(CN) – The Fifth Circuit dismissed a class action against UBS Financial Services Inc. brought by individual retail-brokerage customers affected by the fall of Enron in the early 2000s.
The action against UBS was previously tied to a multidistrict litigation against Enron until the class opted to continue on its own. That complaint was eventually amended multiple times and finally dismissed for failure to state a claim, and was also found to be untimely by the Fifth Circuit.
The plaintiffs fell into two categories, retail-brokerage customers who bought Enron securities, and former employees who optioned for stock through employment securities, according to the 22-page ruling. Enron’s actions spurred the world’s largest Chapter 11 bankruptcy at the time.
“According to the complaint, Enron began to ‘seriously manipulate its financials,’ to conceal the negative effects of its accounting practices on public financial statements.” Wrote Judge Patrick Higginbotham. “After a series of financial disclosures and restatements, events spiraled. The company’s CFO, Andrew Fastow, was placed on a leave of absence, the Board of Directors formed a special committee to investigate the financial disclosures, and eventually, Enron filed for bankruptcy.”
The class argued that Enron and UBS had a “mutually self serving relationship that took precedence over and conflicted with the interests of UBS’s retail customers.” The class also claimed UBS knew of Enron’s “financial chicanery,” and knew about sensitive nonpublic material concerning Enron’s “financial manipulations.”
Following a stay from the Supreme Court pending a separate case, the class moved to amended its complaint a fourth time which was denied as untimely by the district court, which the Fifth Circuit approved.
Judge Patrick E. Higginbotham wrote that the revised complaint was untimely as the class waited two years after the Supreme Court stay was lifted to pursue their amended claim.