Circuit Court reverses stay on producing public records

Back to TopCommentsE-mailPrintBookmark and Share

A northern Indiana District Court was wrong in granting a Wisconsin city’s motion for a stay, which allowed the city to withhold public records from the bank suing it for violating securities law, the 7th Circuit Court of Appeals concluded today. The issue was whether the order issued by a state court for the city to produce the documents could be stayed by federal law because the request constituted discovery proceedings.

American Bank was one of several owners of bonds issued by the City of Menasha, Wisc., to finance the conversion of an electric power plant it owned to a steam-generated plant. The project went way over budget and the city defaulted on the bonds. The bond owners filed a class-action suit against Menasha, claiming it violated federal securities law by not disclosing to prospective buyers of the bonds material information about the conversion project.

Shortly after the suit was filed, American Bank asked to inspect public records relating to the conversion project pursuant to Wisconsin’s Public Records Law. The city was slow to respond, so a state court ordered the city to comply with the request. The city asked the District Court for a stay under subsection 4(b)(3)(D) of the Securities Litigation Uniform Standards Act of 1998. This act amended the Private Securities Litigation Reform Act to let District Courts “stay discovery proceedings in any private action in a State court, as necessary in aid of its jurisdiction, or to protect or effectuate its judgments, in an action subject to a stay of discovery pursuant to [section 78u-4(b)(3)(B), quoted above].”

The Circuit judges had to decide whether this provision authorizes the District Court to enjoin a private securities plaintiff from gaining access to records that a state’s public records law entitles members of the public to see and copy at their own expense. The judges rejected Menasha’s argument that American Bank was engaged in discovery and can’t appeal the stay unless it can invoke one of the exceptions to the rule against interlocutory appeal of discovery orders. The 7th Circuit instead agreed with American Bank that the stay is not the stay of a discovery order and it can only be an injunction. Only a stay of discovery is authorized by the SLUSA, wrote Judge Richard Posner in American Bank v. City of Menasha, et al., No. 10-1963.

“In any event there is no expense to the defendant, as he doesn’t have to rummage through his files to respond to a demand for information - at least qua defendant; it is happenstance that in this case the custodian of the records and the defendant are one and the same - the City of Menasha,” wrote the judge. “The City shouldn’t be allowed to use its dual status to gain an advantage over other defendants in private securities litigation. And while it’s true that if American Bank uses any of the information it gleans from the records to oppose the motion that the City has filed to dismiss the class action suit the City’s lawyers will have to analyze the information, so will American Bank’s lawyers; the analysis costs are symmetrical.”

The city also wanted the stay to prevent American Bank from suggesting to a newspaper that it request and publish the records or even hint at a suggestion. Making the stay that broad would “create a precedent of unmanageable scope,” wrote the judge. He called the city’s position wrong and futile.

“Of course if states create discovery procedures but call them ‘requests for public records,’ perhaps by deeming all records in the files of private corporations public, this would not defeat a motion for a stay. Substance trumps form. But in this case substance and form coincide,” wrote Judge Posner.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
Subscribe to Indiana Lawyer
  1. I have a degree at law, recent MS in regulatory studies. Licensed in KS, admitted b4 S& 7th circuit, but not to Indiana bar due to political correctness. Blacklisted, nearly unemployable due to hostile state action. Big Idea: Headwinds can overcome, esp for those not within the contours of the bell curve, the Lego Movie happiness set forth above. That said, even without the blacklisting for holding ideas unacceptable to the Glorious State, I think the idea presented above that a law degree open many vistas other than being a galley slave to elitist lawyers is pretty much laughable. (Did the law professors of Indiana pay for this to be published?)

  2. Paul Hartman of Burbank, Oh who is helping Sister Fuller with this Con Artist Kevin Bart McCarthy scares Sister Joseph Therese, Patricia Ann Fuller very much that McCarthy will try and hurt Patricia Ann Fuller and Paul Hartman of Burbank, Oh or any member of his family. Sister is very, very scared, (YES, I AM) This McCarthy guy is a real, real CON MAN and crook. I try to totall flatter Kevin Bart McCARTHY to keep him from hurting my best friends in this world which are Carolyn Rose and Paul Hartman. I Live in total fear of this man Kevin Bart McCarthy and try to praise him as a good man to keep us ALL from his bad deeds. This man could easy have some one cause us a very bad disability. You have to PRAISAE in order TO PROTECT yourself. He lies and makes up stories about people and then tries to steal if THEY OWN THRU THE COURTS A SPECIAL DEVOTION TO PROTECT, EX> Our Lady of America DEVOTION. EVERYONE who reads this, PLEASE BE CAREFUL of Kevin Bart McCarthy of Indianapolis, IN My Phone No. IS 419-435-3838.

  3. Joe, you might want to do some reading on the fate of Hoosier whistleblowers before you get your expectations raised up.

  4. I had a hospital and dcs caseworker falsify reports that my child was born with drugs in her system. I filed a complaint with the Indiana department of health....and they found that the hospital falsified drug screens in their investigation. Then I filed a complaint with human health services in Washington DC...dcs drug Testing is unregulated and is indicating false positives...they are currently being investigated by human health services. Then I located an attorney and signed contracts one month ago to sue dcs and Anderson community hospital. Once the suit is filed I am taking out a loan against the suit and paying a law firm to file a writ of mandamus challenging the courts jurisdiction to invoke chins case against me. I also forwarded evidence to a u.s. senator who contacted hhs to push an investigation faster. Once the lawsuit is filed local news stations will be running coverage on the situation. Easy day....people will be losing their jobs soon...and judge pancol...who has attempted to cover up what has happened will also be in trouble. The drug testing is a kids for cash and federal funding situation.

  5. (A)ll (C)riminals (L)ove (U)s is up to their old, "If it's honorable and pro-American, we're against it," nonsense. I'm not a big Pence fan but at least he's showing his patriotism which is something the left won't do.