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Fifth Circuit vindicates Merrill Lynch & CSFB decision to fight Lerach



Peter Lattman is reporting that the Fifth Circuit has struck down the class certification seeking to hold bystander banks liable in the Enron collapse (Feb. 9 and links therein). "As we have recognized, class certification may be the backbreaking decision that places 'insurmountable pressure' on a defendant to settle, even when the defendant has a good chance of succeeding on the merits."

But perhaps Lerach can now bring a lawsuit on behalf of the shareholders of the banks that paid billions of dollars of protection money in response to the extortionate lawsuit. He'll appeal to the Supreme Court, but the money he has already collected from other deep-pocket bystander codefendants is unaffected by the ruling.

Update: Press coverage: AP/Law.com; NYT; WSJ; Houston Chronicle; WaPo. The Fifth Circuit decision conflicts with the legal standards of the Ninth Circuit, so there's a decent chance the Supreme Court takes the appeal. (As the joke goes, "This is a petition for certiorari from a decision of the Ninth Circuit Court of Appeals—and there are other reasons for granting the writ as well.") In the blogosphere, Roger Parloff surprisingly comes out on the side of the plaintiffs, perhaps not recognizing that the trial court's exception would swallow the rule. Others: Ribstein; Beck/Herrmann; Hurt.

Update, Mar. 21: More in the blogsophere: Roberts has a good summary; Denniston thinks Supreme Court review unlikely because of developments in the trial court in the cert petition in the Ninth Circuit case of Avis Budget Group, et al., v. California State Teachers Retirement System.

 

 


Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.