Enron investors’ lawsuit against banks is blocked

Investment banks Merrill Lynch & Co. and Credit Suisse Group won a huge victory Monday when a $40-billion class-action lawsuit filed by Enron Corp. investors was blocked by a federal appeals panel in New Orleans.

The U.S. Court of Appeals for the 5th Circuit wrote that U.S. District Judge Melinda Harmon’s decision to grant class-action status to the case was partly based on legal error regarding the banks’ liability, and it sent the lawsuit back to the lower court for reconsideration.

The banks had argued that Harmon wrongly allowed investors to allege Merrill Lynch and Credit Suisse were primary participants in the fraud that eventually led to the energy giant’s collapse.

“We are very disappointed,” said William Lerach, a lawyer for the Enron investor plaintiffs. “We respect the court, but we think the decision is clearly wrong.”

Lerach said the plaintiffs would seek a Supreme Court review of the appeals court’s decision, which came just four weeks before the trial was set to start.

A spokesman for Merrill said the investment bank was pleased by the decision. A spokeswoman for Credit Suisse could not be reached.