The City of San Diego was the target of a lawsuit on May 31, 1989 charging that the presence of the cross violated the California Constitution and the first amendment of the United States Constitution relating to separation of church and state in the United States.
On December 3, 1991, Gordon Thompson, Jr., a judge for the United States District Court for the Southern District of California, ruled in favor of the plaintiff, Philip K. Paulson, resident of San Diego and a Vietnam War veteran, noting that the cross was permanently positioned inside a public park and was maintained at taxpayers' expense.
He further noted that it violated Article 1, Section 4 of the California Constitution, which is known as the "No Preference" Clause.

During this first phase of the case, the plaintiffs were represented pro bono by lawyer and legal scholar Peter Irons.
He discontinued his involvement in the case in 1998 when threats made him fear for the safety of his two daughters.

On June 2, 1992, San Diego voters approved Proposition F, which allowed transfer of the 22 feet of Mt. Soledad Natural Park under the cross to a non-profit corporation for maintenance of a historic war memorial.
p. 185  In 1993, the city appealed the 1991 District Court decision (permanent injunction forbidding the permanent presence of the cross on publicly owned land) to the Ninth Circuit Court of Appeals, which upheld the District Court injunction, holding that the mere designation of the cross as a war memorial was not enough to satisfy the separationist No Preference Clause of the California Constitution.
The Ninth Circuit Appellate Court held that "highly visible, religiously significant Easter crosses, erected in public parks owned and maintained by local government, in the absence of any symbols of other religions, and without any independent historical significance, violated the 'No Preference' Clause of the California Constitution".
The City and County of San Diego petitioned and were granted a hearing en banc (a vote by the entire 28 judges of the court).
They lost by a unanimous vote by all 28 judges.

In response to the injunction, in 1994, the city sold 224 square feet (21 m²) of land at the base of the cross for $24,000 to the Mount Soledad Association.
At that time, the city did not solicit or consider any bids or offers from other prospective buyers of this land and the Association clearly stated its intention to keep the cross as part of its proposed war memorial.
 p. 185 
On September 18, 1997, Judge Thompson ruled that both the negotiated sale of the cross site to the Mount Soledad Memorial Association and the size for the plot sold to the Mount Soledad Memorial Association violated two separate provisions of the California Constitution.
Judge Thompson wrote, "it is the exclusion of any other purchasers of or bidders for the land that gives the appearance of preferring the Christian religion that the California Constitution forbids."
Judge Thompson also wrote that "the City's attempt to comply with this Court's order by selling only a small portion of the land underneath the Mount Soledad cross still shows a preference or aid to the Christian religion."
Judge Thompson added, "Both the method of sale and the amount of land sold underneath the Mount Soledad cross do not cure the constitutional infirmities outlined in this Court's previous Order." (
referring to the December 3, 1991 order stating "a permanent injunction forbidding the permanent presence" of the Mount Soledad cross on public property.
Judge Thompson again gave the City of San Diego another 30 days to remove the cross).
The City of San Diego was the target of a lawsuit on May 31, 1989 charging that the presence of the cross violated the California Constitution and the first amendment of the United States Constitution relating to separation of church and state in the United States. On December 3, 1991, Gordon Thompson, Jr., a judge for the United States District Court for the Southern District of California, ruled in favor of the plaintiff, Philip K. Paulson, resident of San Diego and a Vietnam War veteran, noting that the cross was permanently positioned inside a public park and was maintained at taxpayers' expense. He further noted that it violated Article 1, Section 4 of the California Constitution, which is known as the "No Preference" Clause.
During this first phase of the case, the plaintiffs were represented pro bono by lawyer and legal scholar Peter Irons. He discontinued his involvement in the case in 1998 when threats made him fear for the safety of his two daughters.
On June 2, 1992, San Diego voters approved Proposition F, which allowed transfer of the 22 feet of Mt. Soledad Natural Park under the cross to a non-profit corporation for maintenance of a historic war memorial. p. 185  In 1993, the city appealed the 1991 District Court decision (permanent injunction forbidding the permanent presence of the cross on publicly owned land) to the Ninth Circuit Court of Appeals, which upheld the District Court injunction, holding that the mere designation of the cross as a war memorial was not enough to satisfy the separationist No Preference Clause of the California Constitution. The Ninth Circuit Appellate Court held that "highly visible, religiously significant Easter crosses, erected in public parks owned and maintained by local government, in the absence of any symbols of other religions, and without any independent historical significance, violated the 'No Preference' Clause of the California Constitution". The City and County of San Diego petitioned and were granted a hearing en banc (a vote by the entire 28 judges of the court). They lost by a unanimous vote by all 28 judges.
In response to the injunction, in 1994, the city sold 224 square feet (21 m²) of land at the base of the cross for $24,000 to the Mount Soledad Association. At that time, the city did not solicit or consider any bids or offers from other prospective buyers of this land and the Association clearly stated its intention to keep the cross as part of its proposed war memorial. p. 185 
On September 18, 1997, Judge Thompson ruled that both the negotiated sale of the cross site to the Mount Soledad Memorial Association and the size for the plot sold to the Mount Soledad Memorial Association violated two separate provisions of the California Constitution. Judge Thompson wrote, "it is the exclusion of any other purchasers of or bidders for the land that gives the appearance of preferring the Christian religion that the California Constitution forbids." Judge Thompson also wrote that "the City's attempt to comply with this Court's order by selling only a small portion of the land underneath the Mount Soledad cross still shows a preference or aid to the Christian religion." Judge Thompson added, "Both the method of sale and the amount of land sold underneath the Mount Soledad cross do not cure the constitutional infirmities outlined in this Court's previous Order." (referring to the December 3, 1991 order stating "a permanent injunction forbidding the permanent presence" of the Mount Soledad cross on public property. Judge Thompson again gave the City of San Diego another 30 days to remove the cross).
Mount Soledad Cross