Louisiana: toss lawsuit against pro-gun bond underwriting policy

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A Louisiana judge should throw out a lawsuit challenging the State Bond Commission’s decision to exclude two underwriting firms from working on the state’s Garvee bond deals because of their gun policies, the commission’s attorneys argue.

The state was responding to the lawsuit filed by Louisiana resident Sandra Brown in the 19th Judicial District Court in Baton Rouge on June 18.

Brown contends that the Bond Commission unlawfully prohibited Citi and Bank of America Merrill Lynch from participating in the underwriting pool for the issuance of the state’s first grant anticipation revenue vehicle bonds last year. The two banks were barred because commissioners disliked firearms policies they enacted after the February 2018 gun massacre of 14 students and three adults at Marjory Stoneman Douglas High School in Parkland, Florida.

BAML said it would stop lending to companies that make assault-style guns for non-military purposes. Citi’s policy asked new retail sector clients to adhere to “best practices” policies for firearms sales, including a minimum age of 21 for gun buyers and not selling bump stocks or high-capacity magazines.

Brown's lawsuit seeks an injunction barring the Bond Commission from disqualifying banks in the future for the same reasons.

“Plaintiff fails to state a cause of action because the facts alleged in the petition do not demonstrate that the Bond Commission committed a direct violation of a prohibitory law,” said an Aug. 8 filing on behalf of Louisiana Attorney General Jeff Landry.

The state gave five more reasons why the litigation should not go forward, including the fact that Brown failed to object within 30 days of the publication of a notice that the commission intended to issue the Garvee bonds.

That notice, published Dec. 18, 2018, said objections to the bonds or the proceedings that authorized them must be filed within 30 days or the debt would be presumed to be legal and “no court shall have the authority to inquire into such matters.”

The state’s response to the lawsuit was largely anticipated, said Brown’s attorney, David LaCerte, a partner with Sternberg, Naccari & White LLC.

“While the state argues that the matter is subject to a 30-day time limitation, it is important to note that the petition expressly does not seek to overturn any bond issued and the 30-day provision applies to the challenge of issued bonds,” LaCerte said. “If the suit sought an overturning of the bonds issued, the 30-day challenge restriction would clearly apply.”

LaCerte added, “The plaintiff here is only requesting a prospective declaration and is not challenging the bonds themselves.”

LaCerte said his brief responding to the state is due Oct. 9. A hearing is scheduled Oct. 17.

During the process of selecting underwriters for the Garvee deals, the Bond Commission on questionnaires asked those interested if they had gun policies that “restrict or would otherwise infringe on the constitutionally protected rights of the citizens of the state to lawfully keep and bear arms.”

Both Citi and BAML indicated on their responses that their policies would not affect the rights of individuals to bear arms.

Landry, in a letter to Bond Commission chairman and state Treasurer John Schroder, said both banks’ responses were “misleading and disingenuous,” and would justify excluding them from being in the underwriting pool.

The commission voted 7-6 on Aug. 16, 2018 to block Citi and Bank of America Merrill Lynch from being considered as senior managers on the Garvee bond deals.

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Sell side Garvee bonds Lawsuits State of Louisiana Louisiana Bond Commission Bank of America Merrill Lynch Citigroup Louisiana