Silvercreek Mgmt., Inc. v. Citigroup, Inc. (346 F. Supp. 3d 473, 2018)

J. PAUL OETKEN, United States District Judge Plaintiffs, a group of investment funds known as "Silvercreek," brought this action against Defendants, a set of financial institutions, for conduct relating to the issuance of debt securities by Enron Corporation ("Enron"). Plaintiffs assert claims under New York state tort law and under federal and Texas securities laws. Defendants Credit Suisse, Deutsche Bank, and Merrill Lynch each move for summary judgment. (Dkt. Nos. 114-15, 121.) For the reasons that follow, the motions are granted in part and denied in part.

I. Background

Like many of the others to have emerged from the Enron bankruptcy, this is a case whose "facts are difficult to detail but easy to summarize." Regents of Univ. of Cal. v. Credit Suisse First Bos. (USA), Inc. , 482 F.3d 372, 377 (5th Cir. 2007). Familiarity with the factual background of this particular dispute is presumed based on this Court's prior opinion on Defendants' motion to dismiss, see Silvercreek Mgmt., Inc. v. Citigroup, Inc. , 248 F.Supp.3d 428, 434-36 (S.D.N.Y. 2017), and the relevant facts will be detailed with greater particularity below. The following general background is drawn primarily from the parties' Rule 56.1 statements and is not subject to genuine dispute unless otherwise noted.

Between October 18, 2001, and October 26, 2001, Plaintiffs invested over $100 million in two different Enron securities: the 7% Exchangeable Notes (the "7% Notes") and Zero Coupon Exchangeable Notes (the "Zero Notes" or "Zeros"). (Dkt. No. 221 ("DBSUF") ¶ 344; Dkt. No. 215 ("CSSUF") ¶¶ 118, 127; Dkt. No. 220 ("MLSUF") ¶¶ 218, 250, 253.) Plaintiffs'

purchase of the notes came at a turbulent time for Enron. Cautionary signs regarding the company's stability were beginning to emerge, including the departure of some high level executives, revised financial statements, and the announcement of an SEC inquiry into Enron's financials. (MLSUF ¶ 256; CSSUF ¶ 693.) But balanced against these warning signs was Enron's continued issuance of positive press releases confirming its financial solvency. (MLSUF ¶¶ 259-60.) And analyst and credit agency reports around this key eight-day period were mixed, with some downgrading their assessments of Enron's credit-worthiness but most continuing to recommend Enron as a strong buy or safe investment. (MLSUF ¶¶ 266-84; see also generally Dkt. No. 139-79.) Some of the many positive reports about Enron issued in October 2001 came from the Defendants in this case. (See, e.g. , MLSUF ¶¶ 270-71, 275, 279, 281-82, 284; Dkt. No. 168-45 at 2 (October 26, 2001 Credit Suisse analyst report listing Enron as "strong buy"); DBSUF ¶¶ 358-59.)

Unfortunately for Plaintiffs, time would soon vindicate those skeptical of Enron's financials. On November 8, 2001, Enron was forced to again issue restatements of its audited financials, this time correcting all of its annual reports going back to 1997 as well as its first two 2001 quarterly reports, resulting in billion-dollar changes to reported shareholder equity and balance sheet debt. (CSSUF ¶¶ 714-17; DBSUF ¶¶ 351-56.) On December 2, 2001, Enron filed for Chapter 11 Bankruptcy, wiping out practically the entire value of Plaintiffs' late-October investments in Enron's securities. (DBSUF ¶¶ 363, 365.) Plaintiffs' resulting losses on these investments, along with Defendants' alleged role in perpetrating Enron's fraud and influencing Plaintiffs' purchase of Enron's overvalued securities, form the crux of this suit.

Enron's corrections to its financial statements, issued in the weeks following Plaintiffs' investments, stemmed primarily from the company's practice of engaging in transactions with unconsolidated special purpose entities ("SPEs") and off-balance-sheet transactions. (DBSUF ¶ 367.) Enron would conduct transactions with these SPEs-which Enron or its executives nominally controlled but whose assets and debts were not consolidated with Enron's-in order to hide debt and generate income, thereby producing a deceptive picture of Enron's financials. (Id. ) Each Defendant played some role in designing, marketing, funding or implementing a number of the transactions that Enron used to cook its books. (See, e.g. , DBSUF ¶¶ 378, 639-48; CSSUF ¶¶ 758-68, 800; MLSUF ¶¶ 341-45.) Each of the Defendants was also involved to varying degrees with the marketing and distribution of the 7% Notes and Zero Notes that Plaintiffs had purchased in late October 2001. (See, e.g. , MLSUF ¶ 245; CSSUF ¶¶ 120-26; DBSUF ¶¶ 704-13.)

Plaintiffs assert a number of claims based on Defendants' involvement in the transactions underlying Enron's fraud, as well as each Defendant's role in directly marketing Enron's securities to Plaintiffs. Specifically, at issue in these motions are six causes of action: claims against all three Defendants for (1) aiding and abetting Enron's fraud, (2) aiding and abetting Enron's negligent misrepresentation, and (3) conspiracy with Enron to commit fraud; claims against Credit Suisse and Merrill Lynch for (4) negligent misrepresentation; and claims against Credit Suisse and Deutsche Bank for violations of (5) Section 11 of the Securities Act, 15 U.S.C. § 77k(a), and (6) the Texas Securities Act ("TSA"). All of the Defendants now move for summary judgment on all claims.

While the parties do not generally dispute the foregoing facts, they sharply contest the extent to which the Defendants understood Enron's overall scheme and the legal significance of their contributions to Enron's fraud. Despite turning on a wide range of materials and evidence, the parties' disputes can largely be boiled down to a few core questions:

• Were the Defendants' transactions with Enron inherently fraudulent, or was it only Enron's deceitful reporting of these otherwise legitimate transactions that formed the basis of the underlying fraud? (Dkt. No. 217 ("DB Reply") at 6-14.)

• To what extent was each Defendant aware of Enron's overall fraudulent scheme, and to what extent can each Defendant's transactions be said to have actually furthered Enron's overall fraudulent scheme? (Dkt. No. 219 ("ML Reply") at 2-8, 16-19.)

• Can Plaintiffs establish that they relied on Enron's false financial statements, or on Defendants' own inaccurate assessments of Enron's financial stability, when purchasing the Enron securities? (Dkt. No. 214 ("CS Reply") at 7-13.)

Did either Enron or the Defendants directly owe Plaintiffs a duty to accurately report information regarding Enron's financial solvency and the value of its securities? (CS Reply at 3-7; ML Reply at 21-22.)

Each of these questions is addressed in detail below.

II. Legal Standard

A "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. A fact is material if it might affect the outcome of the suit under the governing law." SCR Joint Venture L.P. v. Warshawsky , 559 F.3d 133, 137 (2d Cir. 2009) (quoting Roe v. City of Waterbury , 542 F.3d 31, 35 (2d Cir. 2008) ).

