SEC Tries to Bring Lloyd’s Fraud Cases to U.S.
Lloyd’s of London was dealt a setback Tuesday when the Securities and Exchange Commission told a federal appeals court that U.S. investors should have their fraud cases against the British insurer heard in American courts, not in England.
In a separate development, Lloyd’s enjoyed what analysts consider a temporary legal victory when a federal judge dismissed a lawsuit brought by California’s securities regulators.
U.S. District Judge Terry J. Hatter Jr. in Los Angeles cited technical reasons for the dismissal--a failure to comply with the court’s rules--and left the door open for the California Department of Corporations to refile its case. A spokesman said the Department of Corporations was examining the court’s ruling “with the expectation that we will refile the complaint.”
Lloyd’s of London, a major international insurance market, faces lawsuits in this country and elsewhere from investors claiming they were misled about the risks of becoming an insurance underwriter. So far, 11 states including California have filed fraud lawsuits against Lloyd’s, while a few others have reached agreements limiting Lloyd’s collection efforts in their states.
Lloyd’s is suffering from major losses because of asbestos and environmental insurance claims. It strongly denies charges it misled U.S. investors and exposed them to insurance claims Lloyd’s allegedly knew would lose millions of dollars.
Lloyd’s on Tuesday said it was pleased with the court’s dismissal and it would “welcome it as an opportunity to continue our discussions with the state of California.”
In the SEC case, the agency filed a friend of the court brief in a separate, private California lawsuit pending before the U.S. 9th Circuit Court of Appeals in California. It is not known when the court will rule or if it will side with the SEC, but several analysts predicted the SEC’s brief will influence the court and help U.S. investors in Lloyd’s.
For the first time, the SEC insisted the investors’ case be heard in U.S. courts and not in British courts, where Lloyd’s is immune from private securities lawsuits.
The SEC acted after a federal court in Los Angeles in 1995 rejected a lawsuit filed by Lloyd’s investors, known as “names.” British courts are supposed to hear legal disputes under agreements the names signed when they first joined Lloyd’s, the lower court said.