A Model For Olympus Shareholder Litigation
5 January 2012
By Paul Hinton and Makoto Ikeya
The admission by Japan's Olympus Corporation of a JPY 135 billion (US$1.8 billion) accounting scandal -- and the dramatic drop in the company's share price since news of the irregularities became public -- leave little doubt that litigation will result. In this article from Law360, NERA Vice Presidents Paul Hinton and Makoto Ikeya examine the history of the Olympus case and discuss how court decisions in other recent scandals will affect the potential for litigation in both Japan and the US. While Olympus' largest potential claimants in shareholder litigation include US- and UK-based institutions, the US Supreme Court's 2010 ruling in Morrison v. National Australia Bank Ltd. closed the door to international investors seeking recovery through the US courts for fraud-related losses unless the transactions were executed in the US. However, the authors note, though the door is closed to litigation for most Olympus shareholders in the US, the statutory protections provided by Japan's 2006 Financial Instruments and Exchange Act (FIEA) and the rulings in recent cases have opened the door to such litigation in Japan. Mr. Hinton and Mr. Ikeya point out that the shareholder suits against Livedoor Co. Ltd., whose accounting fraud remains the largest yet to be litigated under FIEA, provide some basis for assessing the prospects for shareholder litigation against Olympus in Japan. Similarities in the nature of the alleged frauds perpetrated by the two companies make the Livedoor experience particularly instructive, and suggest that at least some Olympus shareholders could recover much of their losses through litigation.
