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The Manhattan federal judge who will serve as mediator among litigants in the Enron Corp.’s shareholder and bankruptcy cases is notoriously tough and forthright, traits many lawyers said may prove ideal for such a large and complex settlement discussion. Southern District of New York Senior Judge Kevin T. Duffy was named mediator in an unusual joint order issued Wednesday by Southern District Bankruptcy Judge Arthur J. Gonzalez, who has been overseeing Enron’s Chapter 11 bankruptcy, and Judge Melinda Harmon of the U.S. District Court for the Southern District of Texas, who has been hearing the shareholder litigation. Manhattan criminal defense lawyer Gerald B. Lefcourt, who has appeared before Duffy several times, said the judge is an excellent choice for the mediation role. “Judge Duffy is a no-nonsense, direct-to-the-point judge who is not interested in a lot of lawyering,” said Lefcourt. “He’s very shrewd and has the ability to take a complicated structure and break it down to its essence.” The non-binding mediation Duffy faces will clearly be complicated, bringing together a plaintiffs’ group represented by William S. Lerach of Milberg, Weiss, Bershad, Hynes & Lerach, a debtor’s group represented by Martin J. Bienenstock of Weil, Gotshal & Manges, and a financial institutions group represented by Richard W. Clary of Cravath, Swaine & Moore. Most of the financial institutions, including Citigroup and J.P. Morgan Chase, are both Enron creditors and defendants in the shareholder suits, which allege they abetted Enron executives’ fraud. The Wall Street Journal reported this week that Enron was weighing whether to sue some of the banks on similar grounds. The parties’ willingness to settle remains uncertain. A lawyer involved in the matter who asked to remain unnamed said the banks had incentive to settle because they were eager to secure injunctions on all future claims that the bankruptcy court can only issue as part of a reorganization plan, which could be unveiled in the next few months. “They have one shot at the apple,” the lawyer said. But one attorney representing a smaller plaintiff in the case, said he thought mediation at this stage would be “a waste of time.” He pointed out that Judge Harmon’s decision last December denying the banks’ motions to dismiss was highly controversial and could be vulnerable on appeal for its liberal interpretation of the U.S. Supreme Court’s ruling in Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, which held that shareholders could not sue “aiders and abettors” in securities fraud suits. “I agree with her opinion but it could easily have gone the other way,” he said. “If you were one of the banks, would you shell out $2 billion or $3 billion on her theory of the case?” But another plaintiff’s lawyer, currently working on another major corporate fraud case, said corporate defendants may not have the stomach for an appeal. “We have to get a trial verdict for them to appeal,” he pointed out. A number of lawyers who have dealt with the 70-year-old Duffy expressed confidence that his tough demeanor could help move the parties toward a resolution. “He’ll be hands-on and hard-working and it’s not going to take as long as people think,” said Lefcourt. Civil litigator Richard Emery of New York’s Emery Celli Cuti Brinckerhoff & Abady said Duffy is “long-experienced, a very skillful judge” but also a “very strong personality who certainly lets his opinions be known.” “That may serve well in this case,” said Emery. “That must be what these judges wanted.” Stuart Hirshfield, a bankruptcy partner in the New York office of Ropes & Gray, also said Duffy is a good choice for the mediation role, noting that the judge had overseen similarly complicated cases in the past, including that accompanying the 1990 bankruptcy of investment bank Drexel Burnham Lambert. Duffy, a federal judge since 1972, is perhaps better known for presiding over the trials of several of the men convicted of the 1993 World Trade Center bombing. The 2nd U.S. Circuit Court of Appeals last month affirmed the 1998 conviction of the bombing’s mastermind, Ramzi Yousef, and praised Duffy for “carefully, impartially and commendably” conducting Yousef’s two trials. But the 2nd Circuit also took Duffy to task in 1996 for displaying “antipathy” toward the plaintiff in a workplace injury case against the Metro-North commuter railway. The appellate court ordered a new trial before a new judge after finding that Duffy improperly aided the defendant by expressing impatience and making sarcastic comments about the plaintiff’s counsel and witnesses, who included a doctor who wore a white lab coat while testifying. “To be sure, having a doctor appear in white coat invited some comment and perhaps justified some of the court’s annoyance, but hardly such remarks,” wrote 2nd Circuit Judge James L. Oakes at the time. Lefcourt said many lawyers are wary of Duffy. “You certainly tiptoe more around Judge Duffy,” he said. “You know he has very strong reactions.” But Lefcourt stressed that Duffy is tough but fair. The plaintiff’s lawyer involved in the Enron matter disagreed, though, and said Duffy’s legendary toughness may have precisely the wrong impact on the plaintiffs’ amenability to settlement. “He’s one of the meanest individuals on the bench and he loathes plaintiffs’ lawyers,” he said.

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