Cleary Gottlieb today won a motion to dismiss two Enron-related class actions brought against Goldman Sachs by the former shareholders of Portland General Corporation, which merged with Enron in June 1997. Goldman Sachs had acted as a financial advisor to Portland General in connection with the merger and gave a fairness opinion to its board of directors. Plaintiffs also sued Arthur Andersen and two former officers of Portland General, alleging that all defendants breached their fiduciary duties to shareholders in failing to perform proper due diligence and in aiding and abetting one another in issuing a false and misleading proxy statement. Cleary lawyers believe this is the first time Judge Melinda Harmon, who is supervising nearly all of the hundreds of Enron-related securities cases, has dismissed with prejudice any Enron case.
Accepting nearly all of Cleary’s arguments, Judge Harmon held that Goldman Sachs had no fiduciary or other duties to the Portland General shareholders, since it was retained solely to render a fairness opinion to the board and shareholders were advised in the proxy statement not to rely on the opinion in deciding how to vote on the merger. She further found that Goldman Sachs had not aided and abetted any other defendant because it neither had knowledge of nor substantially assisted in any breach of their fiduciary duties. Finally, she held that plaintiffs had not and could not plead the requisite element of loss causation because the former Portland General shareholders could have sold their Enron stock at a profit for nearly four years following the merger and because numerous other parties, including Arthur Andersen, have been convicted of criminal acts that break any chain of causation as a matter of law. Judge Harmon denied other defendants’ motions to dismiss and denied plaintiffs’ motion to remand the cases to the Oregon state court in which they were originally brought.