Labaton Sucharow served as lead counsel for a class of non-U.S. purchasers in In re National Australia Bank Securities Litigation, No. 03-CV-6537 (U.S. District Court for the Southern District of New York). In August 2003, the case was brought on behalf of a class of purchasers of the securities of National Australia Bank Ltd. ("NAB") alleging that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by disseminating materially false and misleading statements concealing fraud by NAB at its wholly-owned United States subsidiary, HomeSide Lending, Inc. ("HomeSide").
The alleged accounting fraud occurred entirely in Florida where HomeSide was based, but the fraudulent financial information was published in NAB's financial statements that were disseminated from Australia. On October 26, 2006, the District Court dismissed the Complaint, finding that it lacked subject matter jurisdiction over the claims of non-U.S. purchasers of NAB securities purchased on non-U.S. exchanges. Labaton Sucharow appealed the decision and argued the appeal on July 18, 2008.
On September 17, 2008, the Securities and Exchange Commission ("SEC") submitted a significant brief in support of non-U.S. purchasers in the action against NAB. The SEC filed an amicus brief recommending that the Australian plaintiffs in this case should be able to utilize the U.S. court system for an effective means to redress their losses.
The SEC advanced the position that non-U.S. shareholders may avail themselves of the U.S. federal securities laws and federal courts to pursue defendants who engaged in securities fraud when the fraudulent conduct in the United States was material to the scheme's success and a substantial part of the fraud.
On October 23, 2008, the U.S. Court of Appeals for the Second Circuit declined to adopt the SEC's position and affirmed the District Court's opinion.
On behalf of the plaintiffs, Labaton Sucharow filed a petition for writ of certiorari with the United States Supreme Court. On November 30, 2009, the Supreme Court issued an order that it would review the questions presented by the case. The Supreme Court heard the appeal on March 29, 2010.
The Supreme Court issued its opinion on June 24, 2010. Justice Scalia delivered the opinion of the Court and held that the federal securities laws do not provide a cause of action to foreign investors suing foreign and American defendants for securities fraud if the foreign investors purchased or sold the securities on foreign exchanges.
Although the Court's decision is disappointing, Labaton Sucharow prosecuted the Morrison action on behalf of Australian investors because it believes that the U.S. securities laws must protect foreign investors from fraud committed in large part on American soil, even when that fraud only affects securities purchased on foreign exchanges. When fraud is committed in the United States, its victims should have recourse under U.S. law and receive the same protection and restitution as American investors. We will continue to fight for the cause of shareholder rights to the full extent allowable by U.S. law and we will urge Congress to enact legislation that would reverse the effects of this decision.