Prudential Energy Fund Investors Seek Texas Move
Lawyers for investors in failed Prudential Securities limited partnerships launched a bid Friday to transfer court claims against the brokerage into Texas state court--a move that could dramatically expand the firm’s exposure to huge damage awards.
The case involves more than 130,000 small investors who lost hundreds of millions of dollars from investments in oil and gas limited partnerships known as the Prudential-Bache Energy Income Funds.
For the record:
12:00 a.m. April 23, 1993 For the Record
Los Angeles Times Friday April 23, 1993 Home Edition Business Part D Page 2 Column 6 Financial Desk 2 inches; 54 words Type of Material: Correction
Prudential Securities--Due to an editing error, an article in Saturday’s editions incorrectly stated that a federal judge in New Orleans had rejected a proposed settlement between Prudential Securities and investors in its Energy Income Funds limited partnerships. The judge has delayed the settlement and cited concerns about its fairness, but has not yet issued any final ruling.
So far, the litigation has been centered in a federal court in New Orleans, where a judge rejected as inadequate a previous offer by Prudential to settle a class-action suit brought by investors.
Now, some attorneys want to proceed, instead, under Texas’ strong Deceptive Trade Practices Act, which permits triple damages, large interest awards--and substantial lawyers’ fees.
In addition, Texas juries in recent years have returned several massive findings against major corporations.
Investors have accused Prudential and the Louisiana firm that managed the partnerships, Graham Resources, of fraudulently marketing the investments as safe alternatives to bonds and certificates of deposit. Both firms deny any wrongdoing.
The Houston law firm of Fleming, Hovenkamp & Grayson, which represents more than 2,000 of the investors, filed papers Friday asking a Texas district court in Brazoria County, just south of Houston, to authorize a state class-action suit. The suit would encompass all Energy Income Funds investors nationwide, according to attorney George M. Fleming.
It is far from certain, however, that the legal maneuver will succeed. With neither Prudential nor Graham Resources based in Texas, the theory that a Texas court has jurisdiction hinges on the fact the operations of many of the partnerships were centered in Texas oil and gas fields. Also, a significant number of the investors live in Texas. William J. Ahearn, spokesman for Prudential, said the firm hadn’t yet received copies of the Texas court filing and therefore had no comment.
In a separate development, oil man George B. Kaiser said he would extend until April 29 his tender offer for the limited partnership interests. A Kaiser executive said the Oklahoman may boost his $173.5-million offer.
