Hoteliers and city sued for "ill-gotten gains"

As attorneys for the city and Tourism Marketing District fight over legal fees in a lawsuit filed in 2012 over a hotel-room fee imposed by hotel owners to pay for promoting San Diego as a tourism destination, a new class-action lawsuit again challenges the legality of the tax.

The lawsuit was filed on November 22 by consumer advocate attorney Ron Marron. The complaint alleges the hotel tax violates state Proposition 26, which requires voters to approve the levying of any taxes in order to make it more difficult for local agencies to charge hidden fees. It also states that there are inherent conflicts of interest in the make-up of the Tourism Marketing board, filled with the city's largest hoteliers who voted to impose the tax and are who are responsible for spending it to promote their hotels.

Also at issue are whether the funds collected are benefitting the city's tourism industry; the data used by hoteliers to justify the tax is also questionable.

"[The] 'benefit' to the qualifying hotels is measured by a flawed Return-on-Investment calculation that is based on speculation, conjecture, estimations, and misleading statistics," reads the lawsuit.

"The City has turned a blind eye to these unlawful and wasteful expenditures of taxpayer funds because the [Tourism Marketing District] itself is nothing more than a ruse that the city uses to effectuate an 'in-lieu payment' scheme.... Simply put, the [Tourism Marketing District] assessment is an unlawful hidden tax that was not approved by the electorate. The city’s imposition of the assessment and its spending of [Tourism Marketing District] funds should be restrained to prevent illegal expenditure and waste."

The class-action lawsuit is asking that a judge order the city and Tourism Marketing District to submit a declaration admitting that the assessment is a tax and was not approved by the electorate, as required by state law. In addition, the complaint seeks restitution "in the amount that [the City of San Diego and San Diego's Tourism Marketing District] have been unjustly enriched through their ill-gotten gains.”

Attorney Marron declined to comment on any pending litigation.

THAT OTHER LAWSUIT

Many of the same claims brought by Marron's client's are not new. Most, in fact, were included in the December 2012 case brought by San Diegans for Open Government against the Tourism Marketing District.

In an effort to get that lawsuit dismissed, attorneys for the Tourism Marketing District attacked the legitimacy of the group's members as well as its attorney, Cory Briggs.

The ensuing legal fight over the group's standing resulted in years of litigation and a hefty legal bill for the Tourism Marketing District.

In an April 2015 email obtained by the Reader, Tourism Marketing District attorney Michael Colantuono admitted that there was a 50/50 shot that the district would win a case on the merits. Instead, Colantuono confessed to trying to make the case disappear by challenging San Diegans for Open Government's standing to sue.

"...[W]e may not longer have need of the standing defense give[n] that the law may soon be with us on the merits," Colantuono wrote to then–Tourism Marketing District director Lorin Stewart regarding a court case filed in Ontario, California.

In December 2015, after spending upward of $3 million to Colantuono's Sacramento-based legal firm, Superior Court judge Joel Wohlfeil ruled that the group did have standing to sue, thus allowing the case to move forward.

In August 2016, the Tourism Marketing District amended its contract to exclude small hotels (70 rooms or less) in order to get the case dismissed.

As previously mentioned, the two sides are waging a new fight over legal fees for Briggs.

THE OTHER OTHER LAWSUIT

The November 22 class-action lawsuit is not the only legal battle on the horizon for the Tourism Marketing District. On September 1, 2016, attorneys for the California Taxpayer Action Network filed a separate lawsuit against the city and the Tourism Marketing District. The lawsuit, as reported by San Diego Union Tribune columnist Dan McSwain, argues many of the same points.