The Morning Report
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Wednesday, Sept. 20, 2006 | A state appeals court on Tuesday threw out a $91.7 million verdict against the city of San Diego and sent another $29.2 million verdict back for retrial in the famed Roque de la Fuente case, allowing the cash-strapped city to breathe a bit easier as it attempts to stabilize.
The decision from the Fourth District Court of Appeals confirms a June tentative ruling by the same three-judge panel, which overruled a jury’s decision that the city drove down the value of the South Bay developer’s Border Business Park by planning an airport on the land and rerouting border truck traffic through the business park. The judges also sent the developer’s breach of contract claim, originally confirmed by a jury, back for another trial.
With interest, the city faced a $150 million debt to de la Fuente at a time when officials are scrounging for every cent to manage a stifling $1.4 billion pension deficit, depleted reserves and a number of other financial troubles.
“If the city had been hit with that exposure, the city would have been looking at bankruptcy,” said City Attorney Mike Aguirre. “Now we’re looking at nothing.”
The city attorney said officials would continue negotiations with de la Fuente over the one remaining claim and two other outstanding lawsuits the developer has brought against the city. The city offered de la Fuente $50 million in November to settle all of his claims, but he rebuffed the offer.
Attorneys for de la Fuente were unavailable for comment as of press time. The city could still face a sizeable bill in the case, but not nearly as big as expected if the ruling stands.
“We’re anxious to enter into settlement talks with him,” said Fred Sainz, spokesman for Mayor Jerry Sanders.
The city has also filed suit against its insurer in the case, AIG, after it declined to cover the city’s costs. “Our hope and expectation is that whatever the city has to do is covered by AIG,” Aguirre said, referring to any settlement or ultimate jury verdict faced by the city in the case.
In 2001, a jury agreed with de la Fuente’s claims, awarding him $25.5 million in damages for the city’s attempts to plan a bi-national “twin port” airport partially on his land and $39.8 million for the city’s rerouting of the border truck route through the business park in the 1980s and 1990s. The trial court also awarded the developer an additional $26.4 million in pretrial interest payments.
The developer won by arguing that the city’s actions resulted in “inverse condemnation” in that it forced down the land’s value. In 1993, the city foreclosed against 35 parcels in the business park.
“The court found that the city’s airport announcements, made without having first ascertained that the government of Mexico would cooperate, were unreasonable and amounted to a taking,” according to court documents.
An additional $29.2 million award was given to the developer on claims that the city reneged on promises not to change zoning in the area.
The loss was an embarrassment for the office of then-City Attorney Casey Gwinn.
The ruling released Tuesday threw out the two inverse condemnation claims. In order to make such claims and prove that he wasn’t impacted by simple governmental planning decisions, de la Fuente had to prove he was uniquely impacted by the city’s actions.
However, the appellate panel found that sketches showed that de la Fuente’s property wasn’t the only one that would’ve housed a runway under preliminary airport plans.
“Border (Business Park) failed to adduce any evidence that the city’s announcements concerning the proposed Otay Mesa airport subjected it to direct and special injury,” the ruling states.
And, the judges ruled, the developer also failed to prove that “total gridlock” resulted from the city’s rerouting of the truck route, which was done when commercial truck traffic was closed at the San Ysidro border crossing and moved to Otay Mesa Road.
The appeals panel handed down its preliminary judgment in June. Last month, each side had 15 minutes to orally argue their case in front of the panel.