If the class of Enron investors suing the banking firms associated with the company were worried by last week’s decision in Stoneridge Investment Partners, they had reason to be.
Today, the U.S. Supreme Court denied their bid to proceed against the bankers from firms including Merrill Lynch and Credit Suisse Group. The order, a PDF file, can be found on the Court’s website here.
A day after the opinion in Stoneridge was handed down, Enron investors, citing “critical differences between Enron and Stoneridge,” petitioned the Supreme Court to distinguish the holding so as not to bar their pending securities lawsuit seeking billions from the Wall Street banking firms they say colluded with Enron officials leading up the company’s collapse in 2001. (The case is California Regents v. Merrill Lynch, 06-1341)
The 5th U.S. Circuit Court of Appeals had barred the case from proceeding as a class-action securities suit. The investors sought review from the Supreme Court, which put the request on hold until the Stoneridge case was decided.
In a petition and supplemental brief filed with the Supreme Court Wednesday – the day after the Stoneridge decision was handed down – the Enron investors tried to distinguish their case from the parameters of the Stoneridge holding.
“This Court’s decision in Stoneridge demonstrates critical differences between Enron and Stoneridge,” stated the investors’ supplemental brief in California Regents. “Stoneridge holds that the §10(b) right of action does not reach ordinary customer/supplier companies when their partners in ordinary business relations subsequently account improperly for the transactions entered between or among them. It does not rule out liability for fraud by financial professionals that is directed at securities transactions, i.e., transactions structured and designed to make quarterly and year-end numbers.”
In their reply brief, the banking firms claim that Stoneridge affirms that the suit should be barred, and calls the allegations in the complaint a “legal contrivance that attempts to string together scores of acts by Enron” and tie those acts to numerous third parties.
The Court denied certiorari today, effectively ending the case.
Today the Court also issued an opinion, holding that prison guards fall within the “law enforcement officer” exemption to the Federal Tort Claims Act, and therefore may assert sovereign immunity in Ali v. Federal Bureau of Prisons [PDF file].