Supreme Court rejects appeal by Enron investors
WASHINGTON (Reuters) - The Supreme Court on Tuesday rejected an appeal by Enron Corp investors seeking to proceed with a $40 billion class-action lawsuit against investment banks like Merrill Lynch & Co Inc that put together financing deals for the now defunct energy trader.
The Supreme Court denied the appeal without any comment or recorded dissent -- a rejection legal experts said means an end to the lawsuit.
"Fundamentally, it means it's over," said Jay Brown, a securities law professor at the University of Denver's Sturm College of Law.
Enron investors had asked the Supreme Court to hear the case after an appeals court ruled for Merrill Lynch, Credit Suisse Group and Barclays Plc and said the lawsuit could not go forward.
The appeals court said the banks did not play enough of a role in the company's deception for the court to determine that they manipulated the price of Enron securities, which meant investors could not sue jointly as a class.
The $40 billion lawsuit accused the banks of underwriting transactions for the company that hid debt and provided false positive cash flow from operations, among other things.
Credit Suisse First Boston said it was pleased with the court's decision. A Merrill spokesman had no comment, a lawyer for Barclays could not be reached.
The rejection of the Enron appeal on Tuesday followed the Supreme Court's ruling in a similar case on January 15 that sharply limited the ability of shareholders to sue third parties, such as banks and advisers, in securities fraud cases.
In that case, the top court ruled 5-3 that shareholders could not sue such third parties unless investors directly relied on the parties' statements or representations when making investment decisions.
At the time, the law firm representing Enron investors said the high court had made a distinction between third parties in the goods and services arena, and those involved in the investment sector.
On Tuesday, the investors' law firm said it was not giving up.
"The fight continues to hold these banks accountable for orchestrating the Enron fraud," said Dan Newman, a spokesman for Coughlin Stoia Geller Rudman & Robbins, which represents Enron investors.
"Enron shareholders may have viable options in district court because of misleading information provided by the banks in offering documents and analyst statements," he said.
Citigroup, Lehman Brothers, Bank of America, JPMorgan Chase and CIBC have settled with Enron plaintiffs and paid a total of about $7.3 billion.
Enron, once a high-flying energy company, collapsed in a 2001 accounting scandal. Former Enron chief executive Jeffrey Skilling is serving a 24-year sentence for his conviction on conspiracy, fraud and insider trading.
(Reporting by James Vicini and Rachelle Younglai; Editing by Brian Moss/Tim Dobbyn)
