14 Agencies Lose Bid to Sue O.C. in District Court

Fourteen California cities and government agencies that sued Orange County for the unpaid balances of their investment pool accounts have temporarily lost their bid to have their lawsuits heard in U.S. District Court here.

U.S. District Judge Gary L. Taylor on Tuesday rejected a request by the agencies to have their lawsuits transferred from Bankruptcy Court.

The 14 agencies are known as the “Killer Bees” for having chosen Option B under a court-approved settlement that gave pool investors selecting that option only 77% of their pre-bankruptcy deposits but the right to sue for the unpaid 23%. That right was surrendered by the vast majority of pool investors, who under Option A chose to receive 77% of their deposits plus a series of IOUs for the balance.

Taylor agreed with county bankruptcy lawyers that the request by the Option B agencies was premature, because U.S. Bankruptcy Judge John E. Ryan had not yet ruled whether the agencies’ complaints could proceed in his court.

John Amsden, a county bankruptcy lawyer, said Taylor’s ruling “was clearly correct,” and the Killer Bees should “never be in District Court.” He said they should be treated like other creditors in Bankruptcy Court.

“No amount of fancy legalese can turn the Option B’s lead into gold,” Amsden added.

In identical 78-page complaints filed in U.S. Bankruptcy Court here, the 14 agencies said the ill-fated investment pool run by then-County Treasurer-Tax Collector Robert L. Citron functioned as a trust, and the county is therefore liable for the funds entrusted to it. The agencies are seeking $44 million of their own money plus triple damages.

Larry Engle, a San Francisco lawyer who is coordinating the Option B lawsuits, was not available for comment.

But Amsden said the county will ask Ryan at a Nov. 28 hearing to dismiss the Option B lawsuits entirely.

The Option B agencies are: the city of Mountain View, city of Santa Barbara; city of Atascadero; city of Montebello; Montebello Redevelopment Agency; Santa Barbara Redevelopment Agency; Santiago Water District; city of Milpitas; city of Claremont; city of Buena Park; Buena Park Redevelopment Agency; city of Yorba Linda; Yorba Linda Redevelopment Agency, and Yorba Linda Water District.