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Court to Lawyers: Stop Beating a Dead Decision
Definitely dead.
"Scheme liability," that is, for third parties such as lawyers, accountants and investments banks in cases alleging corporate fraud on investors.
Coughlin Stoia Geller Rudman & Robbins, William S. Lerach's former law firm, tried a Hail Mary pass of sorts last Thursday, filing a brief at the Supreme Court arguing that their $40 billion in claims against Enron's investment banks could somehow survive the court's 5-3 ruling in Stoneridge Investment Partners v. Scientific-Atlanta.
Well, let's just say Lerach's former partners did not have a Tom Brady moment.
When the justices sat down for their Friday conference, a regular event to dispose of petitions with issues that track decisions rendered earlier in the week, they put the nails on the coffin of scheme liability.
"The petition for a writ of certiorari is denied," the justices ordered in the Enron case, called Regents of the University of California v. Merrill Lynch et al. The order notes that Justice Anthony M. Kennedy "took no part in the consideration or decision of this petition." Kennedy penned the majority opinion Stoneridge.
Meanwhile, the Supreme Court ordered the 9th Circuit Court of Appeals to reconsider a ruling that allowed "scheme liability" claim in Avis Budget Group v. California State Teachers' Retirement. That case alleges that business partners of Homestores.com, among them Time Warner, participated in an effort to pump up its financials.
The Supreme Court explicitly ordered the 9th Circuit to reconsider the case "in light of" the justice's ruling in Stoneridge.
Update: Dan Newman, spokesman for Coughlin Stoia, says the Enron plaintiffs are still not giving up:
"The fight continues to hold the banks accountable for orchestrating the fraud as Enron shareholders have viable options in District Court because of misleading information provided by the banks in analyst statements and offering documents," he said in an email message.
He added that the 5th Circuit Court of Appeals sent the case back to district court in Houston for further proceedings when it rejected claims against the banks based on "scheme liability."
Newman must be a fan of Mark Twain.
by Karen Donovan
