A state appeals court on Thursday approved the dismissal of a lawsuit brought by a dozen school districts against San Mateo County and its Treasurer over financial losses suffered when Lehman Brothers collapsed, ruling that such investment decisions are “discretionary activity which should not be the subject of scrutiny and second-guessing”.
The districts sued the County and then-Treasurer Lee Buffington over approximately $20 million in investment losses that followed the bankruptcy of the investment bank Lehman Brothers in September 2008. The funds were required by law to be invested in a pool managed by the County Treasurer.
Overall, public agencies in San Mateo County collectively lost $155 million in Lehman investments. These agencies included the 12 districts as well as the County itself, cities and numerous special districts.
In its ruling, the appeals court in San Francisco said that a Treasurer’s “decisions as a public servant investor bear the hallmarks of discretionary activity which should not be the subject of scrutiny and second-guessing by a coordinate branch of government.”
“We are pleased with the decision and that a three-judge panel essentially came to the conclusion that we have argued all along: the Treasurer cannot be sued for making complex investment decisions or for failing to predict Lehman’s collapse,” said Stuart Gasner of Keker & Van Nest, a San Francisco law firm representing the County and the Treasurer.
“What’s important to remember is that Lehman’s collapse came shortly after company executives reassured investors that the company was sound,” Gasner added.
The court’s decision will allow County officials to focus on a separate suit filed in federal court in New York that seeks to hold Lehman executives personally accountable for defrauding investors.
Read the Court Ruling.
(Note: Mr. Buffington passed away in December 2011.)
The suit was brought by: San Mateo Union High School District, Menlo Park City Elementary School District, San Mateo County Superintendent of Schools, Belmont-Redwood Shores Elementary School District, Cabrillo Unified School District, Burlingame Elementary School District, Jefferson Elementary School District, Ravenswood City School District, San Bruno Park Elementary School District, San Carlos Elementary School District, Los Lomitas Elementary School District, Portola Valley Elementary School District and Woodside Elementary School District.
Stuart Gasner 415-676-2209 or firstname.lastname@example.org