A resident fellow at the American Enterprise Institute led an opinion piece in The New York Sun — Enron: Extortion, Interrupted — with this about the Supreme Court’s denial of certiorari in Regents of Univ. of Calif. v. Merrill Lynch, 06-1341 (U.S. Jan. 22, 2008):
Yesterday, the Supreme Court refused to hear an appeal of a decision rejecting Enron investors’ attempt to recover from investment banks. The ruling closes an underreported chapter in American litigation history: how trial lawyers used the Enron scandal to successfully and legally extort billions of dollars from investment banks with a legally meritless lawsuit.
Blawgletter must suppose that the author hadn’t read Regents, which reversed certification of a class of investors because two of the three Fifth Circuit judges believed, contrary to the district court and their dissenting colleague, that individual issues would predominate over common ones for purposes of Rule 23(b)(3).
Does that make the case against the investment banks a "legally meritless" effort to "extort", as the writer asserts? We think not.
As we said earlier today, individual claimants may yet recover more of their losses from knowing enablers of Enronian fraud. They just can’t do it the most efficient way — by membership in a class of all investors, large and small, who lost billions of dollars because of what the investment bankers did.
Nor does an argument that earned the support of half of the federal judges who considered it on the merits strike us as "meritless". The Wall Street firms that paid billions to settle the claims correctly perceived a real risk that their defense would not prevail. The ones that settled could have waited for justice to take its course — as Credit Suisse and Merrill Lynch did.
Should the settlers blame themselves for guessing wrong? Or should they take satisfaction in eliminating the risk of a bad outcome?