In a recent decision, a District Court in California declined to exercise supplemental jurisdiction over the Japanese law claims in a case; thus, assuring the other countries of the world that they need not fear that the United States is the Shangri–La of class action litigation for lawyers representing those allegedly cheated in foreign securities markets. While holding so, the Court maintained that foreign governments have the right to decide how to regulate their own securities markets. This respect for foreign law would be completely subverted if foreign claims are allowed to be piggybacked into virtually every American securities fraud case, imposing American procedures, requirements, and interpretations likely never contemplated by the drafters of the foreign law.
The plaintiffs, customers, brought a class action under the Private Securities Litigation Reform Act after the defendants, Toyota Motors and others, made statements against a background of allegations of defects in Toyota vehicles.
In around 2000, Toyota received thousands of reports of unintended acceleration in several models of both the Toyota and Lexus brand vehicles. These reports continued through the last decade and were the subject of at least eight investigations by the National Highway Traffic and Safety Administration (“NHTSA”) between 2003 and 2010. Toyota identified driver error and non-standard or misaligned floor mats as the source of the problem.
In the meantime, Toyota began acquiring internal evidence that the unintended acceleration might have been due to a more serious mechanical or electrical defect in the design of the cars themselves. Toyota technicians were able to reproduce unintended acceleration not related to floor mat placement on several occasions.
In early 2010, in the face of increasing reports of accidents related to unintended acceleration, Toyota admitted that many of its vehicles were subject to several design defects. As a result, it instituted recalls at an estimated cost $4 billion. By the end of a wave of revelations, Toyota’s stock price had dropped at least 11%. The size and severity of the defects prompted both a NHTSA investigation and investigations by Congress, and in April 2010, the NHTSA fined Toyota $16.4 million for failure to comply with regulations regarding defect disclosure.
The customers filed numerous securities fraud suits...
