401 F. App'x 889
5th Cir.2010Background
- Brown appeals district court's dismissal with prejudice under Rule 12(b)(6) and alternatively Rule 9(b) for failure to plead with particularity.
- Facts originate from In re Enron Corp. Securities Litigation; Enron collapse led to securities class actions in SD Tex; Regents of the University of California appointed lead plaintiff under PSLRA.
- Lead Counsel was Milberg Weiss; Bilek and his Houston firm served as local counsel; district court approved a contingency fee of 9.52% (about $688 million) and allocated about $16 million to Bilek.
- Brown alleges Bilek provided false/exaggerated information to the Enron court to secure the fee award, reducing recovery to the class.
- Removing to federal court, the district court held Brown could not sue on behalf of a class represented by the Regents and Brown could not attack the fee award via a tort action; the complaint also failed Rule 9(b) pleading.
- The Fifth Circuit reviews de novo Rule 12(b)(6) dismissals and Rule 9(b) pleadings; if pleadings are deficient, leave to amend is a matter of discretion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Brown must pursue his claims through the PSLRA lead plaintiff. | Brown argues he may sue independently of Regents. | Bilek argues only Regents may vindicate the class interests under PSLRA. | Yes; Brown's claims must be brought through Regents under PSLRA. |
| Whether Brown pleads fraud with particularity under Rule 9(b). | Brown contends pleading meets Rule 9(b) requirements. | Bilek contends pleading lacks specificity and particular facts. | No; Brown failed to allege particular facts showing which information was false and why. |
| Whether the district court abused its discretion by not allowing leave to amend. | Brown sought opportunity to replead. | Court properly denied leave due to lack of proposed amended facts. | No abuse of discretion; no proposed amendment submitted. |
| Standard of review for Rule 12(b)(6) and Rule 9(b) determinations. | Relevant standards applied to pleadings. | Same standards govern dismissal. | De novo review; Rule 9(b) heightened particularity requirements apply. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (claims must be plausible; pleading must state a claim with enough factual matter)
- Plotkin v. IP Axess Inc., 407 F.3d 690 (5th Cir. 2005) (Rule 9(b) requires specificity about fraudulent statements)
- Nathenson v. Zonagen, 267 F.3d 400 (5th Cir. 2001) (clarifies Rule 9(b) standards for fraud pleadings)
- Guidry v. Bank of LaPlace, 954 F.2d 278 (5th Cir. 1992) (Rule 9(b) particularity for fraud-based fiduciary claims)
- In re Cendant Corp. Sec. Litig. (Cendant II), 404 F.3d 173 (3d Cir. 2005) (lead plaintiff selects/monitors counsel; fee award implications)
- Unimobil 84, Inc. v. Spurney, 797 F.2d 214 (5th Cir. 1986) (context of Rule 9(b) pleading specificity)