X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Enron Corp.’s former close friends — who already have plenty to keep them up at night, including a federal class action suit in Houston — are facing another potential nightmare. And this one is forming in a place not especially known for its Southern hospitality toward defendants: Alabama state court. The case is being brought by Alabama’s retirement fund, which claims it lost $75 million as result of Enron’s meltdown. Not surprisingly, the choice of the troubling jurisdiction was not lost on the defendants, which include Arthur Andersen LLP, Citigroup Inc., Merrill Lynch & Co. Inc., J.P. Morgan Chase & Co., Credit Suisse First Boston (USA) Inc., Bank of America Corp. and three former Enron executives. Their counsel had the case removed in April to federal court on grounds that it was related to Enron’s bankruptcy. But District Court Judge W. Harold Albritton kicked it back to state court in late May, following the fund’s motion to remand. (Andersen and the Enron executives did not join in the motion to remove the case.) And in August the bad news for the defendants continued, when Montgomery County Judge Johnny Hardwick denied motions to dismiss. The defendants had denied the allegations and argued that the court lacked jurisdiction. The remand and overcoming the dismissal motion were major victories for the retirement fund’s firm, Birmingham’s Haskell Slaughter Young & Rediker, which is facing lawyers from at least 16 different firms on the other side. Most of the defendants have local and New York-based counsel. The list includes such heavyweight firms as Simpson Thacher & Bartlett (for J.P. Morgan), Cravath, Swaine & Moore (for Credit Suisse) and Davis Polk & Wardwell (for Andersen). The Retirement Systems of Alabama suit, first filed in March, was the first in which a state pension fund took aim at Enron’s major investment banks and auditor on securities fraud claims in state court. (In September, Ohio’s pension fund followed Alabama’s lead, to become the second.) How has Alabama avoided the federal class action zoo in Houston? For starters, it doesn’t have to be there. Under the 1998 Securities Litigation Uniform Standards Act, state pension funds are exempted from the rule requiring major securities suits to be filed in federal court. And because the suit did not name Enron as a defendant, the fund was able to stay out of bankruptcy court in New York, which would have sent the case to the federal class action holding pen in Houston. Then there’s the CEO of the pension fund, David Bronner, a man not known for being shy about aggressive litigation. Bronner’s fund was part of the class action in Houston when the case first got started, but, after a novel attempt to become a “special adviser” to a lead plaintiff failed, it lost interest in the federal case. Bronner became more attracted to the idea of litigating in his own backyard, where things tend to move faster, and where his fund would be in the driver’s seat. The retirement system’s law firm also likes its chances in state court, where its lawyers say that they can find aiders and abettors liable, which can’t be done in federal court. Notably, two of the firm’s partners — Thomas Krebs and J. Michael Rediker — have played key roles in drafting and shaping Alabama securities law over the last 30 years. Not especially good news for the defendants. “Suffice it to say, the Alabama Securities Act has been construed more broadly for the protection of investors,” says Krebs, who once headed the Alabama Securities Commission. If Krebs and the retirement fund get their way, discovery could start this fall. For the out-of-town defendants, the Crimson Tide could take on a whole new meaning.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.