When District Court Judge Melinda Harmon granted AllianceBernstein's motion for summary judgment in the sprawling In re Enron Corp. Securities, Derivative and ERISA Litigation class action, the decision might have gone down as a minor footnote in the multibillion-dollar lawsuit. After all, Alliance Capital Management (AllianceBernstein's predecessor) already was exonerated in other Enron-related cases. Its dismissal from a long list of defendants was a relatively small development compared to the
$7 billion in settlements Enron investors already reached with other financial institutions in the Texas case.
Given the weakness of Lerach's evidence, Harmon said the firm should have realized the claims were unfounded after the discovery phase and should have dropped the case rather than continue pressing it forward into the judgment stage. Thus she dismissed the complaint and ruled the plaintiffs' attorneys should pay Alliance's defense costs for the judgment phase--sending a pointed message to securities litigators.
"The judge is saying, 'Don't waste my time,'" says Mark Kirsch, chair of U.S. litigation for Clifford Chance in New York, who defended AllianceBernstein. "Even if you bring a lawsuit in good faith, you are only entitled to carry it through if there is a good basis to do so."