This email updates you on the joint defense conference call and the issues
related to the September 19th hearing.  It is long, so you may want to print 
it
out and read a hard copy.

Your suggestion of following the joint defense discussion of what they'll
discuss with the court on September 19th was a good one.  Although I think the
general direction of the joint defense group is sound, it may be in EPMI's 
best
interest to have counsel there (even if it is local counsel so that we can 
avoid
travel expenses at this point).

Consistent with what the Bankruptcy Court has stated on the record and based
upon more recent conversations with his former law clerk, the Judge would like
to resolve at the hearing whether the parties are willing to go to mediation 
and
whether there is agreement to appoint a special discovery master to handle the
myriad of discovery disputes that have already arisen and that are certain to
multiply as the cases move forward.  From listening to the defense counsel who
have appeared before the judge in this case, it is clear that this judge does
not want to decide anything, is loath to try these cases, and promises to give
only 1 day a month for any trial, let alone the 15 trials that would be
necessary to hear these cases if they don't settle.  The judge will not 
consider
summary judgments and he is held in low regard by the defense group.

The big players on the joint defense team very much want the equivalent of a
special discovery master, but they want the powers defined more broadly so 
that
the master can make recommendations to the judge of how to try these cases if
they go to trial (e.g., bifurcation of factual and legal issues to resolve
before full trial on the merits, order in which the cases will go to trial,
etc.).  The recommendation of the rest of the joint defense group is to ask 
that
a special pre-trial master be appointed to resolve discovery disputes and make
recommendations to the bankruptcy judge for further proceedings, including
trial.  Each defendant would be able to go to mediation whenever it feels it 
has
enough discovery, but the majority of the defense group did not want to ask 
for
the appointment of a settlement mediator at this time.

Although there was not complete consensus, the majority view was to propose 
that
the costs of the special master be split evenly among all the parties.  There
are approximately 12-15 adversaries on file, and counsel representing more 
than
one defendant were already arguing that they should only be treated as only 
one
party given how closely aligned their defenses and interests are.  Further,
although most of the defense group feels that the trust should be required to
pay its share as 1 party, many are willing to withdraw that requirement and 
let
the trust get a free ride if the trustee objects to the proposal (thereby
isolating the trustee and making him look foolish).

I raise this in detail because of my concern that EPMI, with much cleaner and
stronger defenses, may end carrying more of the expense freight than it 
should.
Given that everyone envisions that this pretrial mediator will have his or her
hands full, the expense of even 1/15 of that could add up quickly.  My
suggestion is that the plaintiff or particular defendant who files the 
discovery
dispute pays for the time the pretrial master spends resolving it.  For 
matters
involving all defendants, then the costs be split evenly.  My further
suggestion, echoing what ya'll said on our last conference call, is to try to
position this case for settlement as soon as possible so that the expenses do
not mount by virtue of the morass of the rest of the litigation against
defendants who did not terminate their contracts.

The next issue is whether to attend the hearing on the 19th.  The order 
setting
the hearing was finally entered on September 6th.  Elizabeth Austin --
recommended local counsel (see previous emails) -- was kind enough to send me 
a
copy.  The Order requires that the hearing be attended by "all counsel for all
Defendants in the pending adversary proceedings."  Counsel are further 
required
to have full authorization to resolve any issue arising at the status 
conference
and "shall be either accompanied by the person or persons authorized and
competent to accept or reject the resolution of such issues or such persons
shall be available by telephone."

Further, the docket reflects that a pretrial order is due in our case by
September 13!!! This is an special animal of the local rules and is not the
typical pretrial order.  It only requires that parties states whether they 
agree
that the case is a core or non-core proceeding, set forth the answer or 
response
date, and set forth the  proposed length for discovery.  The plaintiff is
responsible for contacting the defendant to reach agreement on the pretrial
order.  To date, I assume that you've received no calls or correspondence from
Kaye Scholer about this.  In another adversary filed against El Paso about the
same time that the case against Enron was filed, the trustee has already
unilaterally filed a motion to extend the deadline for filing the pretrial.
I'll check the docket again on Monday to see if such an extension motion was
filed in our adversary.  If we are contacted by the trustee counsel between 
now
and the 13th, it will take all of about 15 minutes to prepare the pretrial
order.

Again, this is a long way of saying that, although we are not obligated to do
anything about the pretrial order, especially since we haven't yet received a
copy of the complaint, we do have actual knowledge of the proceedings, we have
joined the defense group, and we may get off to a bad start if we don't attend
the hearing and then try to argue that we don't want some part of the order
entered to apply to us.  If I were the judge, my first question would be "why
weren't you here on the 19th so that you could have objected then."  To 
respond
that we didn't think we had to because we had not yet received a copy of the
complaint in the mail may not endear us to the judge if he presses us to find
out what we actually knew about the hearing.

My recommendation is that either local counsel or I attend the hearing, even
though I'd love to avoid the cost altogether.  There is a joint defense 
meeting
the night before and the morning of the status hearing where the group is 
going
to further attempt to reach agreement among themselves as to how they're going
to propose to handle discovery and legal issues assuming that a pretrial 
master
is appointed.  If you decide that I don't need to go, I would recommend that 
our
local counsel attend if we have retained him or her by then.  If it is 
Elizabeth
Austin, I have confidence that she will adequately protect Enron's interests,
especially given her prior involvement in the case.  If counsel for EPMI 
attends
the hearing, then you, Elizabeth, or Jeff should be reachable by phone in case
something comes up that we need authorization for.

We have another joint defense conference call set up for Wednesday, Sept. 13 
at
1:00 pm.  By that time, a draft of the proposed order for the pretrial master
will be circulated with the proposed sharing of costs provisions.  If we are
going to object to an equal sharing for all work performed by the pretrial
master, I should advise the group on Wednesday in this call.
If we aren't able to get this case settled relatively quickly, there will be a
great deal of benefit by being a member of the joint defense group, especially
with regard to establishing other grounds for termination of the transactions
and fighting the trustee's damage calculations.  In determining the 
appropriate
settlement amount (reduction of EPMI's proof of claim)  we should be cognizant
that the costs of the defense may be higher than it would otherwise be if this
were the only pending litigation involving this kind of claim.

I look forward to your response.  I will be in town all of next week, so call 
at
your convenience.




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