventing an illegal expenditure." See San Bernardino County v. Superior Court (2015) 239 Cal.App.4th 679, 686-688 (a case in which Mr. Briggs, was plaintiff's counsel). This is particularly true when the plaintiff has sued a defendant who is not even a party to the agreement. Defendant also argues that Plaintiff never established this action involved a restraining and preventing of an illegal expenditure. "In conclusion, Plaintiff never established this action involved a restraining and preventing of an illegal expenditure. This was confirmed by Plaintiff's own chief executive officer, Pedro Quiroz. Further, Plaintiff never established that a corporation or resident therein of the San Ysidro School District paid a tax within one year before the commencement of the action, never made a demand for cure and correction, and is trying to overturn a completed settlement. Plaintiff is not suing the parties to the settlement agreement, and has no standing to sue Dr. Fonseca." The plaintiff called Pedro Quiroz as its first witness at the evidentiary hearing. Mr. Quiroz testified to being a board member for SDOG who maintains a P.O. Box in Ocean Beach as its mailing address which is an organization designed to help uphold and obey the law. Mr. Quiroz was deposed as the person most qualified or knowledgeable about SDOG practices and procedures. The Court was astonished by Mr. Quiroz's complete lack of knowledge and understanding of the intricacies of this legal issue involving the lawsuit filed by his organization. Mr. Quiroz represented himself to be the CEO of SDOG and testified as follows: Testimony of Mr. Quiroz: Question: The corporation, San Diegans for Open Government, when you have had meetings, you have never met in the jurisdiction of the San Ysidro School District, have you? Answer: I can't recall ever doing that. Question: okay. And so as far as the corporation San Diegans for Open Government, they have never paid, to your knowledge, taxes in the jurisdiction of the San Ysidro School District; is that right? Answer: That I don't know. Question: And you are not a resident of the San Ysidro School District; correct? Answer: Correct. Question: You do not live there? DATE: 02/20/2020 DEPT: MINUTE ORDER Page 3 Calendar No. CASE TITLE: San Diegans for Open Government vs CASE NO: 37-2017-00007369-CU-MC-CTL Fonseca [IMAGED] Answer: No. Question: Is that true? Answer Yes. Question: You do not work there; is that correct? Answer: Correct. Question: You do not own property there; is that correct? Answer: Correct. Question: You do not attend school there? Answer: No. Question: I may have a double negative. Do you attend school in the San Ysidro School District boundaries? Answer: I do not. Question: So you are in no way a resident of the San Ysidro School District; am I correct? Answer: Correct. Question: Have you ever met Nora Camacho? Answer: I don't think I have. Question: Have you ever met Ana Camacho? Answer: No, I don't think so. Question: Have you ever met Carmen Ordoñez? Answer: No, I don't think so. Question: I noticed these applications, they have a mark at the bottom where it says either approved or denied, and it does not appear to be checked off. Would it be accurate to say that these forms were never checked off as to whether or not these applications were approved or denied? Answer: Well, it's true that they weren't checked off, but we did talk about them and approve them. Question: So when was this application by Nora Camacho submitted to San Diegans for Open Government? Answer: I'm not sure. I don't know. Question: You have no idea? Answer: No. Question: And you were the person most knowledgeable from San Diegans for Open Government; is that true? Answer: True. Mr. Winet, defense counsel, also argues that Mr. Briggs, Plaintiff counsel, asserted deposition objections in an attempt to instruct the witness not to answer what the Court considered a key question: MR. WINET: Starting at Page 28, Line 20 -- I'm sorry, starting at Page 29, Line 3 (As read:) "Question: Can you give me the name of one of those people? "And then the question is -MR. BRIGGS: "I'm going to object on privacy grounds and instruct the witness not to answer," MR. BRIGGS: "I'm not going to identify the names of members." And would it be accurate to say that you did not provide the names of any of the members of San Diegans for Open Government at the time of your deposition? Answer: Yes. Mr. Winet, on cross-exam in the evidentiary hearing, asked more in-depth questions about this witness' knowledge about the case and the Court was surprised about the lack of understanding or knowledge of the litigation by the organization CEO, Mr. Quiroz. Question: Sure. DATE: 02/20/2020 DEPT: MINUTE ORDER Page 4 Calendar No. CASE TITLE: San Diegans for