San Diego-based law firm Lerach Coughlin Stoia Geller Rudman & Robbins has vowed to challenge a US court ruling that the multibillion-dollar class action filed by the Enron investors against the energy company’s banks must be thrown out.
William Lerach, the lead partner for the investors, said the Fifth Circuit Court of Appeal in New Orleans was “wrong in the law” and that the firm is “going to seek a Supreme Court review immediately”.
Enron was the world’s largest energy-trading company and was worth $68bn (£34.76bn) before it collapsed in December 2001. Its bankruptcy saw the loss of more than 5,000 jobs and a minimum of $1bn (£511.24m) in retirement funds.
The three-judge panel ruled last week (19 March) that the investors cannot club together and sue New York-based Merrill Lynch, Zurich-based Credit Suisse Group and London-based Barclays in a single suit.
The investors would have to pursue the banks individually, which would increase their costs dramatically. According to Lerach, this will mean the plaintiffs would not be able to continue the litigation.
Judge Jerry Smith wrote in the opinion: “Presuming plaintiffs’ allegations to be true, Enron committed fraud by misstating its accounts, but the banks only aided and abetted that fraud by engaging in transactions to make it more plausible; they owed no duty to Enron’s shareholders.”
Judges Grady Jolly and James Dennis concurred with Smith’s view.
The ruling does not affect the $7.3bn (£3.73bn) in earlier settlements reached with other Enron banks, but will make a difference for the banks such as the Royal Bank of Scotland, which is still embroiled in the still unsettled Enron saga.
The judgment comes just weeks before a trial of the class action was scheduled to start. It overturns a ruling by Judge Melinda Harmon of the Federal District Court in Houston, who had overseen a number of Enron-related cases.
Lerach, acting for the plaintiffs, was assisted by fellow Lerach Coughlin partner Patrick Coughlin.
Partner Richard Clary from Cravath Swaine & Moore represented Credit Suisse, while partner Stuart Baskin from Shearman & Sterling acted for Merrill Lynch. Litigation managing partner David Braff from Sullivan & Cromwell was instructed by Barclays.