Thursday, November 7, 2013

Itoba Ltd. v. Lep Group PLC case brief

Itoba Ltd. v. Lep Group PLC case brief summary
54 F.3d 118 (1995)

Appellant company challenged a judgment of the United States District Court for the District of Connecticut, which dismissed its securities fraud action against appellee foreign corporation for lack of subject matter jurisdiction, Fed. R. Civ. P. 12(b)(1).

The district court dismissed appellant company's securities fraud action on grounds that it lacked subject matter jurisdiction.

  • On appeal, the court found that appellant purchased appellee foreign corporation's shares based on analyses and conclusions in a report that were predicated on information found in the Form 20-F that appellee filed with the SEC; therefore, the contents of appellee's Form 20-F were a "substantial" and "significant contributing cause" to appellant's purchase decision. 
  • The court found that the fact that appellee's shares were issued and purchased in England did not bar jurisdiction, because the conduct test centered its inquiry on the nature of conduct within the United States as it related to carrying out the alleged fraudulent scheme. 
  • The court found that the fraud occurred on an American exchange and persisted abroad and had impacted detrimentally upon thousands of United States shareholders. 
  • The court reversed and held that a sufficient combination of ingredients of the conduct and effects tests was present to justify the exercise of jurisdiction by the district court.


The court reversed the judgment of the district court and remanded for trial. The court concluded that the allegations were sufficient to support jurisdiction, where appellant defrauded company relied on a report predicated on appellee foreign corporation's Form 20-F and the fraud occurred on an American exchange and abroad and impacted thousands of American shareholders.

Suggested Study Aids For Securities Regulation Law
Securities Regulation in a Nutshell, 10th (Nutshell Series)
Securities Regulation: Examples & Explanations, 5th Edition
Securities Regulations: The Essentials

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