Enron investors appeal to U.S. Supreme Court

WASHINGTON (Reuters) - Enron Corp. investors appealed on Thursday to the U.S. Supreme Court, seeking review of their class-action lawsuit against investment banks that put together financing transactions for Enron, which collapsed in 2001.

The investors seek to overturn last month's ruling by a U.S. appeals court that their lawsuit cannot proceed, a big victory for Merrill Lynch and Co. Inc. MER.N, Credit Suisse Group (CSGN.VX) and Barclays Plc (BARC.L).

The appeals court ruled that the banks did not play enough of a role in Enron's deception for the court to determine that they manipulated the price of Enron's securities, which meant investors could not sue jointly as a class.

The U.S. Court of Appeals for the 5th Circuit wrote that U.S. District Judge Melinda Harmon's decision to grant class-action status to the case was partly based on "legal error" regarding the banks' liability.

In appealing to the high court, lawyers for the plaintiff investors said the appeals court's decision "is wrong and dramatically misreads statutory language and this court's precedents."

Arguing that the banks can be held liable for billions of dollars in damages under federal securities law, the lawyers said in the appeal: "The banks were not only aware of the deception -- they actively engaged in and thereby committed an active concealment."

In seeking Supreme Court review, they also cited conflicting appeals court rulings on the legal issue at the heart of the case.

The Supreme Court last month agreed to hear a case raising a similar issue on whether shareholders of companies accused of securities fraud can sue other companies on charges that they also took part.

Lawyers for the plaintiffs said the Enron case would be a "suitable companion" to be heard with the other case. Or they said the Enron case could be held until the Supreme Court decides the other case.

The banks, which had advised Enron on certain financial transactions, had argued that Judge Harmon wrongly allowed investors to allege they were primary participants in the fraud that eventually led to Enron's collapse.

The banks next will file their response to the appeal, and it could be several months before the Supreme Court decides whether to hear the appeal.