In re Enron Corp. Securities, Derivative, MDL No. 1446.

CourtUnited States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
Writing for the CourtMelinda Harmon
Citation511 F.Supp.2d 742
PartiesIn re ENRON CORPORATION SECURITIES, DERIVATIVE & "ERISA" LITIGATION. Mark Newby, et al., Plaintiffs v. Enron Corporation, et al., Defendants. Connecticut Resources Recovery Authority, Plaintiff, v. Murtha Cullina, LLP, et al., Defendants. Connecticut Resources Recovery Authority, Plaintiff, v. Kenneth L. Lay, et al., Defendants. Connecticut Resources Recovery Authority, Plaintiff, v. Kenneth L. Lay, et al., Defendants.
Decision Date16 February 2005
Docket NumberCivil Action No. 11-01-3624.,Civil Action No. H-03-1579.,Civil Action No. H-03-1558.,Civil Action No. H-03-1580.,MDL No. 1446.
511 F.Supp.2d 742
In re ENRON CORPORATION SECURITIES, DERIVATIVE & "ERISA" LITIGATION.
Mark Newby, et al., Plaintiffs
v.
Enron Corporation, et al., Defendants.
Connecticut Resources Recovery Authority, Plaintiff,
v.
Murtha Cullina, LLP, et al., Defendants.
Connecticut Resources Recovery Authority, Plaintiff,
v.
Kenneth L. Lay, et al., Defendants.
Connecticut Resources Recovery Authority, Plaintiff,
v.
Kenneth L. Lay, et al., Defendants.
MDL No. 1446.
Civil Action No. 11-01-3624.
Civil Action No. H-03-1580.
Civil Action No. H-03-1579.
Civil Action No. H-03-1558.
United States District Court, S.D. Texas, Houston Division.
February 16, 2005.

Page 743

COPYRIGHT MATERIAL OMITTED

Page 744

COPYRIGHT MATERIAL OMITTED

Page 745

COPYRIGHT MATERIAL OMITTED

Page 746

COPYRIGHT MATERIAL OMITTED

Page 747

COPYRIGHT MATERIAL OMITTED

Page 748

COPYRIGHT MATERIAL OMITTED

Page 749

MEMORANDUM AND ORDER

MELINDA HARMON, District Judge.


 ROADMAP
                I. Factual Background and H-03-1580 ....................................751
                

Page 750

II. Pending Motions ..........................................................757
                 A. H-03-1580 .............................................................757
                 B. H-03-1579..............................................................757
                 C. H-03-1558..............................................................758
                III. Motions in H-03-1580......................................................760
                 A. CRRA's Motion to Remand and/or Abstain or to Strike, Dismiss or Sever
                 and Remand............................................................760
                 B. Court's Ruling on Key Issues...........................................761
                 1. "Related To" Bankruptcy Jurisdiction ...............................761
                 2. Well Pleaded Complaint Rule ........................................763
                 3. CRRA's Motion to Abstain ...........................................764
                 4. CRRA's Motion to Strike, Dismiss or Sever and Remand
                 Apportionment Complaint ............................................765
                IV. Motions in H-03-1558 .....................................................774
                 A. CRRA's Motion to Remand or Abstain or to Strike, Dismiss or Sever .....774
                 B. CRRA's Motion to Stay .................................................775
                 C. CRRA's Petition for Certification of Interlocutory Appeal .............775
                 D. Credit Agencies' Motion for Leave to File Motions to Dismiss or For Stay
                 of Discovery .........................................................776
                 E. CRRA's Motion to Consolidate ..........................................777
                 F. CRRA's Motion to file Sur-Reply .......................................777
                 G. Defendant Andrews & Kurth LLP's Motion to Dismiss .................777
                 1. Allegations in the Complaint .......................................777
                 2. The Arguments and Court's Comments .................................778
                 3. Court's Rulings ....................................................788
                 a. Personal Jurisdiction ...........................................788
                 b. Applicable State Law ............................................790
                 c. Standing ........................................................797
                 d. CUTPA ...........................................................799
                 e. Aiding and Abetting Negligent and/or Fraudulent
                 Misrepresentation .............................................801
                 (1.) General Challenges .........................................801
                 (2.) The Elements of a § 876(b) in Connecticut .............804
                 (a.) Scienter ..............................................804
                 (b.) Substantial Assistance ................................805
                 H. Credit Rating Agencies' Motions to Dismiss ............................808
                 1. Negligent Misrepresentation ........................................809
                 a. Rating Agencies' Arguments ......................................809
                 b. Court's Ruling on Negligent Misrepresentation Claim .............815
                 (1.) First Amendment Protection .................................817
                 (2.) Duty of Care ...............................................826
                 2. CUTPA ..............................................................827
                 a. Rating Agencies' Arguments ......................................827
                 b. Court's Ruling on CUTPA claims ..................................830
                 (1.) Professional Negligence Exemption ..........................830
                 (2.) Unfair Practice that Violates CUTPA: The Cigarette Rule ....833
                V. Summary of Rulings .......................................................835
                 A. H-03-1580 .............................................................835
                 B. H-03-1558 .............................................................835
                 C. H-03-1579 .............................................................836
                

