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George Fleming wants to try his Enron-related securities fraud suits in state court instead of federal court, where more than 70 suits have been consolidated before U.S. District Judge Melinda Harmon of Houston. He has a number of reasons for that strategy, including the desire of many of his clients. His firm, Fleming & Associates in Houston, has filed seven securities fraud suits in state court against Enron-related defendants and even has a trial setting in March 2003 in a suit in Washington County, Texas. That’s nine months before the December 2003 trial date Harmon set for Mark Newby, et al. v. Enron Corp., et al. But the 5th U.S. Circuit Court of Appeals put a kink in Fleming’s plan with a decision on Aug. 9 that upholds a ruling from Harmon that bars his firm from filing without her permission any new state court suits stemming from the downfall of Enron. A three-judge panel of the 5th Circuit found that on Feb. 15 Harmon did not abuse her discretion by issuing the injunction against Fleming and his Houston-based firm. The court suggested Harmon was justified to do so because Fleming’s firm had, on more than one occasion, obtained ex parte temporary restraining orders from state court judges to prevent defendants in the suits from destroying documents or disposing of assets. “[T]he district court did not err in concluding that Fleming’s actions constitute a sufficiently serious and systematic abuse of the courts to warrant the injunction,” Judge Patrick Higginbotham wrote. “The district court properly saw these moves in state court to be unjustified efforts to harass parties to the federal cases, and viewed its response as not burdening rights to proceed in state court,” he wrote. Higginbotham, of Dallas, heard the appeal along with Judges Jacques Wiener Jr. of New Orleans and Fortunato Benavides of Austin. Fleming says, “I’m convinced we weren’t engaged in conduct here that either violated any of the rules or was unethical. I’m disappointed with the order. But we take it seriously.” Fleming says he will ask the 5th Circuit for a rehearing, and if he’s unsuccessful there, he may ask the U.S. Supreme Court to review the issue. “There’s enough to do with the rights of the states versus the rights of the federal government,” he says. Robert M. Stern, a lawyer for former Enron Chief Executive Officer Jeffrey Skilling, says he is generally pleased with the 5th Circuit opinion. “The opinion recognized that Judge Harmon needs to be able to manage this very complicated case in a meaningful way, and all of these disputes need to be resolved in one forum for any justice to be served,” says Stern, a partner in O’Melveny & Myers in Washington, D.C. “The crux of our argument was that the [Securities Litigation] Uniform Standards Act ought to have pre-empted this sort of gamesmanship,” he says. Stern is one of three lawyers who argued against Fleming before the 5th Circuit panel in June. Diane Sumoski, a partner in Carrington Coleman Sloman & Blumenthal in Dallas and a lawyer for former Enron Chairman Kenneth Lay, and Craig Smyser, a partner in Smyser, Kaplan & Veselka of Houston, who represents Enron’s former Chief Financial Officer Andrew Fastow, did not return telephone messages seeking comment before press time. APPEAL FILED Fleming says he firmly believes neither the All Writs Act nor the Anti-Injunction Statute would allow Harmon to issue the order preventing him from taking his clients’ concerns to state court. He also says he followed provisions of the Securities Litigation Uniform Standards Act and kept each state court suit to fewer than 50 plaintiffs and state-law claims and didn’t file them as class actions. Fleming appealed to the 5th Circuit on Feb. 22, after Harmon denied the firm the right to file two state court suits. She noted in the denial that the firm failed to provide copies of the suits. The 5th Circuit panel agreed with Fleming that the All Writs Act and the Anti-Injunction Act do not independently give the district court jurisdiction. But Higginbotham pointed out that Harmon clearly has jurisdiction over the Enron securities litigation, Newby, and could preserve and protect that jurisdiction. She has the authority to “compel lawyers properly before it from engaging in vexatious and needlessly harassing maneuvers,” he wrote. The opinion did concede one point to Fleming. The panel wrote that Harmon couldn’t deny Fleming & Associates the right to file an Enron-related state court suit simply because it is fashioned to avoid provisions of the SLUSA. But the appeals court also wrote that while Fleming & Associates is “duty-bound” to protect the interests of clients and has the right to select venue for its clients, judges have the power and duty to remind lawyers they are professionals. “This is no matter of rules of fine etiquette. Rather, it is the matter of lawyers as officers of the court conducting themselves in ways that do not impede the work of the courts,” Higginbotham wrote. APPEALING AGAIN Fleming & Associates has about 1,200 clients who are or were Enron shareholders and lost money when the energy trading company’s stock took a nosedive in 2001 before the company filed a Chapter 11 in December of that year. He has filed litigation that is part of the suits seeking class action status before Harmon. But because of Harmon’s order, Fleming says the firm has filed only seven suits in state court so far on behalf of only 82 clients. Fleming appealed Harmon’s ruling on behalf of his firm and four clients who are plaintiffs in an Enron-related securities fraud suit filed in Bexar County, Texas. Fleming says a speedy trial date isn’t the only reason he wants his Enron suits in state court. He says state court provides full voir dire, 10-2 verdicts instead of the 12-0 needed in federal court and a local jury pool. Fleming has another appeal pending before the 5th Circuit related to his Enron-related suits, but no oral argument setting. Fleming is appealing Harmon’s order that prevents his firm from proceeding with discovery in the Washington County suit, Jane Bullock, et al. v. Arthur Andersen, et al., No. 32716, before discovery in the consolidated federal action. That discovery won’t begin until after Harmon rules on motions to dismiss filed in June by defendants in the litigation. That’s putting a crimp on Fleming’s efforts to meet the March 2003 trial date set by 21st District Judge Terry Flenniken in Brenham, Texas. “It’s kind of a Catch-22,” he notes. “Under the court’s current order, you can try the case, but you can’t do anything to prepare for it.” But Fleming & Associates got a break on Aug. 15 when Judge Olen Underwood of Conroe, Texas, the administrative judge in the second judicial region, denied a Rule 11 motion filed by defendants in Enron litigation asking for a single state judge to oversee pretrial discovery in the state court suits. He denied the motion but said the lawyers can file it again later. Robin Gibbs, a partner in Houston’s Gibbs & Bruns who represents outside directors of Enron in the securities suits, told Underwood that allowing discovery to proceed in separate state courts would be duplicative and waste judicial resources. “Obviously we can’t be going to all these counties,” Gibbs said. “We’ve got our hands full. We have limited resources, insurance-wise and otherwise.” Besides the Jose and Bullock suits filed by Fleming & Associates, at least four other Enron-related suits are pending in state courts, according to argument at the hearing before Underwood. Four lawyers with suits in state court, including Sean Jez, an associate with Fleming & Associates, argued against the motion. Jez told Underwood, “All we’re trying to do is get our clients their just compensation, just get our folks to trial.”

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