WASHINGTON — A lawyers group has filed a friend-of-the-court brief asking a federal appeals court to reconsider its panel's decision to disregard a qualified immunity defense for Miami, Fla.'s former budget director, warning that allowing the Securities and Exchange Commission lawsuit against him to proceed will hurt municipalities everywhere.
International Municipal Lawyers Association executive director and general counsel Charles Thompson said his group, a non-profit, which represents and advocates for local government lawyers, found out about the case from lawyers in Miami and decided that the stakes were high for local governments.
"We spent a lot of time looking at it and thinking about the issue," Thompson told The Bond Buyer Friday.
Friend-of-the-court briefs are submitted by individuals or groups that are not parties to a case, but wish to offer information or perspective for the court's consideration. The court is under no obligation to consider it, but large organizations often file such briefs in cases where the decision may broadly affect many people besides those directly involved.
The SEC charged Boudreaux and Miami with fraud last year, alleging that the city made "numerous material misrepresentations and omissions to investors" in 2009 bond offering documents and financial statements. The commission alleged that Boudreaux facilitated the wrongdoing by executing money transfers designed to "mask" a deficit in the city's general fund. Both the city and Boudreaux have denied the charges and vowed to fight to clear their names.
Boudreaux asked a federal district court in Miami to throw out the case against him on the basis of "qualified immunity," a legal principle that protects government officials performing discretionary functions when their actions do not clearly violate someone's established statutory or constitutional rights.
The district court dismissed Boudreaux's argument, saying the SEC is seeking monetary penalties that would be paid to the U.S. Treasury and would provide equitable relief rather than traditional civil damages that would be punitive.
Boudreaux appealed to the U.S. Court of Appeals for the Eleventh Circuit in Atlanta in January, asking the three-judge panel to overturn the district judge's decision to deny his motion to dismiss the SEC's case. The appeals court ruled against Boudreaux in September, and Boudreaux is now requesting an "en banc" rehearing before the full court.
Thompson, who signed the IMLA letter, urged that the court grant that hearing and overturn the earlier decision, warning it is an "overly broad and ill-advised conclusion that will have severe effects on the ability of municipalities to recruit talented candidates into municipal service, and on the ability of municipal employees to make discretionary decisions, without hesitation, especially when the law is not clearly established."
IMLA attacked some of the legal basis for the decisions at both the district and appellate level, particularly the distinction between civil monetary damages and civil penalties. Previous case law has established that qualified immunity is an allowable defense in civil suits seeking punitive damages beyond compensation, IMLA argued.
The group also questioned the appeals panel's distinction between private suits and federal enforcement action. The court noted that there "there is no history at common law of civil immunities being applied as a defense to federal enforcement actions," but IMLA argued that such a distinction is unworkable and probably at odds with legislative intent.
"If Congress had intended to exempt SEC enforcement actions from the common law defense of qualified immunity it would have done so," IMLA told the court.
The case against both the city and the court was put on hold pending the appeals court's decision, and has not yet resumed. En banc rehearings are rarely granted. Boudreaux's only remaining option would be an appeal to the U.S. Supreme Court.
