It's been called the Roe v. Wade of securities law, the biggest case of its kind to hit the U.S. Supreme Court in 30 years, and if the court rules in the plaintiffs’ favor, it could mean massive liability for accountants, lawyers, investment banks, vendors and other companies.
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Much more is at stake, though, including whether similar cases, such as one against banks that did business with Enron prior to the company’s bankruptcy, can proceed. The Enron case alleges that investment banks Credit Suisse First Boston, Merrill Lynch and others helped Enron create false profits. It has been held in abeyance by the high court, though the court may decide to hear it if the court deadlocks over Stoneridge. Roughly a dozen other cases involve scheme liability, sources say.
“There are many different ways this case could come out,” said Joanne Doroshow, executive director of the Center for Justice & Democracy, adding that the court could rule against investors but word the opinion in such a way as to allow the other scheme liability lawsuits to proceed.
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The case also has created strange bedfellows. Ms. Doroshow’s Center for Justice and Democracy, which opposes tort reform, and the Center for a Just Society, a conservative faith-based group, earlier this year joined with former Enron shareholders to request that the Bush administration stay out of the case. Sen. John Cornyn (R-Texas) has also supported former Enron shareholders and the idea of scheme liability. Former SEC commissioners who have issued amicus briefs are split on where they stand.
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