Enron Lawsuit Against AllianceBernstein Is Dismissed
By Peter Lattman
The Wall Street Journal
Saturday, December 2, 2006
The federal judge overseeing the Enron Corp. shareholders'
class-action lawsuit has dismissed a $1 billion claim
brought by plaintiffs' lawyer William Lerach against
investment firm Alliance Capital Management LP, now known as
In a step unusual in securities class-action cases, U.S.
District Judge Melinda Harmon in Houston ordered the
plaintiffs to pay Alliance's attorney's fees. She also
stated that the payment of attorney's fees would be "more
appropriate" to "be borne" by plaintiffs' counsel.
"We're disappointed in her ruling but Judge Harmon calls 'em
as she sees 'em," said Mr. Lerach of Lerach Coughlin Stoia
Geller Rudman & Robbins LLP. He added that he hopes the
judge may change her view or that the plaintiffs may prevail
on the issue on appeal, but he says that if attorney's fees
"are going to be paid, we're the ones who are going to pay
The class-action lawsuit was brought against investment
firms for alleged fraud related to their underwriting of
This particular claim concerned the service of an Alliance
executive, Frank Savage, on Enron's board of directors and
his signing of a false registration statement for the
issuance of $1 billion of Enron bonds.
The shareholders alleged that Alliance had placed Mr. Savage
on Enron's board to serve its own interest or, at the very
least, approved Mr. Savage's Enron board service and thus
controlled his actions on the board.
The judge rejected the shareholders' claim, saying, "There
is no evidence that Alliance had any authority to influence,
supervise or determine Savage's actions at Enron, nor any
evidence that Alliance induced Savage to watch out for
Alliance's interests while on Enron's board, nor that Savage
did watch out for Alliance's interest after joining the
She also noted that the shareholders provided no evidence
that Mr. Savage "knew or should have known or suspected"
that the registration statement was false and misleading at
the time he signed it.
Mr. Savage was also named as a defendant in the
shareholders' class action and, along with other directors,
settled the claim against him without admitting wrongdoing.
"From a public-policy perspective, what we were really
litigating here was whether an employer can be held liable
for the acts of its employee serving on the board of another
company independently," said Alliance's lawyer, Mark Kirsch
of Clifford Chance LLP.
Mr. Lerach's firm has secured more than $7 billion in civil
settlements for Enron shareholders.
Peter Lattman at