Supreme Court Hears Argument On Jurisdiction Questions In Securities Case

Supreme Court Hears Argument On Jurisdiction Questions In Securities Case

WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court heard oral argument March 29 on the question of whether the United States has subject matter jurisdiction over a class action lawsuit filed by shareholders of an Australian bank who alleged that the company committed securities fraud within the United States and through the use of U.S. mails (Robert Morrison, et al. v. National Australia Bank Ltd., et al., No. 08-1191, U.S. Sup.).

 

Investors sued National Australia Bank Ltd. (NAB), its American subsidiary HomeSide Lending Inc. and certain executive officers and directors in the U.S. District Court for the Southern District of New York, alleging that the defendants issued a series of false and misleading statements in violation of U.S. securities laws. 

 

The District Court granted the defendants’ motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim for relief, and the investors appealed to the Second Circuit U.S. Court of Appeals, which affirmed.

 

Thomas A. Dubbs of Labaton Sucharow in New York appeared on behalf of the petitioners.  He said that under the scope of Securities and Exchange Act of 1934 Section 10(b), American law should be applied to the case because the alleged fraudulent conduct occurred in Florida.

 

Justice Ruth Ginsburg commented that the case “has ‘Australia’ written all over it.”

 

Justice Antonin Scalia stated that the misrepresentations that the plaintiffs allege occurred in the United States have not been joined to the plaintiffs.  “The only misrepresentation to these plaintiffs was made in Australia by an Australian company,” he said.

 

“We don’t want the determination of whether there has been a misrepresentation on the Australian exchange and whether Australian purchasers relied upon that misrepresentation to be determined by an American court,” Justice Scalia said.

 

George T. Conway of Wachtell, Lipton, Rosen & Katz in New York appeared on behalf of the respondents and argued that the petitioners have identified nothing in Section 10(b) that “overcomes the presumption of extraterritoriality or the Charming Betsy Rule.” 

 

Conway conceded upon questioning by Justice Ginsburg that some of the allegedly fraudulent conduct occurred in Florida but argued that the circumstances were similar to other cases in which courts found that the United States did not have jurisdiction.

 

[Editor's Note:  Full coverage will be in the April issue of Mealey’s Emerging Securities Litigation.  In the meantime, the transcript is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #57-100413-022T.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

 

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For more information, call editor Timothy J. Raub at 610-205-1127, or e-mail him at timothy.raub@lexisnexis.com.