Where the nonmoving party will bear the burden of proof at trial, the moving party may establish the propriety of summary judgment by "point[ing] to a lack of evidence to go to the trier of fact on an essential element of the nonmovant's claim." Jaramillo v. Weyerhaeuser Co. , 536 F.3d 140, 145 (2d Cir. 2008). Once the moving party has done so, the burden shifts to "the nonmoving party [to] come forward with admissible evidence sufficient to raise a genuine issue of fact for trial" on each essential element of their claims. Id.

To defeat summary judgment, the nonmoving party cannot rely merely on "some metaphysical doubt as to the material facts" or on "conclusory allegations or unsubstantiated speculation." Jeffreys v. City of New York , 426 F.3d 549, 554 (2d Cir. 2005) (citations omitted). Instead, the nonmoving party must point to concrete "evidence on which the jury could reason ably find for the plaintiff." Id. (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). In evaluating whether the nonmoving party has met their burden, courts are to construe the evidence in the light most favorable to the nonmoving party and draw all inferences in their favor, asking "not whether ... the evidence unmistakably favors one[ ] side or the other but whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." Id. at 553 (quoting Anderson , 477 U.S. at 252, 106 S.Ct. 2505 ).

III. Discussion

The Court addresses Defendants' motions for summary judgment on each of Plaintiffs' claims in turn.

A. Aiding and Abetting Fraud

Silvercreek brings claims of aiding and abetting fraud against all of the Defendants. (TAC ¶¶ 802-13.) The elements of an aiding-and-abetting-fraud claim brought under New York law are: (1) an underlying fraud; (2) the defendant's actual knowledge of the fraud; and (3) the defendant's substantial assistance to the fraud. Krys v. Pigott , 749 F.3d 117, 127 (2d Cir. 2014) ; Oster v. Kirschner , 77 A.D.3d 51, 905 N.Y.S.2d 69, 72 (1st Dep't 2010). Because at trial "[a] claim for aiding and abetting fraud must be proven by clear and convincing evidence[,] ... to survive summary judgment, Plaintiffs must have adduced sufficient evidence to meet this standard at trial." See de Abreu v. Bank of Am. Corp. , 812 F.Supp.2d 316, 322 (S.D.N.Y. 2011) (citation omitted).

1. Underlying Fraud by Enron

As a threshold matter, Plaintiffs must establish an underlying fraud by Enron. For purposes of summary judgment, this means that Plaintiffs must produce evidence sufficient to permit a reasonable jury to find by clear and convincing evidence that (1) Enron issued a statement containing a material misrepresentation or omission of fact; (2) Enron had knowledge of the falsity of the statement; (3) Enron had an intent to defraud; (4) Plaintiffs reasonably relied on Enron's fraudulent statements; and (5) Plaintiffs suffered damages. See Crigger v. Fahnestock & Co. , 443 F.3d 230, 234 (2d Cir. 2006). No party contests that Enron knowingly and intentionally issued false financial statements or that Plaintiffs suffered damages when Enron's fraud came to light and its stock prices collapsed. But Defendants Merrill Lynch and Credit Suisse each move for summary judgment on element four of Silvercreek's underlying fraud claim, namely whether Silvercreek reasonably relied on Enron's fraudulent statements. (CS Brief at 18-23; ML Brief at 32.)

a. Actual reliance

Credit Suisse and Merrill Lynch maintain that there is no evidence that Silvercreek actually relied on Enron's financial statements prior to purchasing the Enron notes in October 2001. (Id. ) Instead, Credit Suisse and Merrill Lynch assert that Plaintiffs purchased the Enron notes "based solely on [their] price." (CS Brief at 18; see also ML Brief at 32 ("Plaintiffs' investments were based solely on Enron's stock and bond prices.").) But the record contains ample evidence showing that Plaintiffs' analysis into whether to purchase the Enron 7% Notes and Zero Notes was more complex and nuanced than Defendants represent. As Louise Morwick-Silvercreek's founder, director, president, portfolio manager, and the woman responsible for making its final investment decisions (CSSUF ¶¶ 8-9)-summarized at one point in her deposition:

We looked at the fundamentals of this business. We were investing in Enron.... I think the market cap, you know, certainly the combined total cap is 20, 25 billion dollars. It's an investment based on the financials of this company and the business strength of this company. And the financials that we were basing our investment decision on were just complete garbage. They were completely wrong. They weren't even close to reality.

(Dkt. No. 168-1 at 374:17-25; see also Dkt. No. 168-2 ¶ 6.) Indeed, in numerous different depositions, interrogatory responses, and declarations submitted over this case's years-long discovery period, Morwick and her associates have consistently recounted how important their optimistic assessment of Enron's long-term financial stability was to Silvercreek's late-October 2001 purchases. (See generally CSSUF ¶¶ 659-66; 698-707.)

Defendants urge that Plaintiffs cannot establish the reliance element of their underlying fraud claim against Enron absent evidence that anyone at Silvercreek had read and relied on any of Enron's fraudulent financial statements at the precise time of their investment. (CS Brief at 22; ML Brief at 32.) But even if Morwick did not reread Enron's fraudulent financial reports immediately prior to making her late October 2001 purchases of the notes, there is still ample evidence to support a conclusion that she actually relied on the false statements contained therein at the time she authorized Silvercreek's purchases. For example, the record reflects that she had previously carefully reviewed Enron's false annual reports prior to past investments in Enron. (CSSUF ¶¶ 202-05, 637-49.) The record also includes evidence showing that Morwick continued to stay abreast of developments at Enron between that time and the October 2001 purchases, including by rereading the prospectuses of the relevant notes, reading select quarterly reports, tracking media and analyst reports, and listening to Enron's quarterly earnings calls. (CSSUF ¶¶ 652, 659-60; Dkt. No. 168-1 at 771-72, 802-03.) All of these sources of information either directly included fraudulent statements by Enron or themselves incorporated and were based on those statements.

