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Keker & Van Nest Wins Appeal in $20 Million Suit Over Lehman Bankruptcy

Press Release

A state appeals court on Jan 31 affirmed 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 the County and Treasurer’s Lead Trial Counsel Stuart Gasner of Keker & Van Nest.

“What’s important to remember is that Lehman’s collapse came shortly after company executives reassured investors that the company was sound,” Gasner added.

Gasner also pointed out that, “This was an ill-advised lawsuit from the very beginning, because the plaintiffs were essentially attempting to move money from one pocket of the County to another."

Gasner centers his practice in the areas of white collar criminal and securities defense, intellectual property litigation and complex corporate disputes. A federal prosecutor before joining Keker & Van Nest, Gasner has tried more than 20 cases to verdict before juries across the United States.

Keker & Van Nest attorneys Michael Celio argued the appeal; Ajay Krishnan assisted in writing the winning briefs.

Celio handles white collar criminal cases, complex civil litigation, and enforcement actions brought by the U.S. Securities and Exchange Commission or the Department of Justice. Krishnan focuses on complex commercial disputes and intellectual property litigation. He has tried a number of cases to verdict, including three as first chair.