A federal judge has dismissed claims by Enron investors against Alliance Capital Management that arose from the service of Alliance executive Frank Savage on the energy company's board.

The investors argued that Alliance should be held liable because Savage signed a registration statement for a $1 billion Enron bond offering that incorporated the company's false financial statements for 1998 to 2000. Alliance, a New York-based money manager, is now known as AllianceBernstein.

U.S. District Judge Melinda Harmon in Houston rejected that argument after concluding that there was "no evidence that Alliance had any authority to influence, supervise, or determine Savage's actions at Enron," The Wall Street Journal reported. She also said there was no evidence that Savage knew or should have known that he had signed a false registration statement.

Jim Hamilton, an analyst at Wolters Kluwer Law & Business, noted the significance of the ruling in a posting on his Web log. Had the judge held Alliance liable based on Savage's service on Enron's board, "the effect would be to chill the willingness of qualified individuals to serve on boards of public companies as independent directors," Hamilton wrote.

In an unusual move, the judge ordered Lerach Coughlin Stoia Geller Rudman & Robbins, the lead counsel for the investors, to pay part of Alliance's legal fees and expenses. In her Nov. 30 ruling, the judge said investors' lawyers should have realized that their claims had no merit before Alliance had to ask the court to dismiss those claims, Bloomberg News reported. The fees will be limited to those incurred by Alliance during the summary judgment phase of the litigation, attorney Lyle Roberts noted in his 10b-5 Daily Web log.

Harmon's order was noteworthy because defendants in U.S. securities lawsuits typically pay their own legal fees even when they persuade a court to dismiss a case. Investors, who generally have contingency fee arrangements with their attorneys, generally have their legal fees paid through a percentage of the settlements that they obtain.

William Lerach said his firm would pay the fees if it does not prevail on appeal or fails to persuade the judge to change her mind, the Journal reported. Savage, along with other former Enron directors, previously reached a settlement with investors, without admitting wrongdoing.

Lerach Coughlin so far has obtained $7.1 billion in settlements on behalf of the University of California and other investors who lost money during Enron's collapse into bankruptcy in 2001. Investors have reached accords with Citigroup, JP Morgan Chase, and three other investment banks and are still pursuing claims against Merrill Lynch, Credit Suisse, Toronto-Dominion Bank, Royal Bank of Scotland Group, Royal Bank of Canada, Goldman Sachs Group, and the law firm of Vinson & Elkins, according to Bloomberg News. Judge Harmon previously dismissed investors' claims against Deutsche Bank and Barclays.

A trial is scheduled for April, but a federal appeals court is reviewing a challenge by Merrill Lynch and other defendants to Judge Harmon's class certification order, Bloomberg News reported.