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1. In general terms, as recounted by Judge Harmon, what is the position of the Fifth Circuit with respect to the pleading scienter with particularity in compliance with the Private Securities Litigation Reform Act.?

2. In general terms, as recounted by Judge Harmon, what is the position of the Fifth Circuit with respect to pleading on the basis of information and belief in the light of the PSLRA?

3. In general terms, what position did Judge Harmon take with respect to the 10b-5 liability as a primary violator of attorneys and accountants who participate in the preparation of a disclosure document, but the document does not purport to be their document or refer to them?

4. In general terms, what position did Judge Harmon take with respect to the 10b-5 liability of a secondary actor as a participant in a scheme to defraud? Conspiracy?

5. Note to the number of instances  in which Judge Harmon refers to the conclusory allegations in the complaint, generally in the context of pleading state of mind with particularity. The following is not an exhaustive list.. At footnote 3, she includes the rote learning that  "The district court should consider all allegations in favor of the plaintiff and accept as true all well-pleaded facts in the complaint." She quickly adds, however, "[n]evertheless, conclusory allegations or legal conclusions masquerading as factual conclusions do not defeat a motion to dismiss." Note what she has to say about conclusory allegations about what insiders knew as a result of their position or confidential reports in discussing the applicable law and pleading scienter. Click HERE. In referring to the specific allegations against the defendants she characterizes "[t]he charges against the banks are a blend of repetitive, conclusory, cookie-cutter contentions.".   Click HERE. In referring to the defendant's contentions she acknowledges "[t]he third-party entities have objected with justification to the undifferentiated, boiler-plate allegations repetitively applied to all or many defendants" and that more is needed than conclusory allegations to defeat a motion to dismiss under §  10(b) and Rule 10b-5." Click HERE. She also acknowledges defendants contention that although scienter must be pled with particularity "instead, Lead Plaintiff substantially relies on conclusory allegations." Click HERE. She also commented in her ruling that conclusory allegations as to what defendants knew as a result of "long-term, continuous, intimate and extensive relationships with Enron and daily interaction with Enron's top." Click HERE. The motion to dismiss includes, among other grounds, failure to comply with Rule 8(e)(1) of the Federal Rules of Procedure, the content of which is set forth at footnote 1. Did Judge Harmon rule on this motion? Did she grant it or deny it? See Order. Would a motion to strke on Rule 8 grounds have been more appropriate. Are Rule 8, Rule 9(b) and the what we referred to as (b)(2) of the PSLRA compatible?

6. In view of Judge Harmon's view with respect to the large number of conclusory allegations, how did she justify finding  the complaint adequate to any of the defendants? Click HERE.

7. Consider the plaintiffs allegations (HERE) relating to Vinson and Elkins. Focusing on the allegations, where they designed to show that Vinson Elkins was a primary violator because of its participation in preparation of  disclosure documents, filings, press release and the like or as a participant in the alleged scheme to defraud, or both. What where the relevant allegations in that regard? What relevance did the allegations relating in 1997 relating to the transactions in JEDI have, which was before the class period began? What allegations are made relevant to Vinson and Elkins knowledge that the disclosure documents etc. it participated in preparing were false or misleading; that the various SPEs and related transactions were part of a scheme to defraud.? What was the relevance of the Vinson and Elkins report of investigation responding to the Watkins allegations, but released after the class period? What allegations were made designed to show Vinson and Elkins motive.

8. Consider Judge Harmon's conclusions (HERE) as to Vinson and Elkins. Did Judge Harmon in concluding the complaint was adequate in terms of alleging Vinson and Elkins was a primary violator because of its participation in preparation of the disclosure documents, filing press releases and like or as a participant in the alleged scheme to defraud, or both. What where the relevant allegations in that regard? What did she rely on in concluding that scienter had been pled with sufficient particularity? Aren't lawyers entitled to the same treatment of  officers  that conclusory allegations about what insiders knew as a result of their position or confidential reports is not adequate to plead scienter? Click HERE. Did she refer back to her earlier discussion of the impact of "allegations of a regular pattern of related and repeated conduct" with respect to the special purpose entities.  Click HERE. What significance did she attach to the Vinson and Elkins report of its investigation of the Watkins allegations? Did she rely on any of the Novak type information and belief allegations attributable to unidentified sources?

9. Go through the same exercise  (as Vinson and Elkins) with respect to the plaintiffs allegations (HERE) relating to Kirkland and Ellis and Judge Harmon's conclusions (HERE) as to Kirkland and Ellis. If you accepted the plaintiff's allegations as true, which law firm was more involved with Fastow and the structuring of the SPEs, Kirkland and Ellis or Vinson and Elkins. Did she ever consider whether Kirkland and Ellis was a participant in a scheme to defraud?  What happened to what she said earlier with regard to the scienter requirement in the context of this complaint being satisfied in part by "allegations of a regular pattern of related and repeated conduct" with respect to the special purpose entities. Click HERE Did the plaintiffs assert any Section 11 claims against Vinson and Elkins or Kirkland and Ellis? If not, why not? See § 1.02[3].

