Status of Lawsuit to Recover
Tobacco Settlement Revenue Misappropriated
From Laguna Honda Replacement Project

In 2003, $25 million was misappropriated from the tobacco settlement revenue (TSR) account that was dedicated by the Board of Supervisors and the then Mayor to use for replacing Laguna Honda Hospital.  The $25 million was used to balance the City budget, which was an improper use of the TSR funds.  A citizens public-interest lawsuit was filed to require the City to repay the misappropriated $25 million, with interest.

Following a probable improper ruling by the Superior (trial) Court, the case has moved to the appeals process in the Court of Appeal, 1st Appellate District.  The following documents are related to the matter before the Court of Appeal.

Petition for Writ of Mandamus
June 8, 2005
“Approval by the Court of Appeal of this Respondents claim would put the judicial seal of approval on what is essentially a bait-and-switch, in which municipalities would be given the judicial go-ahead to first enact a bond ordinance which places a bond measure on the ballot; then draft a ballot proposal which has salutary language to persuade the voters to pass the measure; but which bond ordinance has completely contradictory wording which would nullify the salutary provisions of the ballot proposal. …”

Appellant’s Opening Brief
July 25, 2005
“The case at bar is plainly one of those cases, where justice and right require that equitable estoppel be applied against the City, to prevent it from taking a $99-plus million unfair advantage over the voters, by (1) promising up front to offset taxpayers’ costs by using all of the TSRs [tobacco settlement revenues] to construct the replacement Laguna Honda Hospital and service Proposition A bond debt, and (2) representing to voters, by its official Ballot Simplification Committee, that this is the meaning of Proposition A, but (3) sticking in a contrary clause at the back of the Voters Pamphlet, 22 pages later, so as to enable the City, – if allowed to do so by the courts, – to use tens of millions of the TSRs for other purposes of the City, (including misappropriating $25 million in fiscal 2003–2004 for uses not related to the Proposition A project).”

City’s Opposition Brief
September 13, 2005
On April 19, 1999, the Laguna Honda Hospital Replacement Planning Committee (a blue-ribbon style committee charged with making recommendations to the Health Commission, the Board of Supervisors and the then Mayor on how to rebuild Laguna Honda Hospital) voted to recommend to the San Francisco Health Commission that Laguna Honda be re-built with 1,200 beds. Two weeks later, on May 4, 1999, the Health Commission adopted Resolution Number 16-99 noting that the Replacement Planning Committee had adopted a recommendation to place 1,200
skilled nursing facility beds on the existing Forest Hill location [emphasis added].  Health Commission Resolution 16-99 RESOLVED that the Health Commission supported the Replacement Planning Committee’s proposal to build 1,200 skilled nursing beds, and also RESOLVED that the Health Commission supported use of the entire tobacco settlement revenue funds (now estimated to be $820 million).  The Health Commission resolution was forwarded to the Board of Supervisors, and the Board of Supervisors had the City Attorney draft the Proposition A language that was placed before the voters.

The City now contends, in its Opposition Brief, that the Board wrote an intentionally broad Proposition, which presented only in general terms to the voters language that was quite different from the Replacement Planning Committee’s recommendations and different from the Health Commission Resolution.  The City’s Brief argues that as a routine matter, municipalities frequently write intentionally vague, broad language on purpose, so as not to limit their future responsibilities to build what was promised.  The City also blames the victim (the voters) by stating that “Had the ... voters wanted to specify the type and size of the [LHH replacement facility] they [the voters] could have have done so by expressly including such specifications (i.e., 1,200 skilled nursing beds] in the Proposition A” language.  What the City Brief ignores is that it was not voters who wrote vague language; the City Brief also ignores that most voters do not realize that municipalities consciously choose to play the blame-the-voters/blame-the-victim game.

Finally, the City Brief asserts that a “... person may replace her car with a bicycle” in an effort to claim that the City can replace LHH with anything it wants, even presumably with a bike, rather than with a hospital.

Appellant’s Reply Brief
October 3, 2005
“The City [Respondents’] brief also inexcusably mis-states the contents of an appellate decision, and disregards case law concerning the relevance of the Digest of ballot measures by the City’s ballot committee, in a futile effort to argue that the ballot committee’s statement in the Voters Pamphlet of the meaning of Proposition A is neither binding upon the City, nor relevant. …”

The Appellant’s Reply Brief also notes that the City’s Opposition Brief deliberately elided (to leave out, or suppress intentionally) the fifth element contained in a California Appellate decision in the Associated Students of North Peralta Community College v. Board of Trustees case concerning bond measure “contracts.”   The City’s Opposition brief noted only four of the five elements of bond contracts, eliding the fifth element to be considered by the Courts: “Extrinsic evidence,” in this case the very “extrinsic” documents by which the City obtained passage of Proposition A in 1999, including the 1999 Ballot Digest, and the paid arguments for and against Proposition A that were included in the voter guide.

Judicial Notice Order and Appellant's Request for Judicial Notice
October 24, 2005 and October 4, 2005, Respectively
A Court of Appeals order taking judicial notice that the City is engaged in reducing the 1,200-bed LHH replacement facility without considering — or using — all tobacco settlement revenues to offset the LHH replacement project cost overruns.



Copyright (c) 2005 by Committee to Save LHH.  All rights reserved.  This work may not be reposted anywhere on the Web, or reprinted in any print media, without express written permission.  E-mail the
Committee to Save LHH.