Japan gov’t can weigh in on U.S. investor’s Toshiba lawsuit

The logo of Toshiba Corp is seen behind a traffic light at the company's headquarters in Tokyo, Japan March 29, 2017. REUTERS/Issei Kato
  • Japanese trade ministry allowed to file brief opposing class certification
  • Judge says international comity may be relevant to lawsuit
  • Ministry argues Japanese company should not be sued in U.S. over American depositary shares it did not sponsor

(Reuters) - A federal judge in Los Angeles allowed the Japanese government to explain its opposition to letting an investor lawsuit over Toshiba Corp’s accounting scandal proceed as a class action.

U.S. District Judge Dean Pregerson ruled on Monday that Japan's Ministry of Economy, Trade and Industry (METI) can file an amicus brief in the case over the plaintiffs' objections.

Pregerson said the question of how and when U.S. courts should defer to other countries' legal systems, referred to as international comity, "may be relevant to a variety of issues" beyond where the case can be filed.

Willow Radcliffe of Robbins Geller Rudman & Dowd, who represents the pension fund lead plaintiff in the case, and Arash Sadat of Sadat Law Group, who represents METI did not immediately reply to requests for comment on Tuesday.

The lawsuit targets Toshiba for alleged misrepresentations to investors between 2012 and 2015 amid what became a multibillion dollar accounting scandal after the conglomerate admitted to reporting inflated profits going back to 2008.

The lead plaintiff seeks damages on behalf of investors who bought American depositary shares as well as U.S. purchasers of Toshiba securities on the Japanese market.

METI had weighed in on the case in 2019, urging the U.S. Supreme Court to review a ruling by the 9th U.S. Circuit Court of Appeals that let the case go forward.

The ministry argued in support of Toshiba's position that foreign companies should not be subject to litigation in the U.S. over ADS which they did not create.

The justices denied Toshiba's petition, and the plaintiffs later moved for class action status.

METI argued in a brief in April that allowing the lawsuit, which includes claims the company violated Japanese securities law, to proceed as a class action in the U.S. could encourage investors in other Japanese securities to follow suit, instead of litigating in Japan where class treatment is not available.

The case is Stoyas v. Toshiba Corp, U.S. District Court, Central District of California, No. 15-CV-04194.

For the investors: Willow Radcliffe of Robbins Geller Rudman & Dowd

For METI: Arash Sadat of Sadat Law Group

For Toshiba: Christopher Curran of White & Case

Read more:

Toshiba posts net loss, plans restructuring to put scandal behind it

Foreign issuers, beware: Toshiba didn’t sponsor ADRs, but investor class action gets green light

Foreign investors sue Toshiba over accounting scandal

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Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com