Media Inquiries: Veronique Rodman
vrodman@aei.org (202.862.4870)

FOR IMMEDIATE RELEASE: January 22, 2008

This morning's decision by the Supreme Court to deny review of a Fifth Circuit Court of Appeals decision dismissing Enron shareholders' claims against third-party investment banks is a victory for investors explains Ted Frank, director of the AEI Legal Center for the Public Interest.

Plaintiffs had alleged that investment banks had, by doing business with Enron, intentionally deceived Enron shareholders and were "primary violators" of the securities laws--even though these defendants took huge losses when Enron collapsed.

As Mr. Frank explains, after the district court erroneously held that the case could go forward as a class action, "with plaintiffs claiming total liability of $40 billion, many banks surrendered when offered a chance to settle for less than a nickel on the dollar, and innocent share holders paid $7.3 billion in settlements, about $700 million of which was diverted to attorneys."

Frank points out that:

• The plaintiffs' bar had been pushing for a gigantic expansion of private litigation, and it is enormously beneficial to investors that the Court kept that power in check.
• By shutting the door on such claims, investors will not have their investments dissipated by litigation costs.
• The Supreme Court's decision is consistent with Congress' decision to refuse to create a civil claim.
• One can help investors without paying millions to trial lawyers. Investors are already well-protected by existing laws and regulations and the SEC has criminal and civil enforcement authority against real "secondary violators."

Mr. Frank has written about this case and is available for comment. He can be reached at tfrank@aei.org or (202) 862-5857.

Related discussion about the Stoneridge case.

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