A state appeals court on Thursday approved the dismissal of a lawsuit brought by a dozen local school districts against San Mateo County and its Treasurer over financial losses suffered when Lehman Brothers collapsed.
According to the ruling, such investment decisions are "discretionary activity, which should not be the subject of scrutiny and second-guessing."
A long list of Peninsula and Coastside school 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 of 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. This included the 12 local school districts, as well as the County itself, several 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."
Stuart Gasner, an attorney with Keker & Van Nest, a San Francisco law firm that represents the County and the Treasurer, said in a statement Thursday, "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."
"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 full Court Ruling.
The lawsuit was brought by the following local school districts:
- 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
- Woodside Elementary School District
What do you think of the court's decision? Do you think the County Treasurer should be held accountable for how he decided to invest $155 million in our taxpayer money? Or was the collapse of Lehman Bros. unpredictable, therefore meaning Buffington's decision should be let go? Do you agree that County Treasurers' investment decisions should be 'above scrutiny?' Tell us your thoughts in the comments below.
Editor's Note: Former San Mateo County Treasurer Lee Buffington passed away in December of 2011.
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