Central District Of California Rejects Toyota Shareholders' Japanese Law Securities Claims

Central District Of California Rejects Toyota Shareholders' Japanese Law Securities Claims


The U.S. Supreme Court's June 2010 decision in Morrison v. National Australia Bank looked like the end of securities claims in U.S. courts on behalf so-called "f-cubed" claimants - that is, foreign shareholders of foreign-domiciled companies who bought their shares on foreign exchanges. In the aftermath of Morrison, these foreign claimants have pursued a number of avenues to pursue their claims, including, for example, initiating litigation in the defendant company's home jurisdiction.

Among the more creative approaches was the attempt to pursue - in U.S. courts - claims on behalf of non-U.S. claimants under the laws of the claimants' home country. The highest-profile attempt along these lines emerged in the Toyota shareholder litigation pending in the Central District of California, where the plaintiffs had amended their complaint in shareholder arising from the company's sudden acceleration problems to assert claims under the Japanese Financial Instruments and Exchange Act.  The plaintiffs had substantial incentive to pursue this approach since only a small fraction of the company's shares (less than 10 percent) trade in the U.S. as American Depositary Shares.

However, in a July 7, 2011 opinion (here), Central District of California Dale Fischer made short work of this attempt to circumvent the impact of the Morrison decision. In her July 7 ruling, Judge Fischer rejected the plaintiffs' argument that the court had original jurisdiction over plaintiffs' Japanese law claims under the Class Action Fairness Act (CAFA). She further declined to exercise the court's supplemental jurisdiction over the claimants' Japanese law claims. He dismissed the plaintiffs' Japanese law claims with prejudice.

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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.

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