Enron Lawsuits Must Be Mediated, U.S. Judges Rule

Enron Corp. and banks including J.P. Morgan Chase & Co. and Citigroup Inc. must enter mediation with investors seeking more than $30 billion over the collapse of the Houston-based energy company, two U.S. judges said Wednesday.

U.S. Bankruptcy Judge Arthur Gonzalez and U.S. District Judge Melinda Harmon said in a joint hearing held simultaneously in Manhattan and Houston that the cases should be settled. Citigroup and J.P. Morgan are among the banks that lent money to Enron partnerships and are leading targets of the damage claims.

The order by the judges puts pressure on all sides to end a dispute that stemmed from a corporate collapse almost two years ago that wiped out $68 billion in Enron’s market value. A settlement also would ease the strain on the federal courts that have been forced to deal with the case, legal experts said.

“The judicial system is being taxed to its limit by the size of this case,” said Houston lawyer Christopher J. Bebel, a former federal prosecutor.

Seattle lawyer Steve Berman, who represents Enron employees suing the company over pension fund losses, said plaintiffs’ lawyers will “try in good faith” to reach a settlement. “It’s a hard road to get there.”

The pension funds are seeking $3 billion, though damages may be trebled because their suit was brought under federal racketeering laws.

“We are very pleased that the courts have taken decisive action to resolve this matter,” said Trey Davis, spokesman for the University of California regents, the lead shareholder plaintiff. “We will be focusing on the mediation and fighting for our fair share.”

“We certainly view this as great news, and we’re cautiously optimistic that it will help settle a number of issues and save money for the estate, which in turn maximizes value for our creditors,” Enron spokesman Eric Thode said of the order.