Southampton Town Trustees Served With Injunction; Bank Accounts Remain Frozen

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The 374-year-old Southampton Town Board of Trustees was served with a court injunction last Wednesday, February 12, ordering members to turn over control of their financial accounts to the town comptroller’s office.

The injunction had been looming ever since a State Supreme Court ruling in late January declared that the Trustees are a division of the town government, not an autonomous entity, and may not maintain bank accounts outside the purview of the comptroller’s office. The Trustees maintain nine bank accounts containing close to $1 million, mostly revenue from the sale of sand excavated from Mecox Bay.

Nonetheless, the timing of the injunction seemed to catch the Trustees off guard. The board abruptly canceled its meeting scheduled for last Wednesday afternoon because, as noted by Trustees President Eric Shultz in a terse statement given to those gathered last week, “We can’t conduct any business—they’ve shut us down.”

“Three hundred seventy years,” Trustee Edward Warner muttered with a shake of his head, as board members filed into their offices following the cancellation.

He was referring to how long the Trustees have sat as an elected board, dating back to the founding of pre-colonial Southampton. The Trustees are the oldest elected board in the country.

An attorney for the Trustees, Richard Cahn, filed an appeal of the ruling the following day and has advised the Trustees that the filing of the appellate papers automatically stays the injunction until the appeal is adjudicated. The Trustees have refused to turn over their books or their bank accounts to town control, and they have also refrained from conducting any business in the meantime. The Trustees offices in Town Hall remain open and staffed.

“We’ve decided to not take any financial action at this point until we get some further legal guidance,” Mr. Shultz said. “We are assuming the other side is going to challenge our appeal, and the automatic stay, and we don’t want to keep dispersing checks if we’re going to find out later that was not in our power.”

Indeed, when the attorney for the plaintiffs in the case, Lee Snead, served Southampton Town Attorney Tiffany Scarlato’s office with the injunction order, he also presented legal case law that he said indicates that an appeal would not automatically stay the injunction.

On Friday, the day after the Trustees’ appeal was filed, the Town Board passed a resolution demanding that the Trustees hand over their books, on Ms. Scarlato’s guidance. But the town attorney said later that, because the Trustees are taking the position that the stay is in place, the plaintiffs would have to seek an interpretation from a judge on whether or not they must comply with the injunction while the appeal is reviewed.

The initial lawsuit was brought by a group of residents of the Village of West Hampton Dunes, some of whom have also been embroiled in a seven-year lawsuit brought by the Trustees over the residents’ claim to ownership and development rights of land within the village that the Trustees say belongs to them. The Trustees have painted the suit as an attempt to rob them of the funding necessary to continue the costly legal battle with West Hampton Dunes.

If the injunction is not shelved automatically by the appeal, the Trustees’ position is somewhat up in the air. The decision seems to indicate that if they turn over their checkbooks, the Trustees would technically have to go to the Town Board for permission to spend any of it, including on retainers for an attorney to handle the appeal. Mr. Cahn and another attorney for the Trustees, Joe Lombardo, worked pro bono this week.

“It’s an interesting discussion, what they can and can’t do with this right now,” Ms. Scarlato said.

If the injunction, in the short term, and the ruling, in the long term, were to stand, the implications for the Trustees are equally curious. Town Supervisor Anna Throne-Holst said this week that she did not see why having the comptroller controlling the Trustees’ accounts would be seen as a vastly different situation than what exists now. She added that fears that the Town Board would suddenly hogtie the Trustees and stanch their ability to spend are overblown.

“I appreciate that is their concern but, unlike the rumor and innuendo that is out there, I fully support the role of the Trustees, I support what they are commissioned and mandated to do,” Ms. Throne-Holst said. “We would set the budget for them just like we set the budget for anyone else. If they want to contract with someone, we don’t say you can’t do it.

“Much as our superintendent of highways, or clerk or tax receiver, they retain autonomy over their departments,” she continued. “We administer funds, but that doesn’t mean we interfere with their day-to-day management. Nothing would change.”

Mr. Shultz said those items, along with concerns that the Town Board could try to influence their legal stances—board members, including Ms. Throne-Holst, have said in the past that they would have liked to see the Trustees settle their lawsuit with West Hampton Dunes—there is worry that funds brought in by the Trustees’ lucrative sand sales could be redirected elsewhere in the town.

“At this point, the Town Board has still not indicated to us that money is not going to be removed from Trustees’ accounts without our consent,” Mr. Shultz said. “They haven’t put it in writing that they will not use that money for other things.”

Ms. Throne-Holst said such a scenario is simply not a consideration and is not how any of the town’s other departments and divisions, which have their own accounts, are handled.

The Trustees have already turned to the Town Board for permission to spend money. On the very day the injunction was issued, the Town Board convened a special meeting to approve a resolution allowing the Trustees to spend up to $8,000 to hire excavators to close the Mecox Bay cut ahead of last Thursday’s coastal storm. Mr. Shultz said the board was lucky to be able find a quorum of members to approve the funding, adding that the situation is a prime example of his concerns about being beholden to town control.

“There’s things the Trustees do that have to be done at the spur of the moment, that if we have to rely on the Town Board to have a meeting, it could be too late,” he said. “It’s a very complicated situation. We’re breaking new ground here.”

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