10. The AMENDED complaint includes numerous allegations that quote various persons as making very incriminating or accusatory statements. Such statements, among others can be found at paragraphs 7, 30 (repeated at 391), 45 (repeated at 547),  51,  56,  57, 121(f) (repeated at 581), 300(o), 523, 542,  709, 710, 711, 936,  We cannot take the time to review all or even several of them. Since they reference unnamed sources; presumably, plaintiff was relying on Novak (although in some instances the account of the unidentified sources was taken from newspapers and other publications). We will check out only par. 300(o), which is one of a series of subparagraphs designed to provide the basis for pleading that certain specified representations were false or misleading. This particular subparagraph was designed to establish the basis for the allegation "Enron grossly misrepresented and overstated the nature and potential favorable impact of the Blockbuster VOD joint venture as well as its success." The paragraph among other things included the following: "But an EBS director of engineering stated: "Flat out, we didn't have the technology to do it, and we didn't have the expertise. It was a deal EBS executives entered into with Blockbuster with no capacity to do it." A former EBS employee, who worked directly on the Blockbuster deal in multiple capacities, including product development, financial analysis, and content distribution, stated: "[T]he Blockbuster deal was a fraud, and Enron's top management knew it." Employees working on the Blockbuster VOD deal were told time and again, after they stressed the deal's lack of economic sense, to "just drink more Enron Kool-Aid."  This is one of the more detailed allegations of this nature in terms of identifying who said what. Does it satisfy Novak requirement of identifying the speaker to the extent of determining s/he was in a position to have the information alleged. See §3.10 . In Novak the court remanded to the District Court to determine whether the allegations were sufficiently particularized. Do the allegations referenced above meet the particularity standard of Judge Scirica. See penultimate  paragraph of Section 3.11.  Apply the same analysis to paragraphs 709 through 711.

 11. Be prepared to discuss Judge Harmon's conclusion that the allegations as to Arthur Andersen were adequate to survive the motion to dismiss. Click HERE. Did she rule on the motion to dismiss of the individual Arthur Andersen partners that are named defendants? Click HERE and be prepared to discuss.

12. We could devote the remainder of the semester to consideration of the motions to dismiss of the various investment bank defendants, so we will be selective. Outline the 10b-5 case plaintiff's allegations attempt to make as as to JP Morgan (HERE). Outline Judge Harmon's (HERE) conclusions as to the 10b-5 case against JP Morgan. Which allegations did she accept and which did she reject and why? What did she consider as significant with respect to the issue of JP Morgan's knowledge (or recklessness)? Was this consistent with Zonagen? What role did JP Morgan's research department (analysts) play in the alleged scheme and what did Judge Harmon conclude in that regard? See also her earlier discussion of the role of analysts and in particular the so called "Chinese Wall" in reviewing defendants' contentions.  To what extent did she take judicial notice that relates to the role of analyst and the non-existence of Chinese Walls that does not directly relate to the alleged scheme? Click HERE.

13. We will not explore in detail the holding as to other investment banks, but as to Credit Suisse First Boston did Novak type allegations play a role and what significance did Judge Harmon attach to the recommendations of its research department (analysts). Click HERE.

14. The court granted Deutsche Bank's motion to dismiss. In what respects did the court find the complaint inadequate as to Deutsche Bank? Click HERE.

15. Note the ease with which the court disposed of the motions to dismiss of the Section 11 claims against specific investment banks that acted as underwriters of specific registered offerings. Click HERE. See also courts earlier discussion of Section 11.  Click HERE and HERE. What did the court hold with respect to the defendants' contention that the Section 11 allegations failed to comply with Rule 9(b) of the Federal Rules of Civil Procedure? See also par. 1005 of the AMENDED complaint. Why did the plaintiff concede that the Section 11 claims based on the 7% Exchangeable Notes were not actionable?

16. In the amended complaint review the plaintiff parties and the securities they purchased beginning at paragraph 79 of the AMENDED complaint and at paragraph 1005 of the AMENDED complaint the persons listed as subclass representatives (plaintiffs) as to each of the Section 11 claims and the nature of each of the registered offerings. Consider Judge Harmon's Section 11 finding. Did plaintiffs adequately alleged the purchase of securities covered by the registered offering; did someone clearly miss this as to some of the registered offerings as to which Judge Harmon sustained the pleading of the Section 11 claims?

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