(Reuters) – A U.S. appeals court gave investors in Toshiba Corp’s U.S.-listed securities another chance to show they suffered losses because the Japanese industrial conglomerate misled them about its internal controls before a 2015 accounting scandal.
FILE PHOTO: A logo of Toshiba Corp is seen outside an electronics retail store in Tokyo, Japan, February 14, 2017. REUTERS/Toru Hanai/File Photo
In a 3-0 decision, the 9th U.S. Circuit Court of Appeals on Tuesday said a lower court judge misapplied the law in dismissing the investors’ lawsuit, and that the investors should be permitted to file an amended complaint.
The Pasadena, California-based appeals court said the investors did not sufficiently allege Toshiba committed a “domestic” violation of federal securities law, but that it would “not be futile” for them to try again.
Toshiba said in a statement the company was considering various options, including filing an appeal.
U.S.-based lawyers for Toshiba and the investors did not immediately respond to requests for comment.
Investors led by the Automotive Industries Pension Trust Fund in Dublin, California, sued in 2015 after Toshiba disclosed widespread accounting fraud, saying the revelations caused them to suffer losses as the company’s stock price fell.
In September 2015, Toshiba admitted to having overstated profit by roughly $1.3 billion over seven years.
The scandal also led Toshiba to recognize large cost overruns at its now-bankrupt U.S. nuclear unit Westinghouse, and sell its memory chip business to a consortium led by private equity firm Bain Capital for $18 billion.
In Tuesday’s decision, Circuit Judge Kim McLane Wardlaw wrote that investors’ purchases of Toshiba’s American depository shares or receipts could qualify as domestic if they or Toshiba had incurred “irrevocable liability” in the United States.
The lawsuit was returned to U.S. District Judge Dean Pregerson in Los Angeles.
On June 25, Toshiba said the U.S. Securities and Exchange Commission had completed a probe into its accounting, and had decided not to impose a fine.
The case is Automotive Industries Pension Trust Fund et al v Toshiba Corp, 9th U.S. Circuit Court of Appeals, No. 16-56058.
Reporting by Jonathan Stempel in New York