San Diego-based law firm Lerach Coughlin Stoia & Robbins has vowed to challenge a US court ruling that the multi-billion 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 that the Fifth Circuit Court of Appeal in New Orleans was “wrong in the law” and that the firm are “going to seek a Supreme Court review immediately”.
Enron was the world’s largest energy-trading company, worth $68bn (£35bn), before it collapsed in December 2001. Its bankruptcy saw the loss of more than 5,000 jobs and a minimum of $1bn (£0.5bn) in retirement funds.
The three-judge panel yesterday (19 March) ruled that the investors cannot club together and sue New York-based Merrill Lynch, Zurich-based Credit Suisse and London-based Barclays in a single suit.
The investors would have to pursue the banks on individually, which will increase their costs dramatically, and according to Lerach, will mean that the plaintiffs will 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.”
Judge Grady Jolly and James Dennis concurred with Smith’s view.
The ruling does not affect the $7.3bn (£3.7bn) 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 Enron saga as it has not settled.
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 partner Patrick Coughlin also from Lerach Coughlin Stoia & Robbins.
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.