Defendants also make much of Silvercreek's concession that the drop in the price of Enron's securities directly precipitated its purchase of the 7% Notes and Zero Notes. (CS Brief at 18-19; ML Brief at 32.) But the fact that an investor took price into account when purchasing a bond is hardly remarkable, and that investor's admitting that she did so is not tantamount to admitting that she considered only price. Morwick repeatedly stated that even though she ultimately chose to purchase the notes only once she found the price-point sufficiently favorable, her decision to purchase was fundamentally founded on her prior assessments of Enron's financial stability, which itself was based on Enron's fraudulent financial statements. (CSSUF ¶¶ 619, 660-61, 664-65, 698-707; see also Dkt. No. 168-1 at 802-03.) Crediting as true Morwick's testimony regarding her Enron investment strategy for purposes of this motion, the Court concludes that there is a sufficient basis from which a jury could reasonably find that Silvercreek actually relied on Enron's fraudulent depiction of its financial stability, and not only on price, at the time it purchased Enron's securities.

b. Reasonable Reliance

"In assessing the reasonableness of a plaintiff's alleged reliance, we consider the entire context of the transaction, including factors such as its complexity and magnitude, the sophistication of the parties, and the content of any agreements between them." Emergent Capital Inv. Mgmt., LLC v. Stonepath Grp., Inc. , 343 F.3d 189, 195 (2d Cir. 2003). A claim of reasonable reliance can be defeated where it is clear that "a party has been put on notice of the existence of material facts which have not been documented and [ ] nevertheless proceeds with a transaction" because in doing so the party "may truly be said to have willingly assumed the business risk that the facts may not be as represented." Id. (quoting Rodas v. Manitaras , 159 A.D.2d 341, 552 N.Y.S.2d 618, 620 (1st Dep't 1990) ). Still, where the circumstances and facts underlying a plaintiff's reliance are subject to genuine dispute, courts are reluctant to summarily dispose of fraud claims on the basis of unreasonable reliance. See De Sole v. Knoedler Gallery, LLC , 139 F.Supp.3d 618, 643 (S.D.N.Y. 2015) ("Under New York's contextual approach, the question of what constitutes reasonable reliance is always nettlesome because it is so fact-intensive. Reasonable reliance is therefore a question normally reserved for the finder of fact and not usually amenable to summary judgment." (brackets, internal quotation marks, and citations omitted) ). Accordingly, it is "a rare circumstance in which the issue of reasonable reliance can be resolved at the stage of summary judgment." Glob.Minerals & Metals Corp. v. Holme , 35 A.D.3d 93, 824 N.Y.S.2d 210, 215 (1st Dep't 2006).

Credit Suisse and Merrill Lynch both rely on In re Livent, Inc. Noteholder s Securities Litigation , 151 F.Supp.2d 371 (S.D.N.Y. 2001), to argue that Plaintiffs' reliance on Enron's financial statements was unreasonable as a matter of law. (ML Brief at 32; CS Brief at 22.) In re Livent involved Section 10(b) securities fraud claims brought by investors directly against a securities issuer based on false financial statements. Id. at 439-40. On a motion to dismiss under Rule 12(b)(6), the court dismissed the claims on the basis of plaintiffs' failure to adequately plead reasonable reliance. Id. In doing so, the court emphasized that some of the plaintiffs' purchases had come after the securities issuer had already declared bankruptcy, and that the earliest purchases had come after the company had already issued statements explicitly disclaiming the accuracy of its past financial statements and warning that it was "virtually certain that the company's financial results for [the relevant periods] will need to be restated." Id.

The timeline before the court in In re Livent simply does not map onto the timeline at issue in this case. Here, all of Silvercreek's purchases of the Enron 7% Notes and Zero Notes came before Enron declared bankruptcy. (CSSUF ¶¶ 118, 127; DBSUF ¶ 363.) And although Enron had issued some mixed signals leading up to Silvercreek's investment (MLSUF ¶ 256), Enron announced strong quarterly earnings just two days before Silvercreek began purchasing the Enron notes, telling investors that the recent write-down would be a one-time nonrecurring charge with no impact on Enron's strong outlook moving forward (MLSUF ¶¶ 259-60). The fact that the plaintiffs in In re Livent had already been expressly told not to rely on the company's past financial statements, while Plaintiffs here were expressly told that they could continue to rely on the company's past financial statements, readily distinguishes the two cases.

Defendants also rely on New York cases for the proposition that a sophisticated party with warning signs regarding a statement's falsity has a duty to inquire further into the truthfulness of those statements. (CS Brief at 22; ML Brief at 29.) Courts have certainly granted summary judgment where "sophisticated investors [fail] to protect themselves from misrepresentations made during business acquisitions by investigating the details of the transactions and the business they are acquiring," but they will do so only where "the facts are abundantly clear as to why [ ] reliance was unreasonable." Glob.Minerals & Metals Corp. , 824 N.Y.S.2d at 215-16. Indeed, in all of the cases Defendants rely on, courts were able to identify basic types of due diligence that the relying party should have conducted to prevent its injury but concededly did not. See, e.g., id. at 216 ("At a minimum, [plaintiff] should have contacted [parties with more information]. Even if they refused to provide further information, [plaintiff] should have sought to condition the settlement on the truth of the representations...."); In re Livent , 151 F.Supp.2d at 439 ("[B]asic inquiries would have revealed the truth[.]"); Stuart Silver Assocs. v. Baco Dev. Corp. , 245 A.D.2d 96, 665 N.Y.S.2d 415, 418 (1st Dep't 1997) ("[Plaintiffs] invest[ed] in a real estate venture without conducting a 'due diligence' investigation or consulting their lawyers and accountants ... [and] did not even read the prospectus [.]").

On the basis of these cases, Defendants assert that Plaintiffs ought to have also conducted an independent "analysis" of Enron's financial records. (CS Brief at 21; ML Brief at 32.) This argument is insufficient to warrant summary judgment for three distinct reasons.

First, in contrast to cases in which a party's reliance was unreasonable as a matter of law, the record now before the Court does not contain "facts [that] are abundantly clear as to why [Silvercreek's] reliance was unreasonable." Glob.Minerals & Metals Corp. , 824 N.Y.S.2d at 216. Instead, Plaintiffs here have produced facts sufficient to support a conclusion that they did reasonably inquire into the truth of Enron's statements. As the Court has already explored, Silvercreek consulted a host of different sources in the months leading up to its October 2001 investments, including not only Enron's own financial statements but also the assessments of a number of third-party experts. See supra Section III.A.1.a. The Defendants may dispute whether Plaintiffs' inquiry was sufficient given the mixed news about Enron issuing at the time of the investment. (MLSUF ¶¶ 256-60.) But given the evidence that Plaintiffs did conduct some inquiry into Enron's financials, and that their inquiry revealed dozens of similarly positive assessments of Enron's securities repeatedly issuing from credit agencies, brokers, and analysts during the relevant period (MLSUF ¶¶ 268-86)-some of which came from the very Defendants now moving for summary judgment on the question of Plaintiffs' reasonable reliance (Dkt. No. 168-45; Dkt. No. 193-10)-the Court cannot now say that Plaintiffs' reliance on Enron's representations regarding its financial status in October 2001 was unreasonable as a matter of law.

