California Court of Appeals, Fourth District, First Division
Order Date February 21, 2014.
PROCEEDINGS IN MANDATE after the superior court overruled petitioner's demurrer to real party in interest's first amended complaint. William S. Dato, Judge. Petition denied. San Diego County Super. Ct. No. 37- 2012-00091137-CU-MC-CTL.
McKenna Long & Aldridge, Charles A. Bird, Christian D. Humphreys and Gary K. Brucker, Jr., for Petitioner.
Briggs Law, Cory J. Briggs, Mekaela M. Gladden, and Anthony N. Kim for Real Party in Interest.
Gilbane Building Company (Gilbane) petitions for writ of mandate challenging the trial court's overruling of its demurrer to San Diegans for Open Government's (SanDOG) first amended complaint. In that complaint, SanDOG asserted claims against Gilbane and other construction companies seeking to disgorge all monies those companies allegedly illegally received from contracts with the Sweetwater Union High School District (the District). Gilbane contends the trial court erred in overruling its demurrer because (1) SanDOG does not have standing on its own and cannot rely on the standing of its members; and (2) SanDOG cannot pursue its action because it failed to allege it made a demand on the District to sue and the District refused. We reject Gilbane's arguments and deny the petition.
The San Diego District Attorney's Office investigated allegations that some of the District's board members and its superintendant failed to report gifts and travel funds and misused the District's credit card. The investigation revealed a "pay to play" culture in which Gilbane and other companies provided gifts to the District's officials and their family members in exchange for construction contracts worth several million dollars.
After SanDOG discovered the improper gifts, it informed the District of its intent to sue Gilbane and others and inquired whether the District wanted to prosecute the action with SanDOG. The District did not respond.
SanDOG filed this action against Gilbane, seeking declaratory relief, imposition of a constructive trust on all consideration received by Gilbane, judgment that all consideration be returned to the District, an injunction preventing Gilbane from disbursing monies received from the contracts, and other unspecified relief. SanDOG alleged that at least one of its members resided in and paid taxes within the District and had an interest in ensuring the District's compliance with all conflict of interest laws and maintaining open, transparent government decisionmaking. SanDOG further alleged that it was suing on its own behalf, for its own benefit, for the benefit of its members, for all persons similarly situated, for all taxpayers within the geographical jurisdiction of the District, and for the District.
Gilbane demurred to SanDOG's first amended complaint, arguing, among other things, that SanDOG lacked standing to sue because SanDOG did not pay taxes within the District. Gilbane also alleged SanDOG's action was improper because the District had discretion whether to sue Gilbane. SanDOG opposed the demurrer, contending that an organization who has members paying taxes within the District has standing to bring the action.
The trial court overruled Gilbane's demurrer, finding SanDOG alleged sufficient facts to invoke associational standing to pursue taxpayer suits under Code of Civil Procedure section 526a (section 526a). The trial court also found "[t]he rule that a taxpayer lacks standing to sue on behalf of a public agency unless the agency has a duty to sue and refused to do so does not apply to a case such as this" because "SanDOG [was] not seeking to usurp the District's discretion in managing its affairs."
I. Associational ...