Claims and Bad Faith Law Blog

Summons for Subprime Conduct?

    The existence and extent of fiduciary duties, if any, are themes explored in many situations made by the subprime collapse.  For example, buyers may sue their real estate agent for alleged breach of a fiduciary duty, see David Streitfeld, "Feeling Misled on Home Price, Buyers Are Suing Their Agent" p. A1, col. 4 (New York Times Nat'l Ed., Tuesday, January 22, 2008), among many other possible targets of alleged fiduciary breaches.   See also Vikas Bajaj, "If Everyone's Finger-Pointing, Who's to Blame?" p. C1, col. 2 (New York Times Business Day Nat'l Ed., Tuesday, January 22, 2008). 

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Florida Good Faith Fiduciary Duties: Are Investment Pools Exempt?

     "It's bad faith at best and fraud at worst."  City Attorney
      for Port St. Lucie, Florida, quoted on p. A15, col. 6 of
                       The New York Times, National Edition,
                                      New Year's Day, 2008.

Maybe.  Time and Judicial Holdings in decided cases may tell. What the Port St. Lucie City Attorney was commenting on is the way Florida's State-Run investment pool was run, until recently, for investments by local governments.  State-Run investment pools are exempt, at present, from Federal oversight and regulation.  They were not supposed to invest in anything like subprime mortgage risks, but Florida's pool apparently did invest in a number of such risks, drawn by the lure of high returns and receiving instead unprotected collateral now devalued to junk bond status.

     Florida had the largest State-Run investment pool in the United States.  It now has the first State-run investment pool that experienced a run on the bank, and the first State-run investment pool to impose a freeze on withdrawals which had never previously been restricted.  The story is told by Kirk Semple & Mary Williams Walsh, "Fund Frozen, Florida Towns Feel the Pinch" p. A1, col. 3 (New York Times Nat'l Ed., Tuesday, January 1, 2008).

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