Exactly eight years after Enron Corp filed for bankruptcy protection, a federal judge has dismissed a lawsuit by investors against banks they accused of helping the energy company commit fraud.
Wednesday's dismissal by U.S. District Judge Melinda Harmon in Houston federal court came after Enron investors had already obtained $7.2 billion of settlements, a record for U.S. class-action litigation according to Cornerstone Research.
Lawyers for the lead plaintiff, the Regents of the University of California, concluded there was no chance to obtain meaningful further recovery in light of court rulings.
The potential costs would have been tens of millions of dollars to the class to pursue a case that, legally, had ended, said Patrick Coughlin, a partner at Coughlin Stoia Geller Rudman & Robbins LLP in San Diego who represents the regents, in an interview. There was no point in continuing.
The bank defendants that had remained in the lawsuit included Bank of America Corp's Merrill Lynch unit, Barclays Plc, Credit Suisse Group AG Royal Bank of Canada, Royal Bank of Scotland Group Plc and Toronto-Dominion Bank.
Claims were also dismissed against three onetime Enron officials: former Chief Executive Jeffrey Skilling, former chief accounting officer Richard Causey and former investor relations chief Mark Koenig. All got prison sentences for their roles in Enron's collapse.
Citigroup Inc and JPMorgan Chase & Co are among other banks that previously settled with the investors.
Once the seventh-largest U.S. company, Enron filed for Chapter 11 protection on December 2, 2001 after using off-balance-sheet vehicles and other accounting tricks to hide tens of billions of dollars of debt.
Coughlin said $4.6 billion of the settlement funds have been distributed, with another $1 billion likely to follow this month and the rest possibly by next summer.
It's basically 30 cents on the dollar of the client losses, which is a terrific recovery in light of the legal hurdles we faced, he said.
The U.S. Supreme Court is expected by early summer to rule on Skilling's appeal of his conviction, which he said was based on a flawed legal theory.
A federal appeals court had upheld the conviction but vacated Skilling's 24-year prison sentence, citing error by the trial judge. Skilling has not been resentenced.
The investor case is Newby et al v. Enron Corp et al, U.S. District Court, Southern District of Texas, No. 01-3624.
(Reporting by Jonathan Stempel, editing by Dave Zimmerman)