Plaintiff Connecticut Resources Recovery Authority ("CRRA") filed the three, above referenced, related actions in Connecticut state court, each of which was removed and ultimately transferred to this Court by the Judicial Panel on Multidisistrict

Page 751

Litigation for pretrial consolidation with MDL 1446. All three are brought by Richard Blumenthal, Attorney General of the State of Connecticut, on behalf of CRRA, a Connecticut State agency created and controlled by statute, to recover public money lost or damages for injury allegedly suffered by CRRA when Enron Corporation ("Enron") and its subsidiary, Enron Power Marketing, Inc., stopped payments to CRRA in breach of an agreement known as the "Enron Transaction" and filed for chapter 11 bankruptcy protection on December 2, 2001.

The suits in part arise out of the same nucleus of facts regarding purportedly ultra vires contractual agreements comprising the Enron Transaction, executed in December 2000 by CRRA, Connecticut Light & Power ("CL & P"), and Enron. CRRA on the one hand, in H-03-1558 and H-03-1579, claims that the Enron Transaction was part of the same fraudulent pyramid scheme that has been asserted in Newby and in many of the MDL 1446 action's (involving lawyers, accountants, investment banks, etc.) to misrepresent Enron's financial condition and to lure and defraud investors and businesses. Simultaneously CRRA maintains that its claims in H-043-1580 against three law firms for their role in advising CRRA and structuring the Enron Transaction are separate and unrelated to Enron's financial collapse, even though a substantial portion of its damages resulted when Enron filed for bankruptcy and stopped payments owed to CRRA under the Enron Transaction agreements.1 Because some of the pending motions in the three suits are interrelated, the Court addresses the motions in all three actions in this memorandum order.

I. Factual Background and H-03-1580

A malpractice suit, now designated H-03-1580, Connecticut Resources Recovery Authority v. Murtha Cullina, LLP, et al., was originally filed in the Superior Court for the Judicial District of Hartford, Connecticut under docket number CV 02 0818783 S, then transferred to the Waterbury Complex Litigation Docket under number (X06) CV 02 0174569 S, from which it was removed by some of the subsequently added Third-party Apportionment Complaint Defendants to the United States District Court of the District of Connecticut, before being transferred to the undersigned judge by the Judicial Panel on Multidistrict Litigation.

The causes of action asserted under Connecticut state law in the original Complaint, filed on August 7, 2002, are breach of a legal services agreement, negligence, and indemnification against CRRA's outside counsel, Murtha Cullina, L.L.P. ("Murtha") and Hawkins, Delafield and Wood ("Hawkins, Delafield"). Ex. A to # 1. On November 26, 2002, Defendant Leboeuf, Lamb, Greene & McCrae ("Leboeuf'), which served as outside counsel for Enron during the Enron Transaction and whose opinion letters were allegedly relied upon by CRRA in consummating the Enron Transaction, was added in an Amended Complaint, the governing pleading here. Part of Ex. C to # 1. The causes of action asserted against Leboeuf are negligent misrepresentation, fraudulent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act

Page 752

("CUTPA"), Connecticut General Statutes ("C.G.S.") § 42-110a, et seq. Since H-03-1580 focuses most narrowly on the nature of CRRA's business relationship to the three law firms, and to non-party Enron, in the Enron Transaction, the seed which ultimately gave rise to the all three suits, the Court begins with it to provide factual background.

CRRA alleges the following background facts. H-03-1580 was brought by the Attorney General of the State of Connecticut, on behalf of CRRA, "a public instrumentality and political subdivision of the state of Connecticut pursuant to Conn. Gen.Stat. § 22a-257 et seq. (the Solid Waste Management Services Act)," which manages, recycles, and disposes of solid waste for most of Connecticut's towns. Under waste management services contracts, 169 Connecticut towns paid CRRA's operating expenses and provided at least minimum amounts of waste and recyclables for disposal, while CRRA operated facilities to burn solid waste and convert the resulting waste heat into steam or electricity, which CRRA then sold under energy purchase agreements, and used the funds generated to defray garbage hauling fees charged by CRRA to the member towns.

