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Miriam Rozen

Texas Lawyer

01-23-2007

Houston-based Andrews Kurth has negotiated a tentative agreement to settle all claims brought against the firm by its former client Enron Corp. and the bankrupt Houston energy company's Committee of Unsecured Creditors.

U.S. Bankruptcy Judge Arthur J. Gonzalez of the Southern District of New York, who is presiding over Enron's Chapter 11 bankruptcy filing, must approve the proposed deal, which Andrews Kurth announced on Jan. 19, before it becomes final.

Under the terms of the proposed settlement in In Re: Enron Corp., et al., Andrews Kurth will pay $18.5 million in cash to Enron.

The firm had "ample resources" to cover the settlement, says Andrews Kurth managing partner Howard Ayers, who declines to comment on how much the firm's insurance carrier paid toward the settlement and how much came directly from firm coffers.

Ayers emphasizes that Andrews Kurth denies any wrongdoing related to Enron's now-infamous downfall. But he says after five years of facing the threat of litigation from Enron and its creditors, "This settlement is to put this behind us."

Enron President and board of directors Chairman John Ray III did not return a telephone call seeking comment before presstime on Jan. 19. Harlan Loeb, a lawyer who serves as a spokesman for the company, says he believes the creditors have gotten a good deal in the proposed Andrews Kurth settlement.

In the negotiations, Andrews Kurth was represented by Paul Coggins, a partner in the Dallas office of Fish & Richardson. Enron and the creditors were represented by Texas counsel Lewis LeClair, a shareholder in Dallas' McKool Smith. Coggins did not return a telephone call seeking comment and LeClair declines comment, referring questions to Ray and Loeb.

On June 1, 2006, Houston-based Vinson & Elkins announced it was settling with Enron, also a former client, and the unsecured creditors for $30 million in cash, and Gonzalez has signed off on that agreement. And in September 2005, Gonzalez approved a $5.2 million settlement between Enron, its creditors and Chicago-based Kirkland & Ellis. Kirkland & Ellis had represented several private partnerships that engaged in transactions with Enron.

A hearing on the motion for approval of the settlement is scheduled for Feb. 22. Ayers says he expects the deal to be finalized by the end of February. [See "V&E Settles With Enron and Unsecured Creditors for $30 Million,", Texas Lawyer, June 5, 2006, page 22.]

Also on Jan. 19, V&E may have moved a step closer to winning dismissal from the class action shareholder securities suit filed by disgruntled Enron shareholders, Mark Newby, et al. v. Enron Corp., which is pending in U.S. District Judge Melinda Harmon's court in Houston.

Harmon heard arguments Jan. 12 on a motion filed by the Regents of the University of California, the lead plaintiff in the class action, asking her to approve a voluntary dismissal of V&E from the suit.

Plaintiffs attorney Patrick Coughlin, a partner in San Diego's Lerach Coughlin Stoia Geller Rudman & Robbins, and John Villa, a partner in Williams & Connolly in Washington, D.C., who represents V&E, urged Harmon to dismiss V&E from the suit. Coughlin said a trial against three defendant-financial institutions begins on April 9 in Harmon's court, and it's time to streamline the suit and dismiss some of the defendants.

But Herbert Washer, a partner in Shearman & Sterling in New York, who argued for the defendant-financial institutions, said releasing V&E and other Enron parties from the litigation would be "taking the Enron out of the Enron case."

Harmon took the arguments under advisement.