Auto Industries Pension Trust Fund v. Toshiba Corp.

The Ninth Circuit reversed the dismissal of an action brought by purchasers of American Depository Shares (ADRs) or Receipts, alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act based on Toshiba Corp.'s fraudulent accounting practices. The district court held, under the test in Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247 (2010), that the Exchange Act, which does not apply extraterritorially, did not apply to the purchase of Toshiba ADRs.The panel held that the Exchange Act could apply to the Toshiba ADR transactions, as domestic transactions in securities not registered on an exchange, and that Toshiba ADRs were "securities" under the Exchange Act. The panel applied the "irrevocable liability" test and held that plaintiffs must be allowed to amend their complaint to allege that the purchase of Toshiba ADRs on the over-the-counter market was a domestic purchase, and that the alleged fraud was "in connection with" the purchase. Accordingly, the panel remanded to allow plaintiffs to amend their complaint. View "Auto Industries Pension Trust Fund v. Toshiba Corp." on Justia Law