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Circuit Court reverses stay on producing public records

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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.

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  1. Such things are no more elections than those in the late, unlamented Soviet Union.

  2. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  3. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  4. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  5. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

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