Second, Defendants cannot identify with specificity any type of further inquiry Plaintiffs could have conducted that would not have been stonewalled by Enron's fraud itself. Indeed, Defendants appear to concede that they could not possibly do so, because each acknowledges that Enron's fraud was premised on Enron's ability to conceal the true state of its financials, such that it was knowable only to a select few insiders. (See, e.g. , CS Brief at 36 ("The undisputed evidence thus shows that Credit Suisse took reasonable steps to obtain information about Enron's debt but was stonewalled by Enron."); DB Brief at 4 ("[T]he Enron accounting fraud was premised on secrecy, agreements among key Enron insiders, and transactions that were not public transactions[.]"); ML Brief at 6 ("Enron's operations were known to be complex, opaque, and 'impenetrable.' [Enron's former CFO] acknowledged that Enron's true financial condition would not have been apparent to anyone based on its certified financial statements through 2001." (footnote omitted) ).) The Court does not fault Defendants for arguing in the alternative, but simply recognizes that the question of what should have been discoverable based on publicly available information about Enron in October 2001 is an extremely fact-dependent inquiry subject to the oft-conflicting assessments of numerous experts, witnesses, and the parties. As such, it is a question on which summary judgment would be improper.

Third, and finally, the case law on reasonable reliance makes clear that when trading securities on an open market based on representations in registration statements or from underwriters and credit agencies, even "sophisticated plaintiffs are not required to 'conduct their own audit' in order to rely on a defendant's allegedly fraudulent representations." Landesbank Baden-Württemberg v. RBS Holdings USA Inc. , 14 F.Supp.3d 488, 512 (S.D.N.Y. 2014) (quoting DDJ Mgmt., LLC v. Rhone Grp. LLC, 15 N.Y.3d 147, 156, 905 N.Y.S.2d 118, 931 N.E.2d 87 (2010) ). As the MDL Court that oversaw this case's discovery explained in denying a motion to dismiss New York law fraud and negligent misrepresentation claims brought against a different set of financial institutions:

[A] company's annual and quarterly financial statements filed with the SEC and incorporated into the offering memoranda and prospectuses of the notes, in accordance with their raison d'etre , are standardly used by the market to, and here allegedly constituted Plaintiffs' primary sources for historical information, to gauge Enron's long-term financial stability, the critical factor in evaluating the risk for debt securities.

In re Enron Corp. Sec., Derivative & ERISA Litig. , No. MDL 1446, 2003 WL 23305555, at *8 (S.D. Tex. Dec. 11, 2003). A similar conclusion is appropriate here, particularly because Plaintiffs' inquiry went beyond blind reliance on Enron's annual and quarterly statements but also incorporated credit agency and analyst assessments of Enron's viability. Defendants' proposed construction of reasonable reliance would essentially "require[any] prospective purchaser to assume that the credit ratings assigned to the securities were fraudulent and to verify them through a detailed retracing of the steps undertaken by the underwriter and credit rating agency." IKB Int'l S.A. v. Morgan Stanley , 142 A.D.3d 447, 36 N.Y.S.3d 452, 456 (1st Dep't 2016). The Court declines to "impose a requirement on sophisticated investors that is inconsistent with the philosophy of disclosure at the heart of the Exchange Act ... [by] requir[ing them] to seek out information above and beyond what was publicly available before purchasing [a] stock." Maverick Fund, L.D.C. v. Comverse Tech., Inc. , 801 F.Supp.2d 41, 57-58 (E.D.N.Y. 2011).

In denying Defendants' motions on the reliance element of Plaintiffs' underlying fraud claim against Enron, the Court emphasizes that its role on a motion for summary judgment is not to ask "whether ... the evidence unmistakably favors ones side or the other but [only] whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." Jeffreys , 426 F.3d at 554 (quoting Anderson , 477 U.S. at 252, 106 S.Ct. 2505 ). Here, in crediting as true the testimony of Plaintiffs' witnesses as to their investment strategy and assessment of Enron's financial stability during the key period of October 18, 2001, through October 26, 2001, the Court cannot now hold that no reasonable jury could find in Plaintiffs' favor, even under the clear and convincing standard. Accordingly, Defendants' motion for summary judgment on the reliance element of Plaintiffs' underlying fraud claim against Enron is denied.

2. Actual Knowledge and Substantial Assistance

In addition to an underlying fraud, Silvercreek's claim for aiding and abetting fraud requires proof that Defendants had actual knowledge of Enron's fraud and provided Enron with substantial assistance. See Oster , 905 N.Y.S.2d at 72. Each Defendant moves for summary judgment on both of these elements. (CS Brief at 24-37; ML Brief at 32-37; DB Brief at 17-26.)

"New York law requires that the alleged aider and abettor have 'actual,' as opposed to merely constructive, knowledge of the primary wrong." Chemtex, LLC v. St. Anthony Enters., Inc. , 490 F.Supp.2d 536, 546 (S.D.N.Y. 2007). Accordingly, evidence that a defendant could or should have been able to deduce the fact of an underlying fraud on the basis of red flags or warning signs is not a substitute for actual knowledge. See Nathel v. Siegal , 592 F.Supp.2d 452, 468-69 (S.D.N.Y. 2008). But while constructive knowledge alone cannot support a claim for aiding and abetting fraud, circumstantial evidence can be sufficient to support a finding of actual knowledge. See id. at 468 ("[A]llegations of constructive knowledge or recklessness are insufficient ... [but an] allegation of actual knowledge does not have to be based on defendant's explicit acknowledgment of the fraud."); see also Oster , 905 N.Y.S.2d at 72 ("Participants in a fraud do not affirmatively declare to the world that they are engaged in the perpetration of a fraud. The [New York] Court of Appeals has stated that an intent to commit fraud is to be divined from surrounding circumstances.").

Substantial assistance constitutes "a substantial contribution to the perpetration of the fraud." JPMorgan Chase Bank v. Winnick , 406 F.Supp.2d 247, 257 (S.D.N.Y. 2005). It exists "where a defendant 'affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed.' " Cromer Fin. Ltd. v. Berger , 137 F.Supp.2d 452, 470 (S.D.N.Y. 2001) (quoting Nigerian Nat'l Petroleum Corp. v. Citibank, N.A. , No. 98 Civ. 4960, 1999 WL 558141, at *8 (S.D.N.Y. July 30, 1999) ). The MDL Court that oversaw discovery in this case made clear that substantial assistance "can take many forms," such as "[e]xecuting transactions" or helping a firm to present an "enhanced financial picture to others." In re Enron Corp. , 511 F.Supp.2d 742, 806 (S.D. Tex. 2005) (quoting Primavera Familienstifung v. Askin , 130 F.Supp.2d 450, 511 (S.D.N.Y. 2001) ).

Also embedded into the substantial assistance element is a proximate cause analysis, which requires a showing that "a defendant's participation [was] the proximate cause of plaintiff's injury."

Dubai Islamic Bank v. Citibank, N.A. , 256 F.Supp.2d 158, 167 (S.D.N.Y. 2003). An aider and abettor's substantial assistance to a fraud can be considered a proximate cause where a plaintiff's injury was "a direct or reasonably foreseeable result of the defendant's conduct." Filler v. Hanvit Bank , Nos. 01 Civ. 9510, 02 Civ. 8251, 2003 WL 22110773, at *2 (S.D.N.Y. Sept. 12, 2003).

