Court takes on fraud lawsuit vs. Australian bank

AP News
Posted: Nov 30, 2009 12:44 PM

The Supreme Court has agreed to decide whether Australian investors can use U.S. securities law and American courts to sue an Australia-based bank for fraud.

The justices said Monday they will use the lawsuit against Melbourne-based National Australia Bank to clarify whether and when U.S. law can apply to international dealings.

Several Australian stockholders sued the bank in federal court in New York over alleged financial fraud by a bank-owned mortgage servicing company in Florida.

The stockholders say that HomeSide Lending Inc., which the bank has since sold, fraudently 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 say American courts should have jurisdiction to hear their lawsuit because the alleged fraud was committed in the United States.

But the federal appeals court in New York threw out the lawsuit, reasoning that the alleged fraud had too tenuous a connection to the United States. Any losses suffered by investors resulted more from decisions made by the bank in Australia than what happened in Florida, the court said.

The high court agreed to hear the case over the objection of the Obama administration. The case will be argued in March or April.

The case is Morrison v. National Australia Bank, 08-1191.