The U.S. Supreme Court is taking up the closely watched issue of whether “foreign-cubed” or “f-cubed” suits can be filed by foreign plaintiffs in U.S. courts against foreign issuers of securities for violations of U.S. securities laws. Several Australian stockholders sued the National Australia Bank in federal court in New York over alleged financial fraud by a bank-owned mortgage servicing company in Florida. The plaintiffs said that HomeSide Lending Inc., which the bank has since sold, fraudulently overvalued its assets. The bank later reduced the value of its assets by $2.2 billion because of what it called mistakes by HomeSide. The bank’s stock price dropped sharply as a result. The investors argue that American courts should have jurisdiction to hear their lawsuit because the alleged fraud was committed in the United States.
But the U.S. Court of Appeals for the Second Circuit in Morrison v. National Australia Bank, 547 F. 3d 167 (2008), threw out the lawsuit. It declined to adopt a bright-line rule barring f-cubed suits, but reasoned that the “heart of the fraud” lay outside the United States (NYLJ, Oct. 24, 2008). Any losses suffered by investors resulted more from decisions made by the bank in Australia than what happened in Florida, the court said.
