An Orange County Superior Court judge rejected Costa Mesa's request Monday to dismiss a lawsuit challenging the City Council's effort to outsource municipal services.
The decision could move the longstanding lawsuit closer to trial.
The Costa Mesa City Employees Assn.'s civil action contests the city's widespread austerity measures in 2011, when the council targeted 18 city services for potential outsourcing and issued more than 200 layoff notices.
In December 2012, the council rescinded the remaining pink slips, and city officials asked the CMCEA to drop its lawsuit, filed in May 2011.
The association refused, contending that outsourcing was still on the table even if the layoffs notices were not.
Judge Robert Monarch wrote that the city's outsourcing plan is still in place, potentially making it open for judicial review, "even if not all of it is currently being implemented through layoffs or executed contracts."
In the Santa Ana courtroom Monday, Monarch called his decision "probably one of the toughest calls I've ever had to make."
The association's attorney, Richard Levine, said in the absence of a city ordinance saying otherwise, the union has to assume outsourcing is still possible in Costa Mesa.
Costa Mesa's attorney John Vogt contended that the lawsuit should have been dismissed because the layoffs are now out of the picture.
Only one of the original 18 city services targeted for outsourcing, the city jail, has actually been outsourced, Vogt said.
Considering that, the CMCEA should not base its lawsuit on all 18 and "chasing phantom claims," Vogt said in a follow-up interview Tuesday, adding that "if they have a problem with outsourcing the jail, that's the thing they should focus on."
"Costa Mesa hasn't contracted out street sweeping or animal control," he said. "We are litigating that. Why do [Costa Mesa taxpayers] have to spend money litigating claims that are non-justiciable?"
Jennifer Muir, a spokeswoman for the Orange County Employees Assn., which represents the CMCEA, said Costa Mesans shouldn't have been asked to spend money defending the lawsuit in the first place.
Judges "have told this City Council majority they're wrong," she said. "How many times will be enough before they stop spending taxpayer money on lawyers to advance their illegal outsourcing scheme?"
Attorneys for the association and city are next scheduled to meet in court July 8.