Yesterday the Fifth Circuit reversed the class certification in the Enron shareholder suit pending in Judge Melinda Harmon's court in the Southern District of Houston.  The trial was scheduled to begin in April.  Similar to the 2nd Circuit's reversal of class certification in the IPO Cases, the panel seems to get into the merits of the cases.  Here, according to the Houston Chronicle, the Fifth Circuit reversed because the defendants remaining, the banks, were not primary violators but mere aiders and abettors.  (Readers will recall that for strategic purposes, the plaintiffs dropped many of the individual Enron defendants who would have been primary violators under the theory of the case.)

So, not to make everything about ME, but If this were going to happen, it could have happened before I sent out my paper, The Undercivilization of Corporate Law, which compares criminal prosecutions to civil lawsuits under the same set of facts suggesting corporate misconduct.  So, here we have a set of facts that spawned the Enron Task Force, which gathered numerous guilty pleas and even criminal convictions, some of which have been reversed by appellate courts.  However, under the same set of facts, shareholders are not able to overcome procedural obstacles (or inherent collective action problems) to succeed in a civil lawsuit.  (The Enron plaintiffs were able to secure record-setting settlements from other banks, who may feel silly today, but I'm not sure if those settlements have been approved yet.  That's an item for additional research today.)

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