San Diegans for Open Government's lawsuit challenging San Diego's hotel tax will now go to the second phase of the trial after what has been more than a year's worth of court hearings, depositions, and accusations from hoteliers that the group is the alter-ego of its attorney, Cory Briggs.
On Friday, January 29, San Diego Superior Court judge Joel Wohlfeil ruled on the first phase of the case.
"Ultimately, [San Diegans for Open Government] has proven under Defendants' microscopic examination to be transparent and credible enough and...a real party in interest / interested person whose challenge of the [Tourism Marketing District] approval is consistent with its purpose," wrote Wohlfeil in a 33-page ruling.
The theory behind tourism marketing districts is that the money generated from hotel guests would strengthen tourism, create new jobs, raise sales-tax revenues, and, as an added bonus, the City of San Diego would receive approximately 4 percent to pay for general services.
But, unlike traditional taxes, residents did not approve the tax; the tax was enacted through a vote by hotel owners, with each vote weighted according to size of the hotel and number of rooms.
According to numbers released by the Tourism Marketing District, nearly $30 million is generated from the tax each year.
In 2012, months after city councilmembers extended the life of the district to 39.5 years, attorney Cory Briggs, on behalf of San Diegans for Open Government, filed a lawsuit against the city and the Tourism Marketing District for passing a tax without a public vote.
In the three years since filing, multiple hearings have been held. The Tourism Marketing District has spent millions to try and get the lawsuit dismissed and attempted to discredit San Diegans for Open Government and its lead attorney. According to a public records records submitted by the Reader in November 2015, the hotel group’s attorney bill amounted to $2.1 million.
Attorneys for the Tourism Marketing District, with help from San Diego city attorney Jan Goldsmith, attempted to show that Briggs is the alter-ego of San Diegans for Open Government. They accused him of using the nonprofit as a vehicle to file lawsuits against municipalities in the name of transparency but in reality were only meant to line his pockets.
In addition, the hotel group’s attorneys accused Briggs of forging documents and creating membership forms after the lawsuit was filed. The group asserted that his group didn’t have standing to sue over the 2 percent charge that hoteliers levy on hotel guests to pay to promote San Diego. It was the tourism district’s final attempt to keep the lawsuit from continuing to its final phase.
In September 2015, the Tourism Marketing District and City of San Diego requested judge Wohlfeil bifurcate the lawsuit in order to address the issue of the group’s standing before the merits of the case were heard. The trial was held in November and lasted seven days.
Regarding the charge that San Diegans for Open Government is a front for Briggs Judge Wohlfeil’s January 29 ruling declared that “Briggs is integrally involved in [San Diegans for Open Government's] activities and the pursuit of its corporate purpose. Indeed, based on the witness testimony as well as the letter issued by [San Diegans for Open Government's members], it is an open question as to how much, if any, of its objectives [they] could accomplish without Briggs' 'abilities and convictions.'
“That acknowledged, there is no persuasive reason, based on the totality of the evidence including the autonomy exercised by and the credibility of [members Richard Lawrence and Pedro Quiroz] for the Court to conclude that Plaintiffs [group] is a 'sham' or 'ultra vires,' or that Plaintiff should be deprived of standing to pursue this lawsuit because its alleged status as Briggs' alter ego."
Concluded Wohlfeil, "There is no evidence that Briggs has used Plaintiff 'to perpetrate a fraud, circumvent a statute, or to accomplish some other wrongful or inequitable purpose' such that the Court should 'disregard (Plaintiff) and treat the acts as if they were done by (Briggs).'"
In a January 30 email, Pedro Quiroz, a member of San Diegans for Open Government, celebrated the decision.
“SDOG’s board is grateful to the judge for patiently listening while the city and hoteliers threw everything plus the kitchen sink at us and Mr. Briggs in an attempt to prove that we’re illegitimate. They’ve spent more than three years and over $2 million of public money on lawyers and media in hopes of ruining our good reputations. The judge meticulously considered, and has now rejected, every legal and personal attack they launched against us. It’s now our turn to put their illegal tax under ‘microscopic examination’ so that concerned voters and taxpayers can be vindicated….”
Wohlfeil will next hear whether the Tourism Marketing District is legal. The trial is not expected to be held until late 2016.
But changes might come to the hotel group before any trial takes place. In November, a proposition authored by Briggs is expected to appear on the ballot.
The "Citizens' Plan for the Responsible Management of Major Tourism and Entertainment Resources,” if passed, would raise the Transient Occupancy Tax from 10.5 percent to 15.5 percent. The majority of the money would be deposited into the City's General Fund while two percent would go towards promoting tourism in San Diego and another two percent could be used by hotel owners to help pay for a non-contiguous expansion of San Diego's convention center.