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 that put together financing deals for the energy trader, which collapsed in 2001.
The rejection of the Enron appeal 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 financial institutions, in securities fraud cases.
The Supreme Court denied the appeal in a brief order, without any comment or recorded dissent. Outside lawyers have said a Supreme Court rejection of the appeal would mean an end to the lawsuit.
"Fundamentally it means it's over," said Jay Brown, a securities professor at the University of Denver's Sturm College of Law.
In the Enron case, a U.S. appeals court ruled for Merrill Lynch and Co Inc <MER.N>, Credit Suisse Group <CSGN.VX> and Barclays Plc <BARC.L> and held the lawsuit could not go forward.
Calls to the law firm representing the Enron investors were not immediately returned.
Merrill had no comment. Lawyers for Barclays could not immediately be reached for comment. Credit Suisse First Boston said it was pleased with the court's decision.
Lawyers for both the Enron investors and the investment banks initially had urged that the Supreme Court to hold their case until it had ruled in the other one.
Then late last week, lawyers for the banks urged that the appeal be denied, while attorneys for the investors urged the court to hear the appeal or send the case back to the appeals court for more proceedings in view of the high court's ruling.
In last week's ruling, the top court held by a 5-3 vote that shareholders could not sue third parties such as suppliers and banks in securities fraud cases unless investors directly relied on the parties' statements or representations when making investment decisions.
In the Enron case, the appeals court ruled that 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.
Citigroup <C.N>, Lehman Brothers <LEH.N>, Bank of America <BAC.N>, JPMorgan Chase <JPM.N> and CIBC <CM.TO> have settled with Enron plaintiffs and paid a total of about $7.3 billion.
(Reporting by James Vicini; Additional reporting by Rachelle Younglai; Editing by Brian Moss)