updated 9/24/2007 7:03:44 PM ET 2007-09-24T23:03:44

A federal judge in New York rebuffed on Monday a bid for an early appeal of a ruling in Enron Corp.'s bankruptcy case that major players in the distressed debt sector say has unsettled the market.

U.S. District Judge Shira A. Scheindlin said an appeal now could delay a long-awaited trial of lawsuits by Enron creditors against the company's banks, which is set to start in March 2008.

Some of Wall Street's most powerful trade groups — including the International Swaps and Deriviatives Association, the Securities Industry and Financial Market Association and the Loan Syndications and Trading Association — had backed an appeal. The appeal was sought by Springfield Associates LLC, which bought bankruptcy claims in the Enron case.

In an Aug. 27 ruling, Scheindlin overturned a decision by the U.S. Bankruptcy Judge Arthur Gonzalez, who was overseeing the Enron case. Gonzalez was wrong to rule last year that holders of claims against a bankrupt company could see those claims wiped out if they bought them from a seller who engaged in "inequitable conduct" such as fraud, she said.

Scheindlin said "good-faith open-market purchasers of claims" could not be penalized for the misconduct of the seller. But she added a twist the trade associations didn't expect: Holders of claims that were transferred by means of an "assignment" aren't necessarily protected. "Sales and assignments can have very different consequences for the transferee," Scheindlin wrote.

The trade groups said that distinction introduced a new element of uncertainty that could "sap liquidity and efficiency from the markets," which was unlikely to be resolved wihtout review by a federal appeals court or the U.S. Supreme Court.

On Monday, however, Scheindlin said the trade groups' concerns were "not significant." Springfield, which formally sought the appeal, should take comfort in her Aug. 27 decision, she said, because the company would have a chance to prevail in a trial before Gonzalez about whether it was a "bona fide purchaser" of Enron's bankruptcy claim.

In the Enron case, Citibank and other banks that made a $1.7 billion syndicated loan to the failed energy company sold some of their claims after Enron collapsed into bankruptcy amid allegations of accounting fraud in 2001. One of those buyers was Springfield, which bought a $5 million claim from Citibank.

Two years later, Enron sued Citibank and other lenders, accusing them of abetting the fraud that led to the company's collapse. In January 2005, it sued Springfield, arguing that its bankruptcy claim against Enron could be disallowed or reduced because of Citibank's alleged misconduct. Gonzalez sided with Enron in his March 2006 ruling.

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