The parties have each proffered substantial evidence regarding actual knowledge and substantial assistance. In evaluating each party's showing, the Court is mindful that its only task at this stage is to determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson , 477 U.S. at 251-52, 106 S.Ct. 2505.

a. Credit Suisse

Plaintiffs have produced ample evidence to support their allegations that Credit Suisse had actual knowledge of and substantially assisted Enron's fraud. Credit Suisse marshals a range of different responses to much of this evidence, but they all go to the persuasiveness and credibility of various portions of Plaintiffs' showing, but not to its sufficiency as a matter of law. As another court once explained in rejecting similar arguments from Credit Suisse on a set of nearly identical claims, "Credit Suisse's attempt to give an explanation for each piece of evidence submitted by the Noteholders" does nothing "to force a conclusion that genuine issues of fact do not exist. Rather, at best [Credit Suisse's] Reply Statement of Facts takes small chips out of the mountain of evidence presented by the Noteholders." In re Nat'l Century Fin. Enters., Inc. , 846 F.Supp.2d 828, 871 (S.D. Ohio 2012).

i. Credit Suisse employee testimony

Perhaps most damning to Credit Suisse's motion are the numerous statements and emails in which various Credit Suisse employees appear to explicitly acknowledge their awareness of Enron's fraud. As a lens through which to analyze Credit Suisse's different types of rebuttals and challenges to this category of evidence, the Court begins its analysis by focusing on the statements of one particular Credit Suisse employee, Robert Jeffe, who described in strikingly clear terms his understanding of the fraudulent nature of one of the transactions between Enron and LJM1, an SPE wholly controlled by Enron's CFO:

[T]he idea of somebody selling something to themselves representing both sides was something I had never seen.... There were reservations amongst some of the members of the [Credit Suisse] team regarding the kind of compensation that [Enron's CFO] would receive by completing this transaction.... [I]t struck me as a lot of money, number one, but, number two, the Enron people were paying themselves a lot of money. And the part of it that troubled me the most was ... conflict issues. And it was astonishing that the board of directors, that [Enron's law firm and accounting firm] all had, quote, unquote, signed off on this transaction. It was also troubling from the standpoint of [Enron's CFO] personally wanting to do the transaction. Because I think we all told him at various times that at some point this transaction would come to light and he would look very, very bad.

(Dkt. No. 169-23 at 26-27.) This same employee also described Enron's CFO's behavior more generally as crossing "lines of proper behavior in terms of the way you comport yourself, and this was something that I never ever would consider doing myself even if I had approval from the President of the United States or the U.S. Supreme Court." (Dkt. No. 169-23 at 42.)

Credit Suisse addresses this portion of Jeffe's testimony in its reply Local Rule 56.1 Statement, arguing that this testimony is most fairly construed as reflecting Jeffe's initial concerns about the LJM1 deals, concerns that were addressed by the eventual auditing and third-party vetting of those deals. (CSSUF ¶ 763.) Credit Suisse's construction of this testimony appears to run up directly against the actual content of Jeffe's testimony, which reflects that he already knew and was "astonish[ed]" by the fact that Enron's law firm and accounting firm "all had, quote, unquote, signed off on this transaction." (Dkt. No. 169-23 at 27.) But regardless of the merits of Credit Suisse's interpretation of Jeffe's testimony, consideration of Credit Suisse's alternative interpretation properly belongs to a jury. Viewed in the light most favorable to Plaintiffs, as the Court must view it, Jeffe's testimony evinces Jeffe's understanding of the wrongdoing inherent in LJM1 transacting with Enron.

Further undermining Credit Suisse's alternative construction of Jeffe's testimony are Jeffe's emails and subsequent testimony, in which he acknowledged his awareness of Enron's failure to disclose billions of dollars of off-balance sheet debt. These later statements stemmed from an August 2001 meeting between Jeffe and Enron's then-CFO Andrew Fastow. (See generally CSSUF ¶¶ 506-17.) Jeffe testified that he had been under the assumption that Enron had in the range of sixteen or seventeen billion dollars of total debt, but Fastow revealed to him at that meeting that Enron actually had thirty-six billion dollars of debt. (CSSUF ¶¶ 506-07.) Jeffe testified that he found this number difficult to process, and he referred it to his colleagues at Credit Suisse. (CSSUF ¶¶ 508-12.) Jeffe's colleagues at Credit Suisse then tried to follow up with Enron for more information about this figure, but Enron rebuffed Credit Suisse's inquiries. (CSSUF ¶¶ 509, 516-17.)

As Credit Suisse would have it, Jeffe's testimony about the August 2001 meeting demonstrates that Credit Suisse's knowledge of Enron's fraud was limited because Enron's actual off-balance sheet debt far exceeded Jeffe's initial understanding. (CS Brief at 36.) Credit Suisse also argues that this testimony further buttresses its claims that Credit Suisse was kept in the dark by Enron as to the true extent of its debt. (Id. )

But the Court cannot adopt Credit Suisse's interpretation of this testimony at this stage. Rather, the Court must read the evidence in the light most favorable to Plaintiffs. Viewed in this manner, Jeffe's testimony reveals that a Credit Suisse employee entered a meeting with Enron in August 2001 already knowing that Enron had billions of dollars of unreported debt, which by itself would support a finding of actual knowledge of Enron's fraudulent accounting practices. See Nat'l Century , 846 F.Supp.2d at 872 ("Credit Suisse may not have known all of the intricacies ... but substantial evidence exists to support a conclusion that Credit Suisse had sufficient knowledge to appreciate that [Enron's] representations to investors [regarding its volume of debt] were untrue."). That Jeffe then learned that he was correct in assuming that Enron had billions of dollars of concealed debt, but that Enron's concealed debt actually extended far beyond what he had previously surmised, does not undermine the relevance of this testimony to Plaintiffs' case.

Again, the Court has undertaken this careful exploration Jeffe's testimony, and Credit Suisse's attempts to rebut its persuasiveness, only to highlight the legal insufficiency of Credit Suisse's arguments for purposes of a motion for summary judgment. The record in fact contains a plethora of similar statements from a number of Credit Suisse employees acknowledging their awareness of Enron's wrongdoing and the fraudulent nature of its financials. (See generally Dkt. No. 165 ("PCS Brief") at 14-16; see also Dkt. No. 169-33 (August 16, 2000 email from Credit Suisse banker saying he would "need to go take a shower and go to confession soon" prior to accepting Fastow's invitation to participate in future LJM transactions); Dkt. No. 150-19 (October 19, 2001 email to Credit Suisse banker who worked extensively with Enron reflecting "every time I read about [E]nron's latest travails I think about your ominous warnings 2 years ago that the 'house of cards' may someday collapse.... [H]opefully, we're still making good money on that account anyway. [I]t seems like we are."); Dkt. No. 171-22 (October 22, 2001 email from Credit Suisse banker with subject "I hope you listened to me on [Enron]......." reflecting his understanding that "these partnerships ... [are] all smoke [and] mirrors accounting" but that Credit Suisse "made a bundle").)

