San Diego settles its oldest lawsuit
It started as a deal to develop a 312-acre plot of land in Otay Mesa, then a dusty region along the border that was emerging as an economic boomtown in 1986.
However, developer Roque de la Fuente II’s dream to build an international trade business park ballooned into multi-milllion dollar litigation and earned the distinction of becoming the City of San Diego’s longest-running lawsuit.
On Tuesday, after decades of finger-pointing, trials, back-and-forth appeals and negotiations gone awry, the case has been settled at no cost to taxpayers and with a blueprint to fully develop the land.
The settlement calls for two of the city’s former insurance carriers to pay both sides in the dispute — with $25 million going to de la Fuente’s business park and $8.2 million to the city.
It also calls for no further lawsuits to be filed for the next five years, for both sides to work together to get the business park on the path to development and for a process to deal with potential disputes that might arise.
The City Council unanimously approved the terms Tuesday.
“Everyone wins here,” said City Attorney Jan Goldsmith, who helped negotiate the final terms of the settlement over the past few months. “Border Business Park can finally be developed into the world-class property it was intended to become, creating jobs and growing our tax base. The border region will receive an important economic stimulus. And taxpayers, once on the hook for tens of millions, will not only benefit, but be protected against future litigation.”
It’s not clear if the settlement was driven in any way by de la Fuente’s long-shot U.S. presidential campaign. The 61-year-old Democrat joined the race in October and is underwriting his own campaign, asking for $10 donations each from 10 million Americans.
“It’s one more thing he doesn’t have to focus on,” Vince Bartolotta, de la Fuente’s attorney, who has helmed the case for decades, said of the settlement.
The longevity of the case is right up there with the litigation over the Mount Soledad cross, albeit it has been less publicized. It has outlasted six mayors, three city attorneys and four mediators.
It was headed to yet another trial this spring — at an estimated cost of $20 million, Goldsmith said — to likely be followed by appeals. But one last ditch effort to settle the case worked.
As Goldsmith put it, the settlement turned coal into diamonds.
By the 1980s, de la Fuente, who goes by “Rocky,” had taken over his family’s enterprises of land, car dealerships and other business interests. He then set his sights on Otay Mesa.
He entered into a development agreement with the city in 1986, one that would soon disintegrate.
The business park property is bounded by Airway Road, Harvest Road, Siempre Viva Road and La Media Road.
He accused the city of hampering his efforts to develop the parcel, including plans that were later scrapped to build an airport on part of the land and changes to the border trucking route that sent semis through the property. He sued the city in 1995, and a jury later sided with him.
The 2001 verdict was believed to be the largest judgment against the city ever, at $94.5 million.
After the trial, jurors said it was apparent to them that the city was swindling de la Fuente. City officials came across as incompetent and dishonest, and seemed unable or unwilling to answer basic questions posed by de la Fuente’s lawyers, one juror said.
Another said it appeared as though the city was deliberately trying to make life hard for the developer and take the land for its own use.
The city’s attorneys painted de la Fuente as an inexperienced developer whose business park was the victim of an early-1990s recession, and accused him of violating the agreement with the city in various ways.
Deputy City Attorney Anthony Shanley, who tried the case, wisely noted after the mega verdict in 2001: “I think it’s safe to say that the final outcome of this case is still a long way off.”
How right he was.
The city appealed the verdict, and a new trial was ordered on the breach of contract finding. But the rest of the award was upheld, and, with interest, ultimately put the city on the hook for $136 million.
In 2006, an appellate court reversed the verdict and sent it back to a lower court for a new trial.
In the meantime, since the filing of the initial lawsuit, de la Fuente-controlled entities filed four more lawsuits against the city.
Several more attempts at settlement fizzled.
As the case appeared headed for a second trial, City Council member David Alvarez and a judge who were part of the negotiations asked Goldsmith in July to get involved for a last try.
The resulting 53-page settlement, overseen by retired U.S. Magistrate Judge Leo Papas, went through 61 drafts before being finalized, Goldsmith said. It dismisses all five remaining lawsuits and prohibits any new litigation from being filed.
The settlement puts $18.75 million — three-fourths of the $25 million payout to the business park — in an escrow fund to be doled out over the next five years as the developer obtains the proper permits and installs the necessary infrastructure to legally do business. That infrastructure includes roads, sewer, electrical and water. De la Fuente gets the rest of the settlement up front. The business park will also pay the city $3.4 million in Facilities Benefit Assessments for road construction.
Any issues that might arise during that time frame will be handled by one judge assigned to the case, who will resolve the disputes as he sees fit; no appeals.
“Sometimes when you have very long litigation, that becomes the status quo, and it’s very hard to break,” Goldsmith said of the difficulty settling the case over the years. “We were able to break it through the good work of all the parties involved. … I’ll also say that there there have been different administrations in the city and different interests, and it had to be the right time. Both sides had to see the light, and we all saw it at the same time.”
The case cost the city some $16 million in outside attorney fees, most of which have already been paid for by insurers, made possible through the negotiations of a former deputy city attorney, Don McGrath. About $3 million from the city’s award will cover the remainder, while $5 million goes into the city’s general fund.
Former City Attorney Michael Aguirre, who was in office when most of the multi-million dollar award against the city was overturned, called the settlement a good one.
“Hopefully it will be something that will be behind the city,” Aguirre said Tuesday.
David Wick, CEO of de la Fuente Enterprises, said he is eager to begin work on the property, starting with permits to build a half-mile of road improvements.
About half of the property has been lightly developed, while the other part has been used for parking tractor-trailers involved in cross-border trucking.
De la Fuente has been a polarizing figure in San Diego’s business community. He and the family business have been involved in dozens of lawsuits over the years, many of which he has blamed on government agencies kicking them when they’re down. In one, he settled with San Diego County for $38.7 million for 525 acres of his in Otay Mesa that was acquired to build a new jail.
He also won a 2006 lawsuit against the Border Patrol for a payment of about $2.3 million, which includes interest and attorney fees. He accused the agency of putting sensors in the ground on his property without his permission.
View full article here: The San Diego Union Tribune