Wednesday, May 31, 2006 | The San Diego City Council decided to hire outside lawyers to defend two hefty lawsuits Tuesday, less than a week after the city suffered court defeats that threaten to force a behemoth payment to the pension plan and the rollback of an affordable housing law.
The council followed Council President Scott Peters’ proposal to hire extra legal defense after Peters criticized City Attorney Mike Aguirre’s handling of two high-profile lawsuits. Council members did not comment on Aguirre’s performance during Tuesday’s meeting, and their deliberations took place behind closed doors with the city attorney, but some said they believed Aguirre bungled the two cases.
“I can’t speak for the whole council, but we’re very concerned with the cost of this loss,” Peters said, referring to the affordable housing case, which could empty the trust fund that was set up to construct price-restricted housing.
Others were more diplomatic.
“The judge made a ruling, so we’ve decided what we need to do to go forward,” said Councilman Kevin Faulconer.
Aguirre did not return calls seeking comment Tuesday as of press time.
The Latham & Watkins law firm will be paid up to $300,000 to defend a pension-funding lawsuit that was filed by former city employee William McGuigan. The case seeks to force the city to pay $175 million into its beleaguered retirement fund to make up for past underfunding of the pension system, which has a $1.4 billion deficit.
A judge said last week he was close to issuing a default judgment against the city in the case, saying that the city’s position “verges on carelessness.”
“Even without a default, that liability is enormous,” Peters said. “With the help we got him today, I’m hoping we win or reach a settlement we can afford.”
Charles Christensen, a land use attorney who often represents the San Diego Housing Commission, will be paid up to $250,000 to help the city defend a case brought by the local building industry, who successfully challenged the city’s affordable housing law.
The City Attorney’s Office had advised the City Council that the case was winnable when it was contemplating a settlement, but a judge ruled in favor of the building industry last week.
“We want to have confidence in our attorneys and we’re comfortable with Mr. Christensen,” Peters said.
The expenditures come on the heels of a budget season in which the city has been forced to examine the costs of mounting consultant and legal bills on the city’s budget reserves.
In the pension case, a Superior Court judge ruled Friday that Aguirre mishandled the city’s defense and ordered that he had until this Friday to get his act together or the city would forfeit the $175 million case. The city was also slapped with a fine of at least $20,000, which Aguirre said he will shoulder personally.
The judge and plaintiffs’ attorney want Aguirre to either admit as fact or deny statements he has made in previous lawsuits or investigative reports condemning the city’s pension underfunding. The statements are similar to arguments made by McGuigan in the lawsuit, which Aguirre was then in the position of trying to defend.
Judge Richard Strauss allowed Aguirre until Friday to decide whether he wants to admit or deny those statements, which claim that a number of pension deals violated the City Charter and municipal code, were economically unsound, were concealed by officials who handled the city of San Diego’s financial reporting, and were struck by pension and city officials who had a conflict of interest.
Council members had expressed earlier that they did not feel comfortable with Aguirre handling the case because his views about the city’s past practices were already very publicly known, meaning the defense of the lawsuit would require to argue against his own reports.
Attorney Michael Conger, who represents McGuigan, said he met with Aguirre on Tuesday. Conger said Aguirre told him in the meeting that he would give “unequivocal answers with no quibbling” by Friday.
“I’ll believe it when I see it,” Conger said.
Conger has included 35 statements from Aguirre’s suits and reports within his court filings as evidence of McGuigan’s claims.
Aguirre distributed a draft of his responses to the council Tuesday, denying 30 statements of those statements, but admitting to five of them. The five admissions are all related to what city law mandates, while the denials are more subjective deal with opinions on whether the city’s past practices violated those laws.
Last Wednesday, the city lost a battle over its affordable housing law, a lawsuit the city attorney had advised the council was winnable.
The law, known as the “inclusionary zoning ordinance,” requires homebuilders to keep 10 percent of a project’s units affordably priced or pay an in-lieu fee. The fees are stockpiled to subsidize the construction of affordable housing elsewhere in the city.
The case, which was close to settlement weeks ago, leaves the city potentially liable to pay back millions of dollars in fees it had collected from developers for three years.
The council approved in April a compromise that would have settled the case out of court by lowering the in-lieu fees, but Aguirre scoffed at the settlement and advised the council to fight the court in trial.
Superior Court Judge John Meyer originally said he thought the BIA’s case to be weak, but reversed his opinion after a hearing two weeks ago.
Immediately after the ruling was handed down, Aguirre proposed tweaking the affordable housing law just enough so that it would comply with the court’s wishes.
However, the council decided not to take up the proposed changes Tuesday.