Two former board members of Downtown Santa Monica Inc. filed a lawsuit Friday against the city and its council, challenging the removal of six directors from the nonprofit that manages the downtown business district.
Leonid Pustilnikov and Jon Farzam filed the suit in Los Angeles Superior Court on Sept. 5, arguing the City Council violated the organization's bylaws and California nonprofit law when it removed the board members and installed interim appointees.
The legal challenge comes as Santa Monica grapples with mounting financial pressures. The City Council is scheduled to consider declaring a fiscal emergency at tomorrow’s council meeting. If approved, the resolution would grant the city manager broad powers to address the crisis.
The timing underscores broader instability at City Hall, where the city attorney, community development director, and police chief have all recently resigned.
"The City Council's abrupt decision was unnecessary and has created instability and disruption at DTSM," said Jon Farzam, one of the plaintiffs. "At a time when many downtown businesses are struggling to survive, downtown relies on steady leadership to keep the community safe, clean, and vibrant."
The dispute centers on events from July 29, when Downtown Santa Monica Inc. held an emergency meeting and amended its bylaws to require that city-appointed directors could only be removed "for cause." That same evening, the City Council voted to remove all six directors without citing specific reasons and later pressed the organization to install interim replacements according to the lawsuit.
“Downtown businesses already pay their share through assessments, and they deserve stability, not political disruption. This lawsuit is about restoring trust, making sure decisions are made fairly and with respect for the bylaws. DTSM’s mission is to keep downtown clean, safe, and vibrant, and that gets harder when City Hall creates instability instead of accountability, “ said Farzam.
Pustilnikov argued the removals were retaliatory, claiming directors had raised concerns about the city meeting its baseline service responsibilities.
"DTSM directors were raising concerns about the City meeting its baseline service responsibilities — obligations the City now admits it cannot afford," Pustilnikov said. "Instead of addressing the problem transparently, the City chose to remove directors and destabilize DTSM at a critical moment."
The lawsuit seeks to rescind the removals, reinstate the removed directors and establish that the city lacks authority to remove board members without cause.
The mass firing stemmed from a July 25 memo authored by Councilman Barry Snell, along with Councilmembers Dan Hall and Caroline Torosis, requesting the removal of all six city appointees. The memo cited "growing concerns regarding the lack of transparency and accountability" but provided vague justifications for the unprecedented action. Council members argued the board was too heavily weighted toward property and business owners and lacked representation from individuals not economically connected to the organization.
The removal followed the announcement that CEO Andrew Thomas would depart after failing to secure a $50,000 raise to his $250,000 salary. Mayor Lana Negrete was the sole city council opponent of the mass firing, questioning the emergency justification and comparing the action to authoritarian tactics. DTSM manages the downtown business improvement district with a $10 million annual budget, funded primarily by special assessments.
Downtown Santa Monica, Inc. (DTSM) is a private 501(c)(3) nonprofit organization that partners with the City of Santa Monica to manage the downtown business improvement district. It evolved from the former “Bayside District Corporation” and today oversees services like maintenance, hospitality ambassadors, marketing events (such as the annual ICE skating rink), and economic development programs in the city’s central business district. DTSM operates under a services agreement to enhance downtown beyond baseline city services, with the mission of promoting economic vitality and community life in the area.
DTSM is governed by a 13-member Board of Directors structured to balance public and private stakeholder input. Six board members are appointed by the Santa Monica City Council, six are elected by the downtown property owners, and one seat is reserved for the Santa Monica City Manager (or their designee).