Board of Supervisors v. Davenport & Co. LLC

CourtSupreme Court of Virginia
DecidedApril 18, 2013
Docket121191
StatusPublished

This text of Board of Supervisors v. Davenport & Co. LLC (Board of Supervisors v. Davenport & Co. LLC) is published on Counsel Stack Legal Research, covering Supreme Court of Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Board of Supervisors v. Davenport & Co. LLC, (Va. 2013).

Opinion

PRESENT: All the Justices

BOARD OF SUPERVISORS OF FLUVANNA COUNTY OPINION BY v. Record No. 121191 JUSTICE LEROY F. MILLETTE, JR. APRIL 18, 2013 DAVENPORT & COMPANY LLC

FROM THE CIRCUIT COURT OF FLUVANNA COUNTY Benjamin N. A. Kendrick, Judge Designate

In this appeal, we consider whether the circuit court

erred when it sustained a demurrer to a complaint filed by the

Board of Supervisors of Fluvanna County (the Board) against a

private financial advisor on the basis that the separation of

powers doctrine prevented the court from resolving the

controversy because the court would have to inquire into the

motives of the Board's legislative decision making. An inquiry

into the relationship between the separation of powers doctrine

and the motivation of legislators necessarily implicates

legislative immunity. For the reasons set forth below, we hold

that the Board effectively waived its common law legislative

immunity from civil liability and the burden of litigation, and

therefore reverse the circuit court judgment sustaining the

demurrer filed by Davenport & Company LLC (Davenport).

I. Background

The Board filed a complaint against Davenport in the

Circuit Court of Fluvanna County. The complaint included

allegations of breach of fiduciary duty (Count I), actual fraud (Count II), gross negligence (Count III), constructive fraud

(Count IV), unjust enrichment or disgorgement (Count V), breach

of contract (Count VI), and breach of the Virginia Securities

Act (Count VII).

In its complaint, the Board claimed that Davenport has

continuously served as the financial advisor to the Board for

more than fifteen years, during which David P. Rose (Rose),

Davenport's Senior Vice President and Manager of Davenport

Public Finance, served as the Board's principal contact person.

The Board asserted that Davenport, as financial advisor, made

knowingly false representations and used its fiduciary position

to persuade the Board to hire Davenport as an advisor regarding

the financing of the construction of a new high school (the

Project).

The Board claimed that Davenport made a presentation to

the Board in August 2008 in which it represented the estimated

borrowing cost for stand alone bonds to be 4.87 percent, with

the estimated borrowing cost for the pool of bonds offered by

the Virginia Public School Authority (pool bonds) at 4.81

percent. The Board also alleged that Rose specifically

represented that Fluvanna County could not refinance the bonds

if it participated in the pool bonds, which representation was

made knowingly and was materially false. The Board asserted

2 that it reasonably relied upon these representations when it

voted in favor of issuing stand alone bonds.

When the school bonds were issued in December 2008, the

stand alone bonds had reached an interest rate of 5.95 percent.

The pool bonds, issued three weeks earlier, however, carried an

interest rate of 4.75 percent. The Board alleged that

Davenport also breached its fiduciary duty when it failed to

disclose the significant difference between the interest rates

of the stand alone and pool bonds in August 2008 and the bonds'

interest rates in December 2008, when the bonds were ultimately

issued. The Board claimed that the County incurred nearly $18

million in excess interest payments on the stand alone bonds as

a result of Davenport's malfeasance. It requested

consequential damages in the amount of $18.5 million, $350,000

in punitive damages, attorneys' fees and costs, and

disgorgement of all fees paid to Davenport.

Davenport filed its amended demurrer, plea in bar, answer,

and affirmative defenses with the circuit court. In its

amended demurrer, Davenport argued that the court should

dismiss the complaint, with the exception of the claim for

unjust enrichment (Count V), as it violated the separation of

powers doctrine because the elements of the claims and

Davenport's defenses required the court to adjudicate issues

not properly before the judiciary. The circuit court,

3 following a hearing on the amended demurrer, agreed with

Davenport and held that the separation of powers doctrine

prohibited the court from resolving the dispute because to do

so would require inquiry into the motives of the Board. The

court sustained the demurrer with prejudice and refused to

allow the Board the opportunity to amend the pleadings. The

Board subsequently filed its timely appeal.

II. Discussion

A. Standard of Review

The standard of review applicable to the circuit court's

sustaining of a demurrer is well established:

A demurrer tests the legal sufficiency of a [complaint] and admits the truth of all material facts that are properly pleaded. The facts admitted are those expressly alleged, those that are impliedly alleged, and those that may be fairly and justly inferred from the facts alleged. The trial court is not permitted on demurrer to evaluate and decide the merits of the allegations set forth in a [complaint], but only may determine whether the factual allegations of the [complaint] are sufficient to state a cause of action.

A trial court's decision sustaining a demurrer presents a question of law which we review de novo. Furthermore, like the trial court, we are confined to those facts that are expressly alleged, impliedly alleged, and which can be inferred from the facts alleged.

Harris v. Kreutzer, 271 Va. 188, 195-96, 624 S.E.2d 24, 28

(2006) (internal citations and quotation marks omitted).

4 B. Issue of First Impression

In reviewing these arguments, we acknowledge that the

particular issue presented regarding Constitutional and common

law legislative immunity is one of first impression. In 1979,

the United States District Court for the Eastern District of

Virginia recognized the lack of precedent on the issue, stating

that "the Virginia Supreme Court has not had occasion to

construe the scope of the Virginia speech or debate clause."

Greenberg v. Collier, 482 F.Supp. 200, 202 (E.D. Va. 1979). In

the absence of any Virginia precedent on the issue, the court

turned to the "considerable authority applying and interpreting

the speech or debate clause of the United States Constitution"

in other jurisdictions. Id. It did so because "state and

federal immunities are very similar in their wording[, and]

they appear to be based upon the same historical and public

policy considerations." Id. Today, the Court has occasion to

evaluate the scope of the Constitutional legislative immunity

and its counterpart in common law. We, as the court in

Greenberg, will do so in reliance on state and federal case

law.

C. Separation of Powers

The Board first assigns error to the circuit court's

dismissal of the complaint based on the separation of powers

doctrine. It argues that the controversy at bar is not one

5 that would require the circuit court to interfere with other

branches of government. The Board claims that the court would

not be evaluating legislative motivation for the purpose of

overturning or invalidating legislation, but would instead be

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