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Funds News

UPDATE 1-Australian bank can't be sued in U.S.

* Case involved writedowns by bank’s US mortgage unit

* Justices uphold ruling dismissing the lawsuit (Adds details, byline)

WASHINGTON, June 24 (Reuters) - Foreign investors who bought shares of National Australia Bank Ltd NAB.AX on an overseas stock exchange cannot sue in a New York court over large writedowns related to the bank's onetime U.S. mortgage unit, the Supreme Court ruled on Thursday.

The justices upheld a ruling by a U.S. 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 $1.22 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.

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 U.S. securities laws based on transnational securities fraud.

The U.S. Justice Department, representing the views of the Securities and Exchange Commission, had supported the bank and said the appeals court correctly dismissed the lawsuit.

The bank’s attorneys argued that the securities law at issue in the case only covered investors who purchased or sold securities in the United States.

Foreign governments, including Australia, France and the United Kingdom, and business groups had filed brief in the case arguing against jurisdiction for U.S. courts.

Writing the court’s unanimous opinion, Justice Antonin Scalia said the law at issue does not provide for lawsuits by foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign exchanges.

The Supreme Court case is Morrison v. National Australian Bank Ltd, No. 08-1191. (Reporting by James Vicini, editing by Gerald E. McCormick, Dave Zimmerman)

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