The towns are divided into, and financially guarantee, four regional "projects" that are financially independent of CRRA. Original Complaint at 1-3, Ex. A to Notice of Removal (instrument # 1). The project involved in this dispute is the Mid-Connecticut Project. A statutorily created state agency, CRRA is authorized by C.G.S. § 22a-269 to issue tax-exempt bonds to construct, operate and maintain the Projects; the bonds are secured by contracts that CRRA entered into with the member towns, which provide the waste and recyclables and pay CRRA's operating expenses, and by other CRRA assets. The statute limits CRRA's authority by allowing it to make only...

To continue reading

Request your trial
34 practice notes
  • In re BFW Liquidation, LLC, No. 09–00634–BGC–11.
    • United States
    • United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
    • September 28, 2011
    ...Price Antitrust Litigation, 456 F.Supp.2d 131, 161 (D.Me.2006); In re Enron Corp. Securities, Derivative & “ERISA” Litigation, 511 F.Supp.2d 742, 765 (S.D.Tex.2005); [459 B.R. 786] In re Enron Corp. Securities, Derivative & “ERISA” Litigation, 314 B.R. 354, 359 (S.D.Tex.2004); In re Methyl ......
  • Firefighters' Ret. Sys. v. Consulting Grp. Servs., LLC, CIVIL ACTION NUMBER 14-103-SDD-SCR
    • United States
    • United States District Courts. 5th Circuit. Middle District of Louisiana
    • August 25, 2015
    ...but it is not applicable in "related to" bankruptcy removal cases. In re Enron Corp. Securities, Derivative & ERISA Litigation, 511 F.Supp.2d 742, 764 (S.D.Tex. 2005); In re Brooks Mays Music Co., 363 B.R. 801, 814-15 (N.D.Tex. 2007). Contractual Waiver of Right to Remove For a contractual ......
  • In re National Century Fin. Enter., Inc., Inv., No. 2:03-MD-1565.
    • United States
    • U.S. District Court — Southern District of Ohio
    • July 22, 2008
    ...publisher who disseminates information to the investing public. See, e.g., In re Enron Corp. Securities, Derivative & "ERISA" Litig., 511 F.Supp.2d 742, 826-27 (S.D.Tex.2005). Moody's contends that its ratings are a matter of public concern and therefore entitled to First Amendment protecti......
  • Lentz v. Trinchard, Civil Action No. 02-1235
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • August 2, 2010
    ...whether the AK defendants have minimum contacts with the United States. In re Enron Corp. Securities, Derivative & "ERISA" Litigation, 511 F.Supp.2d 742, 790 (S.D.Tex.2005). Bankruptcy Rule 7004(d) provides for nationwide service of process in adversary proceedings arising under Title 11 of......
  • Request a trial to view additional results
34 cases
  • In re BFW Liquidation, LLC, No. 09–00634–BGC–11.
    • United States
    • United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Alabama
    • September 28, 2011
    ...Price Antitrust Litigation, 456 F.Supp.2d 131, 161 (D.Me.2006); In re Enron Corp. Securities, Derivative & “ERISA” Litigation, 511 F.Supp.2d 742, 765 (S.D.Tex.2005); [459 B.R. 786] In re Enron Corp. Securities, Derivative & “ERISA” Litigation, 314 B.R. 354, 359 (S.D.Tex.2004); In re Methyl ......
  • Firefighters' Ret. Sys. v. Consulting Grp. Servs., LLC, CIVIL ACTION NUMBER 14-103-SDD-SCR
    • United States
    • United States District Courts. 5th Circuit. Middle District of Louisiana
    • August 25, 2015
    ...but it is not applicable in "related to" bankruptcy removal cases. In re Enron Corp. Securities, Derivative & ERISA Litigation, 511 F.Supp.2d 742, 764 (S.D.Tex. 2005); In re Brooks Mays Music Co., 363 B.R. 801, 814-15 (N.D.Tex. 2007). Contractual Waiver of Right to Remove For a contractual ......
  • In re National Century Fin. Enter., Inc., Inv., No. 2:03-MD-1565.
    • United States
    • U.S. District Court — Southern District of Ohio
    • July 22, 2008
    ...publisher who disseminates information to the investing public. See, e.g., In re Enron Corp. Securities, Derivative & "ERISA" Litig., 511 F.Supp.2d 742, 826-27 (S.D.Tex.2005). Moody's contends that its ratings are a matter of public concern and therefore entitled to First Amendment protecti......
  • Lentz v. Trinchard, Civil Action No. 02-1235
    • United States
    • United States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
    • August 2, 2010
    ...whether the AK defendants have minimum contacts with the United States. In re Enron Corp. Securities, Derivative & "ERISA" Litigation, 511 F.Supp.2d 742, 790 (S.D.Tex.2005). Bankruptcy Rule 7004(d) provides for nationwide service of process in adversary proceedings arising under Title 11 of......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT