City Agrees to Pepe’s Towing Settlement

Car Being Towed By Tow Truck

UPDATE: As of Sept. 28, 2020, the settlement between Pepe’s Towing and the City of San Bernardino has been covered by the San Bernardino Sun.

LOS ANGELES, September 25, 2020 — The City of San Bernardino (“City”) has agreed to pay $1.3 million to resolve a civil rights lawsuit brought by Southern California towing business Pepe’s Towing Service (“Pepe’s”), which had filed suit in its fight against the corrupt practices of the City and its officials.

Pepe’s is represented by Larson O’Brien partners Stephen G. Larson and R.C. Harlan.

The settlement agreement follows a federal judge denying the City’s motion for partial summary judgment and just before the suit was set to go to trial.

Pepe’s claims against the City and numerous former and current officials spans more than 15 years of constitutional rights violations related to the City’s alleged corrupt favoritism in granting no-bid tow contracts in exchange for political contributions. Pepe’s, which has rotation tow contracts with various cities in San Bernardino, Riverside, and Los Angeles Counties, tried unsuccessfully for over 18 years to join the tow rotation for the City.

The City’s rotation tow contracts, which are governed by the City Council through a bidding process, were renewed with the same select private tow companies without any open bidding for approximately 20 years. When Pepe’s owner Manny Acosta attempted to work with the City’s police chief and then-members of the City Council to have an open bidding process, the City effectively blocked equal opportunity to any tow companies outside of the existing rotation by enacting a “grandfather” provision favoring previous tow carriers.

The City also only enforced certain contract requirements such as “minimum lot size” against new applicants, including Pepe’s, which were knowingly impossible to meet. Meanwhile, tow companies with already existing contracts continued to be approved with missing, incomplete, or falsified inspection results.

In 2019, Pepe’s filed a suit against the City with civil rights allegations including First Amendment retaliation and conspiracy to keep Pepe’s from obtaining a tow rotation contract. The suit brought to light deeper corruption within the tow rotation contracts scheme upon discovery that the existing tow carriers under contract contributed to the campaigns of elected City officials, including the current mayor.

The City moved for partial summary judgment on the grounds that Pepe’s did not provide sufficient evidence regarding its First Amendment retaliation claim, but U.S. District Court Judge Stephen V. Wilson rejected that motion, finding on Aug. 10, 2020, that summary judgment was “inappropriate.”

The City, which up until Judge Wilson’s order had rejected Pepe’s attempts to resolve the complaint reasonably, agreed to a settlement of $1.3 million, the terms of which include a stipulated judgment in favor of Pepe’s signed by Judge Wilson on Sept. 25, 2020.

“This case is about Pepe’s fight against municipal corruption and unjust favoritism. Mr. Acosta and his company simply want to be treated fairly and have the same opportunities as any other towing company in the cities in which they serve. Such fairness ensures that those communities receive the best service for their tax dollars. We hope that Pepe’s case and others like it help end the corruption, misfeasance, and lack of accountability amongst some city officials.” 

— Stephen G. Larson


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