Itoba Ltd. v. Lep Group PLC
United States Court of Appeals for the Second Circuit
54 F.3d 118 (1995)
Lep Group PLC (defendant), a British holding company, filed documents with the SEC related to a U.S. stock offering that an investment bank relied on to conclude Lep was financially sound; based partly on that evaluation, A.D.T. Limited's subsidiary Itoba Ltd. (plaintiff) purchased Lep shares in an attempted takeover, only for Lep's stock to crash shortly afterward when it was revealed Lep's finances were not as sound as reported. Itoba sued Lep in a Connecticut federal court for securities fraud under section 10(b) of the Exchange Act, but the district court dismissed for lack of subject matter jurisdiction, and Itoba appealed.
Whether federal courts have subject matter jurisdiction over a securities case when the nature of conduct occurring within the United States directly resulted in a fraudulent scheme.