FEDERAL COURT RULES TO KEEP MOST DEFENDANTS IN ENRON SHAREHOLDERS' LAWSUIT
December 20, 2002
Motions to dismiss by J.P. Morgan, Citigroup, Merrill Lynch, CS First Boston, Canadian Imperial Bank of Commerce, Barclays, Arthur Andersen and Vinson & Elkins denied; Bank America and Lehman Brothers also face claims
The federal judge handling the Enron Corp. securities lawsuit ruled today (Dec. 20) against several major financial institutions, law firms and the Arthur Andersen accounting firm, substantially denying most defendants' motions to be dismissed from the case. The ruling clears the way for Enron shareholders to begin the process of depositions and evidence discovery in the case.
In a separate decision, the judge, Melinda Harmon, also ruled that documents provided by defendants during discovery would not be sealed from the public.
"Today's decision by Judge Harmon is a major victory for Enron's investors," said James E. Holst, general counsel for the University of California, which is lead plaintiff in the shareholders' class action suit. "We are gratified by the obvious care with which Judge Harmon has made her decision and will be studying the opinion in detail over the coming days. We look forward to aggressively pursuing the case on behalf of the class."
In a 306-page ruling issued in the U. S. District Court for the Southern District Court of Texas in Houston, Harmon denied in their entirety the motions of J.P. Morgan Chase, Citigroup, Credit Suisse First Boston, Canadian Imperial Bank of Commerce, and Barclays Bank as well as those of Enron's accountants, Arthur Andersen LLP, and Enron's corporate legal counsel, Vinson & Elkins. Merrill Lynch's motion was also denied provided that plaintiffs supplement their complaint as indicated by the court. The motions by Bank America and Lehman Brothers to have Section 10(b) fraud claims dismissed were granted, but the plaintiffs' claims of liability under Section 11 of the 1933 Securities Act were allowed to proceed. Harmon dismissed the claims against Deutsche Bank, and granted a motion from the Chicago law firm of Kirkland & Ellis.
"This decision confirms the validity of our legal claims against the major defendants, and leaves in the case defendants with resources to pay substantial compensation to the class," said William Lerach, a partner in the Enron lead counsel firm of Lerach Coughlin Stoia Geller Rudman & Robbins. "It also should open the way for discovery, which has been stayed pending the decision, to commence.
"We will review the text of the decision over the coming days and provide additional details on the court's analysis as appropriate. We are also pleased that the court has rejected the defendants' attempts to have the evidence produced during the lawsuit kept secret."
In April, the University of California, as lead plaintiff, filed a consolidated complaint that added nine financial institutions, two law firms and other new individual defendants to a list that already included 29 current and former Enron executives and Arthur Andersen LLP. Harmon over the summer began reviewing defendants' motions to be dismissed from this complaint.
The 485-page amended complaint laid out the Enron scheme in detail, naming the nine financial institutions as key players in a series of fraudulent transactions that ultimately cost shareholders more than $25 billion. Two law firms were also added to the list of Enron defendants because of their significant and essential involvement in the fraud -- Enron's Houston-based corporate counsel Vinson & Elkins as well as Kirkland & Ellis, which Enron used to represent a number of so-called "special purpose entities."
View the Court's ruling on the motions to dismiss.
View the Court's ruling on the protective order to keep documents public.