Enron civil cases: settlements, dismissals and the bank appeal

documentedThe December 2002 Newby ruling allowed pleaded claims against several banks and advisers to proceed but dismissed claims against Deutsche Bank and Kirkland & Ellis, and narrowed claims against Bank of America and Lehman. A June 2006 ruling confirmed dismissal of all Deutsche Bank claims and dismissed Section 12(a)(2) claims without prejudice for lack of a representative with standing. ^{1 2}

qualification

Surviving a motion to dismiss means the pleading meets the applicable threshold; it is not a liability finding. The later appellate class-certification outcome materially limits the trajectory against the appealing banks.

documentedOn 19 March 2007 the Fifth Circuit reversed class certification and remanded the case involving Credit Suisse, Merrill Lynch and Barclays. The majority rejected the asserted classwide presumptions of reliance for the banks’ alleged conduct. Judge Dennis concurred in reversal on narrower class-certification grounds and disagreed with the majority’s broad account of primary liability. ³

qualification

This was an interlocutory certification appeal, not a criminal acquittal or an order dismissing every Enron claim against every bank. The separate retained primary decision clarifies a historical outcome within the archive’s time scope.

documentedCitigroup announced a $2 billion Newby settlement on 10 June 2005; JPMorgan Chase announced a $2.2 billion agreement in principle four days later. Both releases stated that approvals remained necessary and rejected an admission of wrongdoing. ^{4 5}

qualification

These source documents establish settlement agreements at announcement, not proof of completed distribution to every investor. The banks cited avoiding uncertainty, burden and expense of litigation.

documentedIn March 2008 Citi announced an agreement to pay $1.66 billion to the Enron estate, withdraw specified claims and resolve related credit-linked-note disputes. The estate would release its claims and allow specified bankruptcy claims, including those of holders of approximately $2.4 billion of credit-linked notes. ⁶

qualification

Citi denied wrongdoing and said the agreements required bankruptcy-court approval. The estate settlement differs from the Newby investor settlement; allowed creditor claims are not an additional $2.4 billion cash payment by Citi.

documentedA December 2005 ruling dismissed claims against Milbank Tweed but denied Goldman Sachs’ motion to dismiss. It permitted amendment of control-person claims involving the Goldman parent and left due-diligence and reliance defences for an appropriate evidentiary stage. ⁸

qualification

The decision addresses pleading sufficiency and amendment, not a finding that Goldman committed the alleged violations.

documentedThe Fifth Circuit affirmed dismissal of the Azurix investor action. It found inadequate pleading of scienter for the Exchange Act claims, lack of Section 12 standing and no material misstatements adequately alleged under Section 11. ⁹

qualification

The decision concerns the particular Azurix investor claims. Recognising the possibility of aftermarket Section 11 standing did not save those claims on their merits.

documentedIn April 2009 the district court dismissed Hewitt’s claims that Enron was obliged to indemnify damages caused by Hewitt’s own conduct under the administration agreement. ¹⁰

qualification

The order concerns contractual indemnity pleadings. It is not a dismissal of all pension or ERISA litigation associated with Enron.

documentedIn 2007 the SEC announced McMahon’s agreement to a $300,000 payment and five-year officer-and-director bar over alleged barge and financial-disclosure misconduct, without admission or denial and subject to court approval. Separately, final judgments against Kathleen Lynn and Jerry Castleman concerning Cuiabá were entered in August 2007, also without admission or denial. ^{14 15}

qualification

Lynn’s judgment required $30,000 penalty and nominal $1 disgorgement. Castleman’s $41,268.29 disgorgement-and-interest amount was waived except for $12,000 based on financial evidence. McMahon’s accountant suspension allowed reapplication after three years; Castleman’s after five. These civil results are not criminal convictions.