A Virginia circuit court is preparing to reconsider Fluvanna County, Va.’s lawsuit against financial advisor Davenport & Co., after the state Supreme Court rejected the firm’s motion for it to reconsider and reverse its April decision that went against Davenport.
The county is seeking damages for misleading financial advice it claims Davenport provided while serving as its FA on a $67.5 million bond sale in 2008. The board asserts that it relied on Davenport’s services when issuing bonds and making other financial decisions, and that the FA breached its fiduciary duty and committed fraud when it encouraged the county to issue the debt in a standalone deal rather than participate in a pool transaction.
A Circuit Court of Fluvanna County judge sided with Davenport in a February 2012 ruling that the court could not decide the case under the commonwealth’s separation of powers doctrine. The judge said the court was not allowed to question the reasoning of the Board of Supervisors, whose members are elected.
But the county appealed the ruling to the Supreme Court.
In a unanimous April 18 opinion, penned by Justice Leroy F. Millette Jr., the high court said the separation of powers doctrine should not apply because the board knowingly gave up its legislative immunity from civil liability. That immunity was designed to give lawmakers the freedom to act without fear of having to defend their motives in a legal proceeding. Millette said the board did as required to waive its protection and allow a court to examine its legislative reasoning and how Davenport may have influenced it.
The Supreme Court on Tuesday notified the circuit court that it must reconsider the case, after it rejected Davenport’s May 14 petition for a rehearing. In that petition, Davenport’s attorneys argued that the court is creating a new precedent that warrants a closer look.
“First, a premise of the majority opinion is that waiving legislative immunity can solve the separation of powers problem in this case,” Davenport’s lawyers wrote. “That premise is incorrect, and neither party here has ever asserted otherwise. Second, the majority opinion appears to hold that the 2011 Board of Supervisors waived the individual legislative immunity of the 2008 board members. If so, this court seems to be the first ever to hold that a legislative body, by corporate action, can waive the immunity of individual members.”
Now that the Supreme Court has rejected Davenport’s argument and mandated the lower court revisit the case, it is difficult to predict with certainty the speed and trajectory it will move at, said attorneys on both sides. It could resume in several weeks, or go back to mediation. William Allcott, a lawyer at McGuireWoods LLP, which represents Davenport, said the firm continues to deny any wrongdoing and remains confident of prevailing in the case. “Davenport continues to stand 100% behind the advice it gave to Fluvanna,” he said.
The case has yet to be heard on its merits because of the earlier dismissal. Allcott said the court would again have to deal with certain obstacles, including a possible statute of limitations barrier, before the court could begin consideration of the case in earnest.