Australian bank investors lose US court case

FOREIGN investors who bought shares of National Australia Bank on an overseas stock exchange cannot sue in a New York court over large writedowns related to the bank’s onetime US mortgage unit, the Supreme Court ruled yesterday.

The justices upheld a ruling by a US appeals court that dismissed the lawsuit on the grounds that American courts did not have jurisdiction.

The bank purchased the mortgage company, HomeSide Lending, for $1.22bn in 1998 and announced two writedowns totaling $2.2bn in 2001. It later sold HomeSide to Washington Mutual, whose banking assets were acquired by JPMorgan Chase in 2008.

National Australia Bank said in 2001 that it had used incorrect interest assumptions to calculate the fees it would generate from servicing mortgages in future years.

The ruling was a defeat for three Australian investors who had purchased shares of the Melbourne-based bank on an Australian stock exchange and who wanted to proceed with their class-action lawsuit in this country. They had argued that foreign plaintiffs can sue in an American court for violations of the US securities laws based on transnational securities fraud.