Fifth Circuit sends Enron lawsuits back to state court

[JURIST] The US Court of Appeals for the Fifth Circuit [official website; JURIST news archive] on Monday revived the possibility of several state-law claims against individuals and entities connected to Enron Corp. [JURIST news archive] by ruling [opinion, PDF] that Texas courts may decide whether the period allotted for bringing such claims has lapsed. The court, based in New Orleans, reversed in part a ruling by the US District Court for the Southern District of Texas [official website] that all the claims were time-barred. Invoking a statute [text] which allows federal courts to "enjoin[] repeatedly vexatious litigants from filing future state court actions," the district court in 2002 ordered Houston law firm Fleming & Associates [firm website] to seek court permission before filing any additional Enron lawsuits. In 2005, the court denied the firm's motion to file 34 lawsuits on behalf of about 1,200 clients alleging state law claims. The court reasoned that allowing the suits to be filed would be futile because they were time-barred under Texas law. The firm appealed, arguing that the claims fell within the limitations period because they "related back" to the date of the firm's motion. In the Fifth Circuit opinion, Circuit Judge Charles Prado [official profile] wrote for the three-judge panel:

The district court was incorrect ... in denying the motion for leave to file suit for the claims that have a four-year statute of limitations. The court did not cite any authority for using its own local rules to dictate the state's filing date for purposes of Texas's relation-back principle. ... Thus, the district court should have allowed the Texas state courts to decide whether the filing of the state petitions relates back to the filing of the motion for leave to file suit (for the claims that have a four-year statute of limitations), meaning that these claims might not be futile. Because the Fleming Firm sought to file these claims before the statute of limitations expired, it is up to the state court to determine how to proceed.
The Fifth Circuit held that the district court correctly denied the firm leave to file claims with limitations periods shorter than four years. The Wall Street Journal has more. Reuters has additional coverage.

Also on Monday, US District Judge Melinda Harmon [official profile] in Houston ruled that plaintiffs in another Enron lawsuit were entitled to nearly $700 million in legal fees - the largest such award in a securities case. This July, experts predicted [JURIST report] that former Enron executives convicted on charges related to the 2001 accounting scandal may be eligible for new trials, depending on the outcome of an appeal by former CEO Jeffrey Skilling. Retrials for three former Enron Broadband Services executives are scheduled to begin in November [JURIST report] following the Fifth Circuit's refusal to dismiss charges.

 

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