Open Government vs CASE NO: 37-2017-00007369-CU-MC-CTL Fonseca [IMAGED] Do you have an understanding that San Diegans for Open Government is trying to restrain or prevent some act from occurring in this lawsuit? Answer: No. What I understand is that -Question: Okay. Thank you. You have answered the question, sir. Thank you. And did San Diegans for Open Government sue the parties to the settlement agreement in this case? Answer: Yes. Question: Did the San Diegans for Open Government sue the San Ysidro School District? Answer: I don't know. Question: Did the San Diegans for Open Government sue Mr. Gonzalez? MR. BRIGGS: Objection. Relevance. And we stipulate to who the parties are. This is cumulative and unnecessary. THE COURT: I'll allow this. Overruled. MR. BRIGGS: You can answer. THE WITNESS: No. I don't know. I don't think so. BY MR. WINET: Question: Who are the parties to the settlement agreement? Answer: I believe Mr. Gonzalez, but I'm not sure. Question: Would you say as the chief executive officer you are the person most knowledgeable from San Diegans for Open Government about this lawsuit? Answer: Yes. Question: And you don't know who the parties to the settlement agreement were; is that right? Answer: Right. One of the few relevant pieces of information this witness was able to provide was remembering a boot camp/lunch in the school district at a restaurant that was within the confines of the school district in question. The best the witness could remember was that the restaurant was located somewhere North of the Mexico Border in South Bay - San Diego County. Mr. Winet pointed out in his opening statement four issues that must be met in order for the plaintiffs to prove they have standing. "There are four issues that we referenced in our supplemental brief that address the issue of standing, and the first issue -- that Mr. Briggs also received our brief yesterday -- has to do with the language of the statute restrain and prevent. The second issue on standing -- and I am going to go through each one of these -- is the limited class of persons who are taxpayers and allowed to sue. The third provision is that the plaintiff needs to show that they made a demand in cure and that demand was refused. And then the fourth is 526a only applies if the government body had a duty to act and not if it's exercising its discretion and entering into a settlement as part of that discretion." The Court, after having considered all the arguments presented and the evidence and briefing, does not believe that plaintiffs have standing to pursue this lawsuit. The total and complete lack of understanding by the Plaintiff CEO Quiroz of the nature of the lawsuit and the correct defendant to be sued. The named defendant is not the proper party to this action in the Court's opinion. DATE: 02/20/2020 DEPT: MINUTE ORDER Page 5 Calendar No. CASE TITLE: San Diegans for Open Government vs CASE NO: 37-2017-00007369-CU-MC-CTL Fonseca [IMAGED] The Court concludes for the foregoing reasons that plaintiffs do not have standing to pursue this litigation. It is the Court's opinion since no standing exists to bring this action that a judgment should be entered in favor of the defendant. The Court was not persuaded by the argument of plaintiffs "just because plaintiff pays taxes through board members" that they have standing to pursue this litigation. The Court also notes that in a previous motion for summary judgment on 1-25-2019 the issue of standing was addressed by the Court in a very peripheral fashion and did not take into account the 4-step process for standing argued by Mr. Winet. Now that the standing issue has been fully briefed and evidence/argument presented, the Court is in a better position to address this issue fully on its merits and sua sponte reverses its previous ruling on standing which was in favor of the plaintiffs. Tentative Ruling: The plaintiff does not have standing judgment in favor of defendant. Attorney's fees and costs subject to motions. -------------------The Court allowed further oral argument on the tentative ruling on February 19, 2020. The Court has read and reviewed all cases cited in the supplemental argument by counsel. The Court does confirm the tentative ruling with one modification. In the tentative ruling the Court indicated: Judgement in favor of Defendant. In this final ruling the Court reverses that position as this is a jurisdictional issue. The issue of jurisdiction is never waived by the parties and can be ruled upon by the Court at any time before and including trial. Therefore, since the plaintiffs lack standing to pursue this action the case is ordered dismissed with prejudice. The jury trial date is vacated. Judge Richard S. Whitney DATE: 02/20/2020 DEPT: MINUTE ORDER Page 6 Calendar No.