Wednesday, July 5, 2006
Ken Lay Dies of a Heart Attack
Reuters reports (here) that former Enron CEO Ken Lay died at his vacation home in Colorado. Under the Fifth Circuit's law of abatement of a criminal conviction when a defendant dies before appellate review of the conviction, "It is well established in this circuit that the death of a criminal defendant pending an appeal of his or her case abates, ab initio, the entire criminal proceeding." United States v. Asset, 990 F.2d 208 (5th Cir. 1993). In a recent Fifth Circuit decision, United States v. Estate of Parsons, 367 F.3d 409 (5th Cir. 2004), the court explained that "the appeal does not just disappear, and the case is not merely dismissed. Instead, everything associated with the case is extinguished, leaving the defendant as if he had never been indicted or convicted." In Parsons, the court vacated a forfeiture order, which means that the government's forfeiture claim against Lay for $43.5 million (see earlier post here) will be dismissed. The Fifth Circuit explained the rationale for the rule: "The finality principle reasons that the state should not label one as guilty until he has exhausted his opportunity to appeal. The punishment principle asserts that the state should not punish a dead person or his estate." An interesting question is whether one can still describe Lay as having been convicted of a crime, at least in a technical sense, because the law no longer recognizes there having been any criminal case initiated against him.
Unlike the criminal case, civil claims against Lay, such as the SEC's case and the securities class action, will continue against his estate. However, because the criminal conviction is wiped out, the plaintiffs cannot rely on it as proof in their case, if my dim memory of collateral estoppel serves me right.(ph)
See Larry Ribstein's Ideoblog here; Peter Lattman's Wall Street Blog here.
I think collateral estoppel applies, based on the Fifth Circuit decisions mentioned in my Conglomerate comment. Res judicata, perhaps not, but courts construe the finality of a judicial determination more broadly in the issue preclusion context.
Posted by: Jake | Jul 5, 2006 6:13:13 PM
Any plaintiffs who seek to apply collateral estoppel applies in subsequent civil suits, as a result of the guilty verdict the jury rendered against the late Mr. Lay, seem to be on pretty firm ground. The Fifth Circuit spoke to this question in RecoverEdge L.P. v. Pentecost, 44 F.3d 1284, 1295 (5th Cir. 1995), stating:
"At oral argument, RecoverEdge also argued that collateral estoppel does not apply to this case because there was no final judgment in the conspiracy case. This argument is legally and factually inaccurate. RecoverEdge's predecessor, the RTC, successfully moved the court to accept the jury's verdict and later to enter final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. Furthermore, a final judgment is not a prerequisite for issue preclusion when a jury has rendered a conclusive verdict. See Restatement (Second) of Judgments § 13 (1982) ( “The rules of res judicata are applicable only when a final judgment is rendered. However, for purposes of issue preclusion, ··· ‘final judgment’ includes any prior adjudication of an issue in another action that is determined to be sufficiently firm to be accorded conclusive effect.” )."
And in Cycles, Ltd. v. Navistar Financial Corp., 37 F.3d 1088, 1090 (5th Cir. 1994), the Fifth Circuit stated:
"Judgments are final for purposes of issue preclusion when fully litigated, even if not yet appealable. See Chemetron Corp. v. Business Funds, Inc., 682 F.2d 1149, 1191 (5th Cir.1982) (holding that a fully litigated, if non-final, decision enjoys issue-preclusive effect); vacated and remanded on other grounds,460 U.S. 1007, 103 S.Ct. 1245, 75 L.Ed.2d 476 (1983); reinstated on remand as to this ground,718 F.2d 725, 728 (5th Cir.1983); reh'g en banc ordered, id. at 730 (vacating opinion for rehearing en banc, which never occurred because parties settled); see also18 Charles A. Wright et al., Federal Practice and Procedure § 4434, at 321 (1981) (surveying leading cases that consider non-appealable judgments to be final for purposes of issue preclusion); 1B James W. Moore et al., Moore's Federal Practice ¶ 0.416[3.-1] (2d ed. 1993) (endorsing rule that pendency of post-trial motions to change the judgment or set it aside does not suspend issue-preclusive effect of the judgment); Restatement (Second) of Judgments § 13 cmt. f (1982) (pendency of motions to set aside a judgment otherwise final for collateral estoppel purposes or to grant a new trial does not suspend issue-preclusive effect of the judgment)."
Posted by: Jake | Jul 5, 2006 6:48:20 PM
Lay couldn't have filed an appeal yet, Johnny. He hadn't been sentenced. That comes first. Now, as Prof. Henning points out, it won't come at all.
Posted by: Peter G | Jul 5, 2006 6:55:06 PM
i like this part of the post:"The Fifth Circuit explained the rationale for the rule: "The finality principle reasons that the state should not label one as guilty until he has exhausted his opportunity to appeal. The punishment principle asserts that the state should not punish a dead person or his estate." An interesting question is whether one can still describe Lay as having been convicted of a crime, at least in a technical sense, because the law no longer recognizes there having been any criminal case initiated against him." is very good
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Posted by: card bomb | Feb 3, 2011 11:22:49 AM
I don't think Lay filed an appeal.
Posted by: johnny | Jul 5, 2006 12:52:54 PM