As with Jeffe's testimony cited above, Credit Suisse also offers alternative explanations for the speaker's intended meaning for each of these statements. (See CSSUF ¶¶ 796, 519-23, 1008.) The Court does not address any of these explanations, because they belong to a jury to evaluate. The Court holds only that these statements provide a sufficient basis for a reasonable jury to find that Credit Suisse had actual knowledge of Enron's fraud under the clear and convincing evidence standard.

ii. LJM1

Plaintiffs highlight a number of specific Enron deals and transactions on which Credit Suisse worked. Credit Suisse's extensive involvement with any number of these transactions could provide probative evidence of Credit Suisse's actual knowledge of and substantial assistance to Enron's fraud. The Court addresses one such set of deals in detail, and holds that Plaintiffs' evidence of Credit Suisse's involvement in these deals alone is sufficient to establish the actual knowledge and substantial assistance elements of Plaintiffs' aiding and abetting fraud claim.

LJM1 was a partnership and SPE formed and controlled by Enron's CFO Andrew Fastow. (CSSUF ¶ 762.) Fastow formed this entity for the purpose of conducting deals with Enron designed to move certain volatile assets off of Enron's books. (CSSUF ¶¶ 758-60.) Because Enron was essentially selling the assets to itself, Enron was able to obtain better prices for these assets than it would have been able to obtain on the open market. (CSSUF ¶ 770.) Enron failed to properly account for sale of and income generated by these assets, primarily because Enron treated the sale as if it were to a third party and not to one of Enron's wholly controlled SPEs. (CSSUF ¶¶ 767-68.) Enron's failure to properly account for its dealings with LJM1 played a substantial role in producing its misleading financials, as was highlighted by Enron when it announced its November 2001 write-downs. (Dkt. No. 169-18 at 5.) That November 2001 disclosure revealed that Enron's prior reporting of income from deals involving LJM1 inflated Enron's reported income in the years 1999 and 2000 by over one hundred million dollars. (CSSUF ¶ 774; Dkt. No. 169-18 at 11.)

Despite Jeffe's misgivings about Enron's proposed use of LJM1 (see CSSUF ¶ 763; Dkt. No. 169-23 at 26-27), Credit Suisse still ended up helping to form LJM1 and funded LJM1 as a limited partner (CSSUF ¶¶ 379, 758-62). According to testimony from numerous other employees of both Enron and Credit Suisse, at the time Credit Suisse "invested" in LJM1, Enron had already told Credit Suisse that its investment was fully guaranteed and would be repaid at a premium (CSSUF ¶ 376; Dkt. No. 181-2 ¶¶ 12-13; Dkt. No. 169-21)-evincing Credit Suisse's knowledge that at the time it funded the deals it knew them to be sham transactions. This same testimony also reveals that Credit Suisse contributed to the design and structuring of the LJM1 partnership and certain of its deals with Enron (CSSUF ¶¶ 764-65; Dkt. No. 181-2 ¶ 54), facts from which a jury could reasonably infer Credit Suisse's actual knowledge of Enron's fraudulent purpose and use of this entity.

Credit Suisse disputes whether its role in the LJM1 deals was itself problematic, and instead urges that it was only Enron's misreporting of deals with LJM1 that was fraudulent. (See, e.g. , CSSUF ¶ 768.) Credit Suisse emphasizes that the LJM1 deals were all vetted by third parties and publicly disclosed to the SEC, and that therefore Plaintiffs cannot rely on Credit Suisse's role in these deals to support its aiding-and-abetting-fraud claims. (See CS Reply at 16-17.)

This argument fails for two reasons. First, the evidence of outside approval of Enron's LJM1 transactions does not definitively establish that Credit Suisse lacked actual knowledge of Enron's fraudulent purpose in pursuing the deals. As Jeffe's own testimony reveals, insiders at Credit Suisse characterized these approvals as "astonishing," and they found these deals problematic despite evidence that outsiders "all had, quote, unquote, signed off on this transaction." (Dkt. No. 169-23 at 27.) Moreover, Plaintiffs have also produced evidence showing that Credit Suisse knew that Enron would game the system to obtain such third-party approval, because Credit Suisse itself helped to restructure other Enron deals in order to obtain such third-party approval from auditors and law firms. For example, Enron's former CFO testified that he recalled Credit Suisse pitching specific methods it had devised to obtain auditor and law firm approval for deals designed to inflate Enron's reported income. (See Dkt. No. 216-11 at 1803-05.) Indeed, when Credit Suisse presented these deal structures it described them as proprietary to Credit Suisse, demanding that Enron sign nondisclosure agreements prior to its pitches. (Dkt. No. 216-11 at 1805.) This evidence provides a basis from which a jury could infer Credit Suisse's awareness that Enron would use flawed outside vetting of its deals in order to further its fraud, and it supplements Plaintiffs' otherwise strong showing of Credit Suisse's employees' knowledge of Enron's fraudulent use of LJM1. Credit Suisse's evidence of outside auditing of the LJM1 deals thus at most produces a genuine dispute of fact insufficient to warrant summary judgment.

Second, even accepting as true Credit Suisse's arguments that Enron's LJM1 deals were properly vetted but only later misreported by Enron subsequent to Credit Suisse's involvement, Credit Suisse's assistance to Enron in initially completing those deals is still sufficient to support Plaintiffs' claims. A party's contribution to "atypical financing transactions" where that party "devised the marketing and financing scheme" may provide a circumstantial basis for inferring actual knowledge and substantial assistance when that scheme is subsequently put to fraudulent use by a primary tortfeasor, regardless of whether that party's role itself involved wrongdoing. See In re Gas Reclamation, Inc. Sec. Litig. , 659 F.Supp. 493, 504 (S.D.N.Y. 1987). As the MDL Court explained, "[s]ubstantial assistance can take many forms. Helping to mak[e] it possible for [a primary fraudster] to claim that the [performance] reports were based on objective valuations is one.... Executing transactions, even ordinary course transactions, can [thus] constitute substantial assistance under some circumstances[.]" In re Enron Corp. , 511 F.Supp.2d at 806 (citations and internal quotation marks omitted). The MDL Court emphasized that one such circumstance is where the aider and abettor had "extraordinary economic motivation to aid in the fraud." Id. Plaintiffs' evidence that Credit Suisse was guaranteed exorbitant returns on its LJM1 investment prior to funding the partnership satisfies that condition. (See Dkt. No. 169-21 (listing income Credit Suisse would be guaranteed in return for its participation in LJM1) ); (Dkt. No. 169-33 (Credit Suisse employee describing Fastow's guaranteed returns to Credit Suisse as a "quid associated with this pro quo" of continued Credit Suisse funding for new LJM enterprises).) Viewing these returns in conjunction with Credit Suisse employees' admitted awareness of problems with LJM1's dealings and Credit Suisse's own role in devising LJM1's deals, the Court concludes that Plaintiffs' evidence of Credit Suisse's involvement in LJM1 is sufficient to satisfy their burden of producing sufficient evidence of a genuine factual dispute as to actual knowledge and substantial assistance.

iii. Enron CFO Andrew Fastow's testimony

Finally, the Court examines statements from Enron's former CFO Andrew Fastow regarding Credit Suisse's involvement with Enron's fraudulent scheme. Fastow's statements regarding his recollection of Credit Suisse's role in devising, financing, and executing that scheme are highly probative of Credit Suisse's actual knowledge and substantial assistance.

