Lloyd's will battle ruling in favor of investors Filing of suits allowed under U.S. law

March 08, 1997|By BLOOMBERG NEWS

WASHINGTON -- Lloyd's of London said yesterday that it will challenge a federal appeals court ruling that allows hundreds of the insurance syndicate's investors to sue for fraud in the United States.

On Thursday, the U.S. Court of Appeals for the Ninth Circuit overturned a 1995 lower court ruling that the American investors must sue in England under English law, as provided in the original contracts between Lloyd's and most of its investors. The judges ruled 2-1 that U.S. securities law supersedes these investor contracts.

The U.S. Securities and Exchange Commission, which filed a friend-of-the-court brief in the case, praised the court decision and said it would help prevent the fraudulent sale of securities by foreign firms in the United States.

Lloyd's plans to request a rehearing by the San Francisco-based appeals court or seek a U.S. Supreme Court review, the syndicate's outside attorney said.

"The likelihood of this decision remaining the law is very, very slim," said the lawyer, Harvey Pitt of Fried, Frank, Harris, Shriver & Jacobson in Washington and New York. "You have wealthy and sophisticated people who agreed to resolve their claims in the United Kingdom, but who now don't want to abide by their agreement."

Pitt said five other U.S. appeals courts, most recently the 4th U.S. Circuit Court of Appeals last summer, had ruled in Lloyd's favor on this issue in re- cent years. Lloyd's will decide within the next couple of weeks which course to take, he said.

The Ninth Circuit appeals court granted the appeal from more than 200 of Lloyd's American investors. The court returned the suit, which seeks unspecified millions of dollars, to the U.S. District Court in San Diego for trial.

"Congress had already determined that such [contracts] were void," said the appeals court, based in San Francisco. "It was not for a court to weigh their reasonableness, not for a court to say whether they offended any policy of the United States."

Pub Date: 3/08/97

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