San Francisco Superior Court Judge Richard Kramer Thursday dismissed a case brought by a group of Peninsula school districts alleging San Mateo County officials violated their fiduciary duties by investing too heavily in Lehman Brothers holdings. Ruling from the bench, Judge Richard Kramer found that the plaintiffs failed to allege that the suit had been brought in a timely matter; that a section of California Government Code precluded them from bringing common law causes of action for negligence and breach of fiduciary duty against the County; and that the schools had failed to state a sufficiently specific breach of contract claim.
Judge Kramer has given plaintiffs until July 18 to amend their complaint.
“The case unfairly attacks the County for failing to predict the collapse of Lehman Brothers,” said Mr. Gasner. “The plaintiffs will get another chance to amend their complaint, but we think this case will not survive motions practice for two reasons. The suit was not filed in a timely fashion and the defendants are immune from suits like this one, that attempt to second-guess discretionary investment decisions after the fact. These are important threshold issues.”
The County and its former Treasurer Lee Buffington are represented by Mr. Gasner, along with Keker & Van Nest partners Michael Celio and Ajay Krishnan and associate Eli Ewing.
Amid the nationwide financial crisis, plaintiffs brought suit against the County following the 2008 Lehman Bros. bankruptcy. Gasner pointed out that the plaintiffs’ attempt to recoup $20 million from the County has only incurred legal expenses on both sides and accomplished nothing for taxpayers. San Mateo County—along with four other counties—is pursuing separate litigation against Lehman, asserting the financial institution committed fraud and breach of fiduciary duty by concealing its dire financial situation from investors.
The next hearing in the case is scheduled for Sept. 13, 2011 in San Francisco Superior Court.