ATLANTA - A 152-year-old default has generated two more lawsuits against Mississippi, this time with about $15 million at stake.
Both suits - one filed by a group of 15 European bondholders and the other by a trio of Americans-were filed July 29 in the Hinds County, Miss., Chancery Court.
Each party seeks to overturn a section of Mississippi's constitution that bars the state from making good on the bonds.
The suits follow the rejection last December of a lawsuit filed by four of the European bondholders before the U.S. district court in Jackson that also sought to overturn Mississippi's ban on repayment.
The federal lawsuit, which did not name a money figure, was dismissed on the grounds that the 11th Amendment to the U.S. Constitution bars citizens of foreign nations from suing a non-consenting state in the federal court.
"We consider these two new suits the collection phase of our efforts," said Paul M. Neville, a Jackson-based attorney representing the European investors. He said that although the two suits are distinct, the groups have coordinated their efforts.
Neville also said the group of four European bondholders that filed suit in federal court last year has appealed that court's December ruling. He said a federal appeals court has scheduled oral arguments in the case at a hearing set for Nov. 5.
Each of the two new lawsuits named seven defendants: Mississipi, the State Bond Commission, the State Bond Retirement Commission, Gov. Kirk Fordice, Treasurer Marshall Bennett, Attorney General Mike Moore, and Edward Rank, executive director of the state's Department of Finance and Administration.
Bennett said yesterday in an interview that the state would continue to fight repayment of the defaulted bonds.
"I understand why the bondholders are pursuing this, but the state must also continue to defend its constitutional prohibition," Bennett said.
The new European bondholders' suit demands that Mississippi repay a total of $13,808,550: $1,575,000 in defaulted principal held by the plaintiffs, and $12,233,550 in back interest.
The American bondholders' suit asks for repayment of about $1.1 million:$137,00 in principal held by plaintiffs and about $1 million in back interest.
The bonds held by the investor groups represent a portion of the $7 million in state general obligation bonds that were issued in the 1830s but defaulted in 1841, following the collapse of two banks funded with proceeds from the bonds.
In 1875, the state amended its constitution to ban repayment. This language was included in the state's present constitution, adopted in 1890.
In the 152 years since the debt defaulted, many bondholders--including the poet William Wordsworth, Queen Isabella of Spain, and the prince of Monaco - have tried and failed to force the state to repay.
The latest effort began last year when the European Association of Mississippi Bondholders, a London-based group of investors who had bought some of the defaulted bonds, decided to launch the federal lawsuit.
In their 12-page complaint filed last month, the European investors argued that the 1875 amendment to Mississippi's constitution and state laws forbidding repayment of the bonds are "null and void...by reason of their contravention and violation of the plaintiff's rights, immunities and/or privileges arising under the Constitution, laws and treaties of the United States."
In particular, the suit alleges that the ban on repayment is an "unconstitutional impairment of contract by the state of Mississipi," violating numerous sections of the U.S. Constitution.
These violations include the limits on state powers spelled out in Article 1, Section 10; the ban on the taking of property without compensation outlined in Amendment 5; and the due process and equal protection clauses of the 14th Amendment.
In addition, the suit charges that Mississippi's nonpayment runs afoul of a 1795 friendship treaty between the United States and Great Britain.
The lawsuit also contends that the State Bond Retirement Commission, created in 1944 to retire state debts, is required to repay the borrowing.
In addition, the suit argues that the Bond Commission should exercise its power to retire outstanding debt out of the state's yearend surplus, which stood at $160 million when fiscal 1993 ended on June 30.
"We regard the state in an unusual position with its massive budget surplus to take care of this old problem," Neville said.
The 10-page suit filed by the American bondholders uses similar language to demand repayment.
"The attempted repudiation of these bonds by the state of Mississippi through its constitutional-...refusal to pay these bonds constitute an unconstitutional impairment of contract...in violation of Article 1, Section 10 of the U.S. Constitution [and] the 5th and 14th Amendments," the suit says.
Both suits ask the court to enjoin defendant Rank, as director of the Finance and Administration Department, to issue a warrant for payment of the claims.