The U.S. Supreme Court dealt a probable fatal blow yesterday to Enron Corp. investors' efforts to recover $40 billion from Wall Street banks in the collapse of the Texas energy company in 2001.
Without comment, the justices refused to hear arguments in the Enron case. Attorneys for shareholders immediately vowed to return to federal court in Houston in an attempt to prove that the investment banks misled the public and helped conceal Enron's true financial condition.
"It's an uphill battle, and we'll keep fighting," said Patrick Coughlin, the lead attorney for the stockholders.
Greg Markel, a lawyer not connected with the case who represents corporate clients in securities-fraud lawsuits, said that shareholders' "chances of succeeding ... are nearly zero."
Enron's demise wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans at what had been the seventh-largest company in the country.
The Supreme Court's refusal to hear the Enron appeal was anticipated after last week's ruling in another securities-fraud case in which the justices ruled that a company's investors must show that they relied on deceptive acts committed by third parties before they can be sued.
In the case a week ago, the third parties were suppliers to one of the nation's largest cable-TV companies. In the case of Enron, the third parties are Merrill Lynch & Co., Credit Suisse First Boston and Barclays Bank PLC.
In the Enron lawsuit, the 5th U.S. Circuit Court of Appeals in New Orleans has already ruled that the banks did not act directly in the market for Enron securities.
Coughlin says that the legal team for Enron investors has evidence that "the analysts knew what was going on" and that the attorneys for the Enron investors can show that the banks "buoyed the market for Enron securities."
To date, Enron plaintiffs have settled for $7.3 billion with several financial institutions, including JPMorgan Chase & Co., Citigroup and Canadian Imperial Bank of Commerce.