Before reviewing Fastow's testimony, the Court first addresses Credit Suisse's arguments that Enron CFO Andrew Fastow's testimony regarding its involvement is inadmissible for lack of foundation. (CS Brief at 27-28.) For purposes of this motion, the Court assumes that Credit Suisse is correct that Fastow's testimony regarding what Credit Suisse actually knew would likely be inadmissible at trial. See Fed. R. Evid. 602. Thus, the Court does not consider any of those portions of Fastow's testimony. But it would be preposterous to conclude that Fastow, Enron's CFO and the primary architect of its financial fraud, lacks foundation to testify about how that very fraud unfolded. Fastow's personal experiences provide foundation for his recollection of interactions with Credit Suisse employees and of specific deals on which he worked with Credit Suisse. (See Dkt. No. 181-2 ¶¶ 2-3.) Moreover, Fastow's recollection of specific statements by Credit Suisse personnel may be highly indicative of the company's actual knowledge, and are at the very least relevant circumstantial evidence from which a jury could infer actual knowledge.

Credit Suisse also argues that the credibility of Fastow's testimony is colored by the context in which it was given: Fastow's incarceration for his role in Enron's fraud and his extensive cooperation with lead plaintiffs' counsel during the MDL proceedings. (CS Brief at 27-28.) Fastow's cooperation with similar plaintiffs may persuasively cast doubt on his credibility, but it does not undermine the relevance and admissibility of his testimony. Similarly, Credit Suisse's citations to inconsistent portions of Fastow's testimony or to statements describing how he hid the extent of Enron's fraud from Credit Suisse may undercut the probative value of his testimony or impeach his credibility. But evaluating Fastow's credibility or the probative value of his testimony is a task for the jury. For purposes of this motion, the Court is required to credit Fastow's detailed account of his cooperation with Credit Suisse as true and view this testimony in the light most favorable to Plaintiffs.

Doing so here reveals additional evidence that might support a finding of actual knowledge and substantial assistance as to Credit Suisse. Fastow described Credit Suisse as one of Enron's "Tier-1 Banks," and he specifically highlighted Credit Suisse as among the banks he "told ... of our financial objectives and they, in many instances, created solutions." (Dkt. No. 181-2 ¶¶ 3, 8, 47.) Fastow related that he paid banks like Credit Suisse "a premium ... in order to engage in structured-finance transactions that contributed to causing Enron to report its financial statements in a desired manner." (Dkt. No. 181-2 ¶ 8.) Fastow testified to having told Credit Suisse that Enron would retain control of certain assets sold to its SPEs, including LJM1, and that because those assets were never truly sold to third parties he could guarantee the banks certain returns on their investments. (Dkt. No. 181-2 ¶¶ 2, 12-13.) Finally, Fastow described how Credit Suisse would help Enron design transactions or participate in presentations with the goal of helping Enron obtain credit approval from rating agencies. (Dkt. No. 181-2 ¶¶ 14, 48; Dkt. No. 216-11 at 1804-05.)

Fastow's testimony regarding his recollection of Credit Suisse's role in Enron's fraudulently reported transactions is highly probative, particularly when viewed in conjunction with Credit Suisse's own statements evincing its awareness of its role in that fraud and the record of its involvement in specific transactions such as LJM1. Given all of this evidence, the Court concludes that there is a genuine dispute of material fact as to whether Credit Suisse had knowledge of and substantially contributed to Enron's fraud. Accordingly, Credit Suisse's motion for summary judgment on Plaintiffs' aiding-and-abetting-fraud claim against Credit Suisse is denied.

b. Deutsche Bank

Plaintiffs have marshaled a similarly substantial body of evidence supporting Deutsche Bank's actual knowledge of and substantial assistance with Enron's fraud. The Court does not detail Deutsche Bank's challenges to the credibility, weight, or sufficiency of each individual piece of evidence, both because these challenges are largely duplicative of Credit Suisse's and because it is not the Court's task in evaluating this motion to consider them.

As with Credit Suisse, Plaintiffs have produced statements from Deutsche Bank employees evincing their knowledge of Enron's fraud. For example, on October 23, 2001, as Enron's stock was collapsing, a Deutsche Bank employee, Seth Rubin, emailed his colleague about a prior deal with Enron known as "Marlin" to ask "do I ... torch the [M]arlin files?" (Dkt. No. 198-9.) When his colleague responded "what [M]arlin files? [N]ot sure I'm familiar with that deal," the employee responded "exactly ... don't know about [F]irefly, [R]awhide o[r] [O]sprey either," referring to three other Enron deals. (Id. ) Another Rubin email from that same day evinced his knowledge of "something funky ... in those [Enron] books." (Dkt. No. 202-7.) In a later email, a colleague told Rubin that he was implicated in the developing SEC inquiry "for aiding and abetting Enron in doing these types of deals." (DBSUF ¶ 672.) Deutsche Bank's reply Local Rule 56.1 statement introduces testimony from Rubin characterizing these statements as jokes. (See DBSUF ¶¶ 669-72.) Silvercreek is entitled to have a jury hear Rubin testify about these statements and evaluate his credibility.

As with Credit Suisse, Plaintiffs have also produced evidence detailing Deutsche Bank's involvement in specific deals that Enron used to produce a misleading picture of its financials. The evidence of Deutsche Bank's role in designing and implementing the Marlin and Osprey transactions referenced in Rubin's email is alone sufficient to meet Plaintiffs' burden on both the actual knowledge and substantial assistance elements of its claim for aiding and abetting fraud. Testimony from Deutsche Bank employees supports a finding that Deutsche Bank helped designed these transactions knowing that Enron's purpose was to hide billions of dollars of debt. (DBSUF ¶¶ 651-53, 662-63; see also Dkt. No. 191-18 at 74-77.) With respect to the Marlin transaction, Deutsche Bank employees revealed in correspondences amongst themselves their understanding that that their task for Enron was "to keep it below the radar of the rating agencies and to ensure that any financing will not effect [sic] the rating of Enron [C]orp." (Dkt. No. 202-12.) Deutsche Bank processed these transactions knowing that Enron's goal was to get this debt off its own balance sheet and onto Marlin's, despite Enron's in effect retaining the debt in the form of a pledge of its own stock to Marlin investors in the event Marlin's assets declined in value. (DBSUF ¶ 654; Dkt. No. 191-18 at 78-80, 84.) Deutsche Bank helped raise hundreds of millions of dollars in outside investments for Marlin, and it received fees from Enron in the tens of millions for doing so. (See, e.g. , DBSUF ¶¶ 658-59.) Deutsche Bank's role in the Osprey transactions was similar in terms of the extent of its participation as well as in its purpose and scale. (See, e.g. , DBSUF ¶ 663.)

