Supreme Court ruling sets precedent for foreign D&O liability litigation

A key factor behind the trend toward increasing directors and officers liability litigation in countries outside the United States is the U.S. Supreme Court's 2010 ruling in Robert Morrison et al. v. National Australia Bank Ltd., which involved Melbourne, Australia-based National Australia Bank's February 1998 acquisition of HomeSide Lending Inc., a Jacksonville, Fla.-based mortgage servicer.

National wrote down the value of HomeSide's assets by $450 million in July 2001, and then by another $1.75 billion in September of that year. Australian shareholders filed suit against both companies and their officials.

The Supreme Court held in its unanimous ruling that the Securities Exchange Act's Section 10(b) anti-fraud provision “reaches the use of a manipulative or deceptive device or contrivance only in connection with the purchase or sale of a security listed on an American stock exchange, and the purchase or sale of any other security in the United States.

“This case involves no securities listed on a domestic exchange,” said the court, in affirming dismissal of the petitioners' complaint by the 2nd U.S. Circuit Court of Appeals in New York.