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From Securities Regulation Daily, September 5, 2014

Ex-city official can’t use qualified immunity to hide from SEC

By Mark S. Nelson, J.D.

A former City of Miami budget director cannot use the qualified immunity doctrine to avoid SEC enforcers, the Eleventh Circuit said today in an unpublished opinion. The ruling ends Michael Boudreaux’s bid to use the interlocutory appeals process to get the circuit court to upend the district court’s refusal to toss the SEC’s case against him. The Eleventh Circuit said Boudreaux’s case was the first federal appeal to raise qualified immunity as a defense to an SEC action targeting a municipal officer (SEC v. City of Miami, et al., September 5, 2014, Per Curiam).

SEC action. The SEC’s latest enforcement action against Miami alleged that the city and Boudreaux engaged in securities fraud and violated a prior cease and desist order for similar misdeeds that occurred in the mid-1990s. According to the SEC, Boudreaux mishandled city money and furnished false budget data that would end up in financial reports mentioned in the city’s bond offerings in an attempt to hide the city’s weak finances.

Qualified immunity is a common law doctrine that shields public officials from vexatious lawsuits for carrying out discretionary tasks while holding them accountable if they misuse their powers. Although the court credited Boudreaux’s observation that qualified immunity has shielded public officials from damages suits under other laws, this case is different because of the SEC’s enforcement stance and the type of penalty the agency wants to impose on Boudreaux.

Court ruling. The Eleventh Circuit said neither the federal securities laws’ antifraud provisions nor the common law back the use of qualified immunity in an enforcement action by a federal agency. Citing the Supreme Court’s 2013 Gabelli opinion, the court noted that the SEC as enforcer is different from a plaintiff in a private suit because of its ability to punish wrongdoers.

Moreover, the court looked to the nature of the monetary relief sought. The civil monetary penalties the SEC asked for are different from a claim for compensation arising from an actual pecuniary loss. The court also said that Boudreaux’s view of its 1995 D’Aguanno opinion is inapt because that case merely explained what “damages” means for a person who is sued in his individual capacity.

The case is No. 14-10363.

Attorneys: Amie Riggle Berlin for the SEC. Brian A. Dominguez (Cole Scott and Kissane PA) for the City of Miami. Benedict P. Kuehne (Law Office of Benedict P. Kuehne PA) for Michael Boudreaux.

Companies: City of Miami

MainStory: TopStory AlabamaNews FloridaNews GeorgiaNews CreditRatingAgencies Enforcement FraudManipulation SecuritiesOfferings

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