Much like Credit Suisse, Deutsche Bank argues that the Marlin and Osprey deals cannot support Plaintiffs' claims against Deutsche Bank because these deals were publicly disclosed and independently vetted. (DB Brief at 8-9.) But again, Plaintiffs have also produce evidenced showing that Deutsche Bank knew that Enron would work to restructure certain deals in order to obtain third-party approval. (See, e.g. , DBSUF ¶¶ 575-76, 632-34.) Indeed, at times Deutsche Bank itself helped Enron do so. (Id. ) Thus, Deutsche Bank's evidence that external entities reviewed and approved the Marlin and Osprey deals at best creates only a genuine dispute of fact as to what exactly Deutsche Bank knew when it assisted Enron. Similarly, Deutsche Bank's argument that there "is no evidence that Deutsche Bank was-or could have been-aware of Enron's subsequent misuse of these transaction structures" (DB Brief at 2 (emphasis in original) ), runs directly into testimony from Deutsche Bank's own employees that they were aware of Enron's intended use of those structures at the time they orchestrated the deals (see Dkt. No. 191-18 at 83-84; Dkt. No. 202-12). Thus, this evidence also does nothing more than establish a genuine dispute of fact as to what Deutsche Bank actually knew when it assisted Enron with the Marlin and Osprey transactions.

Deutsche Bank also argues that even if it provided substantial assistance to Enron's fraud, Silvercreek proximately caused its own injury when it failed to independently inquire into Enron's financials prior to investing. (DB Brief at 25.) But for reasons already discussed, there exists a genuine dispute of material fact as to whether Silvercreek's reliance on Enron's financial statements in October 2001 was reasonable. See supra Section III.A.1.b.

It is well settled that "[p]roximate cause, and the determination of whether an intervening act will serve to cut off liability, necessitates a fact-intensive analysis." In re Sept. 11 Prop. Damage & Bus. Loss Litig. , 468 F.Supp.2d 508, 519 (S.D.N.Y. 2006). To the extent a jury finds that Silvercreek's reliance was in fact reasonable, Deutsche Bank could be liable for proximately causing Silvercreek's injury through any knowing and substantial contribution to transactions that produced the misleading financials on which Silvercreek relied.

Finally, as discussed above, Andrew Fastow's testimony is highly probative in assessing the sufficiency of Plaintiffs' evidence in support of their claim against Deutsche Bank for aiding and abetting fraud. Fastow described Deutsche Bank as one of Enron's Tier-1 banks with which he worked directly and extensively. (Dkt. No. 181-2 ¶ 3.) Fastow averred to having told a Deutsche Bank employee that Enron's financials were inaccurate, and that this same employee worked on a number of transactions that helped produce those inaccuracies. (Dkt. No. 181-2 ¶ 58; see also Dkt. No. 191-18 at 74-79 (testimony from the same Deutsche Bank employee about Marlin).) At the very least, Fastow's testimony, if believed, would confirm the veracity of the many statements from Deutsche Bank's own employees admitting their involvement in and understanding of the purpose behind transactions they facilitated on behalf of Enron. Viewing all of this evidence together, the Court concludes that the record before it provides a sufficient basis for a jury to find in Plaintiffs' favor on the actual knowledge and substantial assistance prongs of their aiding-and-abetting-fraud claims against Deutsche Bank. Accordingly, Deutsche Bank's motion for summary judgment on that claim is denied.

c. Merrill Lynch

Plaintiffs' evidence with respect to Merrill Lynch's involvement with and knowledge of Enron's fraud differs in certain respects from the evidence as to Credit Suisse and Deutsche Bank. The record is devoid of blunt statements from Merrill Lynch employees regarding the need to "torch [Enron] files" or describing Enron as a "house of cards." (Dkt. No. 198-9; Dkt. No. 150-19.) And as the Court explores below, the clearest statements from Merrill Lynch employees directly evincing understanding of Enron's fraudulent purposes involved deals whose effects had been erased from Enron's books by 2000, over a year before Plaintiffs' relevant investments. Still, the Court is mindful that generally "[p]articipants in a fraud do not affirmatively declare to the world that they are engaged in the perpetration of a fraud," and for that reason a jury may divine an "intent to commit fraud ... from surrounding circumstances." Oster , 905 N.Y.S.2d at 72. And here, it must view statements evincing Merrill Lynch's understanding of the fraudulent nature of its 1999 deals with Enron alongside the firm's continued leadership role in subsequent deals. Accordingly, even under the clear and convincing standard, the Court cannot say that there is insufficient evidence in the record as a matter of law for a jury to find that Merrill Lynch knowingly and substantially assisted Enron's fraud.

The Court begins with an examination of the two specific deals for which the record does contain statements demonstrating Merrill Lynch's understanding of Enron's fraudulent purpose. These two deals, known as the Barges and Electricity Trades transactions, were designed to help Enron meet its 1999 revenue targets by temporarily selling assets to Merrill Lynch that Enron was otherwise unable to move before the close of the year. (MLSUF

¶¶ 385, 388-91, 454-56.) The understanding between the parties was that Merrill Lynch would purchase these assets from Enron before the close of the year, thereby generating reportable income for Enron, under the condition that Enron promised to have an SPE repurchase those same assets or to "unwind" the transaction after the close of the year at a significant profit for Merrill Lynch. (MLSUF ¶¶ 391-93, 463-65.) These deals helped Enron report upwards of sixty million dollars of additional income in 1999. (See ML Brief at 11; MLSUF ¶ 461.)

The record demonstrates that Merrill Lynch employees understood the fraudulent nature of the Barges and Electricity Trades transactions. In internal meeting notes and memoranda, Merrill Lynch employees described these deals as "income statement manipulation." (MLSUF ¶¶ 399, 404, 432.) The employees understood that they would be unable to obtain written confirmation of Enron's promise to repurchase the assets in 2000 because it would defeat Enron's purpose of doing the deals, namely "their accounting treatment." (MLSUF ¶ 417.) Merrill Lynch employees described themselves as "doing a favor" for Enron and participating only because Merrill Lynch was "trying to improve business relations with Enron." (MLSUF ¶ 411.) They participated despite recognizing the "reputational risk" associated with their "aid[ing]/abet[ting] Enron's financial statement manipulation." (MLSUF ¶ 405.) Merrill Lynch eventually entered into a settlement with the SEC in connection with these deals, repaying all of its $37.5 million in fees as disgorgement (plus interest) and paying an equal amount in civil penalties. (Dkt. No. 180 ¶ 85.) As part of the terms of the settlement, M