Fund firms and asset managers who believe that they have limited exposure to cases such as the collapse and bankruptcy of Enron may want to take another look. At least two financial services firms have been named as defendants in Enron-related class-action lawsuits. Each of these cases was created by a different issue.

In one case, the plaintiffs are suing Alliance Capital Management Holding. The suit claims that the fund firm breached its fiduciary duty to shareholders by allowing one of the directors of the Alliance Premier Growth Fund to sit on the Enron board of directors.

The plaintiffs in the Alliance case are seeking a return of the fees that the Premier Growth Fund paid to Alliance Capital Management during the 12 months preceding the lawsuit. The fund has some $11 billion in assets on which the fees in question are based.

A second lawsuit filed by participants in Enron's 401(k) plan names Northern Trust, the plan administrator. In that case the suit alleges that Northern Trust failed to distribute required information about Enron stock to plan participants as required under security laws.

At the end of last year, plan participants in the Enron 401(k) held in excess of $1 billion of Enron stock, according to government filings. The bankruptcy of the firm likely erased most of that value.

Both cases are unique in the annals of the business and reflect the increased likelihood of class actions suits when large financial losses are hit by investors in funds and retirement products.

In both cases it is also unlikely that either firm saw potential liability arising from the collapse of Enron. Typically, firms carry a limited amount of directors and officers liability insurance to cover such unexpected lawsuits. Often, firm's coverage does not exceed $25 million. They made need to revisit their assumptions if the wave of litigation expands.  

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