The U.S. Supreme Court on Tuesday dealt another blow to investors who lost money as a result of a corporate fraud.
The high court refused to hear a case brought by Enron investors against a number of banks that conducted business with Enron, according to published reports. The plaintiffs had been seeking a total of $40 billion.
Just last week the Supreme Court ruled that investors could not sue suppliers of a cable TV company that engaged in securities fraud because they had not relied on the suppliers’ deceptive acts in making their investment decisions.
Enron investors claim the two cases are very different because they are accusing the investment banks of colluding with the former energy giant, the Associated Press reported. They can try to revive their case in the 5th U.S. Circuit Court of Appeals in New Orleans, which earlier ruled against them.
So far, Enron investors have been able to reach $7.3 billion in settlements with a number of financial institutions, including JPMorgan Chase & Co., Citigroup, and Canadian Imperial Bank of Commerce.
In last week’s Supreme Court decision, Stoneridge v. Scientific-Atlanta, the court ruled against investors who had accused two Charter Communications Inc. suppliers of colluding with Charter to deceive stockholders and to manipulate the stock price of Charter, the big cable-television company.
The suit alleged that Charter’s vendors were involved in a sham transaction by the cable company involving behind-the-scenes dealings. Charter’s holders had trouble showing that their investment decisions derived from alleged misconduct by the vendors, in the view of one expert while the case was being heard. In fact, the investors had acknowledged that the vendors — including Motorola and Scientific-Atlanta (now owned by Cisco) — were not providing false information about Charter to the securities market, according to the expert.
Business advocates were worried that a pro-plaintiff ruling could clear the way for a flood of lawsuits.