A state appeals court on Thursday (Jan. 31) approved the dismissal of a lawsuit brought against San Mateo County by 12 county school districts including the Menlo Park City, Las Lomitas, Portola Valley and Woodside districts over the collective loss of about $20 million in investments resulting from the 2008 Lehman Brothers collapse.
The districts sued the county and its treasurer at the time, Lee Buffington, in January 2011, claiming that the county failed to act "with care, skill, prudence and diligence" in managing the county investment pool that school districts are required, for a substantial fee, to put their bond revenue and other working funds in.
Other public agencies in the county, and the county itself, had funds in the investment pool, which lost a total of about $155 million with the Lehman Brothers bankruptcy.
The appeals court ruled that the county's investment decisions are "discretionary activity which should not be the subject of scrutiny and second-guessing," according to a press release from the county.
Of the local school districts that joined the legal action, the Menlo Park City School District took the biggest hit by far: It lost nearly $4 million. The Ravenswood School District lost about $854,500; the Las Lomitas district, almost $400,000; the Portola Valley district, nearly $150,000; and the Woodside district, about $100,000.
The Sequoia Union High School District, which didn't participate in the lawsuit, lost about $6.5 million.
The school districts' actions were led by the county Office of Education, headed by Superintendent Anne Campbell.
The lawsuit asserted that the treasurer's office violated state and county investment policies; failed to adhere to legally required prudent investment practices; failed to properly diversify the $155 million in investments "among sectors of the economy"; and failed to sell the Lehman notes "after learning of deterioration in the finances, credit rating, and stock price of Lehman."
After filing the claim two years ago, Superintendent Campbell told the Almanac that her office, school district representatives and the county had been working together for nearly two years to find ways to recover the money, but that the talks didn't yield satisfactory results. She said the districts not only wanted their money back, but want "to be sure that the policies of the county investment pool have been changed to make sure this doesn't happen again."
In November 2011, a San Francisco Superior Court judge dismissed the lawsuit, ruling that the county and its treasurer were immune from civil suits. The appeals court was asked to review the decision.