US court questions Australia bank case jurisdiction

WASHINGTON, Supreme Court justices questioned whether Australians who bought shares of National Australia Bank Ltd on an Australian stock exchange can sue in an American court over large writedowns related to bank's onetime U.S. mortgage unit.

"It has Australia written all over it," Justice Ruth Bader Ginsburg told the attorney for the foreign plaintiffs and said the most appropriate way to decide the case would be under Australia law.

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

The 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.

Three Australian plaintiffs want to proceed with their lawsuit in this country, but a federal judge and a U.S. appeals court in New York dismissed the case on the grounds that American courts do not have jurisdiction.

Justices questioned Thomas Dubbs, a New York attorney arguing on behalf of the plaintiffs, on whether U.S. securities law applied.

Justice Samuel Alito asked whether the plaintiffs would have an adequate remedy in the Australian court system.

Justice Stephen Breyer questioned whether a win for the plaintiffs would interfere with efforts of foreign countries, such as Australia, to regulate their securities markets.

Justice Antonin Scalia said Australia had taken the position that it decides any misrepresentation and whether that had been relied upon by those who bought or sold stock. "Here, you're dragging the American court into it," he said to Dubbs.

George Conway, a New York attorney arguing for the bank, said the law at issue only covered securities purchased or sold in the United States. He said foreign nations have different rules in such areas as liability and disclosure.

The court's ruling is expected by the end of June.

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