A judge on Thursday agreed to dismiss a Fluvanna County lawsuit that claimed a Richmond-based financial company duped officials into issuing nearly $70 million in bonds to build a new high school so the company could earn more by charging higher fees.
The lawsuit, filed Sept. 6 in Fluvanna County Circuit Court, alleged officials with Davenport & Company LLC “knowingly or negligently misled the board in order to increase its own revenues at the expense of the board and Fluvanna County taxpayers” in the 2008 bond issue.
County officials say they were neither surprised nor deterred by the decision and that they will appeal the dismissal to the Virginia Supreme Court.
Judge Benjamin N.A. Kendrick dismissed the case with prejudice, meaning the county cannot refile the lawsuit. Kendrick said the state Constitution separates the legislative branch — the county board, in this case — and the judicial branch of government so that the courts cannot delve into reasons why the county board made its decision, court officials said.
“The judge said that this was not the kind of case of the courts in Virginia will consider,” said William Allcott, of the McGuireWoods law firm in Richmond. Allcott represented Davenport. “The separation of powers means that the courts don’t inquire into the decision-making process of legislative branches of the state government.”
Davenport officials were pleased with the dismissal.
“We have always been confident that Davenport would prevail on the merits of the case, and we remain so, because throughout our long relationship with Fluvanna County we always acted in the county’s best interest,” said Coleman Wortham III, chairman and chief executive officer of Davenport. “We are gratified that all parties will be spared the time and expense of a trial on this meritless claim.”
County officials said they stand by their claims and plan to appeal the decision.
“It was not entirely unexpected that it would likely have to go to the Supreme Court,” said Shaun V. Kenney, chairman of the county board. “The Board of Supervisors plans to appeal. It doesn’t change the substance of the [lawsuit.]”
The lawsuit came in response to events in 2008 when the board was planning to issue bonds to build the county’s new high school. The stock market crashed in September before the bonds could be issued, leaving the board wondering whether to join with the Virginia Public School Authority’s bond issue or go it alone.
In December 2008, the county board approved the use of standalone bonds, which the lawsuit alleged cost the county almost $18 million in excess interest payments. The county bonds were issued two weeks after the Virginia Public School Authority approved the pool bonds.
The state bond pool came in at an interest rate of 4.75 percent. The county bonds were sold at 5.95 percent, according to the lawsuit.
The county claimed Davenport should not have recommended the standalone bonds and should have offered other alternatives.
Davenport officials said they offered the county several options, “carefully explaining every aspect of each option. The contention that Davenport recommended one option over another to enhance its fees is absurd.”
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