WASHINGTON — The Fluvanna County Board of Supervisors voted 5-0 to petition the Virginia Supreme Court for an appeal of a lower court’s dismissal of their lawsuit against former financial advisor Davenport & Co. over $67.5 million of 2008 bonds.
The board had claimed in its seven-count lawsuit that Davenport misled it and pushed it to finance a new high school through a standalone bond issue in December instead of participating in a less costly pool bond deal that had closed the previous month.
It had asked for a trial before a jury and sought $18.5 million in compensatory damages, $350,000 in punitive damages, disgorgement of all fees paid to Davenport, and recovery of attorneys’ fees and other costs. The $18.5 million was the amount of “excess interest payments” the board claimed the county will be paying over the life of the bonds.
Davenport, which had served as the county’s financial advisor for 15 years, denied the charges, saying it fully and accurately explained several financing options to the board. The bonds were sold during a time of interest rate volatility in the midst of the financial crisis, it said.
The firm also suggested that politics were at play. Most of the board members who supported the standalone bond issue have left the board. The board rehired Davenport as its FA in 2009 and did not terminate its contract until 2010.
Fluvanna County Circuit Court Judge Benjamin N.A. Kendrick verbally dismissed the case “with prejudice,” on Feb. 23, meaning it cannot be refiled in the circuit court. Kendrick agreed with Davenport that the court could not decide the case under the state constitution’s separation of powers doctrine.
Davenport’s lawyers with McGuireWoods LLP had argued the board was exercising a delegated legislative power when it authorized the conduit bond deal and that courts cannot revisit such legislative decisions.
Shaun Kenny, chairman of the Board of Supervisors and acting county administrator, said Wednesday that he is disappointed the case was never argued on its merits, but confident the Supreme Court will take up the case.
“Dismissal with prejudice is basically, 'You brought it to the wrong court,’ ” Kenny said. “Should the case be heard on its merits, we do believe we’ll prevail.”
William Allcott, a lawyer at McGuireWoods, said Davenport remains confident in its position.
The circuit court has not yet filed a written order in the case but is expected to do so in the next week or two. When it does, the board will have 30 days to file a notice of appeal with the circuit court, and then 90 days to petition for an appeal before the state Supreme Court.
