The U.S. Court of Appeals in Washington has just laid down a tough standard that foreigners have to meet if they want to claim protection from the 1934 Securities Exchange Act. The ruling should encourage would-be plaintiffs to bring their cases in other parts of the country -- at least until the Supreme Court gets around to laying down a uniform national rule for such litigation. As it is now, the standards vary widely.

The rules that the Securities and Exchange Commission have promulgated under the 1934 statute open the way for investors in a deal that has gone sour to make claims of misrepresentation against those involved in putting the deal together.

But the SEC rules apply only to activities that take place within the United States. As the securities field becomes more global and more overseas firms sell U.S. investments to foreigners, the issue of just how much activity has to take place in the states to give federal courts jurisdiction over disputes becomes increasingly contentious.

Some appellate courts have said that even a slim connection is enough to allow a disgruntled overseas investors to sue. The courts in San Francisco and St. Louis allow suits as long as the legal papers allege some significant activity in the states as part of the scheme.

But in 1975 the U.S. Court of Appeals in New York laid down a much tougher standard of just when a foreign investor can bring such a suit. It is that standard that the U.S. Court of Appeals in Washington, by a 2-1 vote, adopted on July 17 in Zoelsch v. Arthur Anderson & Co. By this standard, the plaintiff has to show that the allegedly fraudulent acts or statements happened in the United States as part of a plan to knowingly defraud the investor and that in fact the investor relied on the misinformation in deciding to put money into the scheme.

In the Zoelsch case, a group of West German investors put money into a U.S. limited partnership, relying on audit reports done by the West German affiliate of Arthur Anderson & Co. Those reports left out key data, the investors claimed, and they sued the U.S. parent of the accounting firm.

The U.S. operation had provided the German accountants with advice on how to handle the audit. But in the majority opinion, Supreme Court nominee Robert H. Bork explained that that guidance was internal, not intended for distribution to potential investors, and, at worst, was "merely preparatory" rather than an integral part of any fraud scheme. That meant that not enough had happened in the states to give federal courts jurisdiction.

Ironically, Chief Judge Patricia Wald, who argued for a standard that would allow more suits, agreed that even under that approach the German investors would have no case against Anderson.

In other cases, courts ruled that: Union trustees of an industry pension plan have to think of the retirees, not the union. The U.S. Court of Appeals in Atlanta threw out a provision of a seamen's union pension plan under which retirees who went back to work for a nonunionized line lost benefits for a longer period than retirees who went to work for a company that was contributing to the pension plan. The only reason for the difference was to help bolster the union by discouraging members from taking work with nonunion lines, the judges said. That meant that adopting such a provision is a breach of the fiduciary responsibilities of the trustees.

Deak v. Masters, Mates & Pilots, July 15. Car rental companies charge so much for a collision damage waiver that it may be unlawful. The major auto rental companies managed to beat back most of a broad-gauge attack on their practices filed as a class action by a disgruntled customer. But the California Court of Appeals found some merit in the claims that charging $6 for one-day coverage of the first $100 in crash damage is an "unconscionable" amount and therefore an unfair business practice. The issue will go to trial.

Truta v. Avis, July 20. Shield laws do not protect information that reporters get from nonconfidential sources. State legislatures have passed such laws to give publishers and broadcasters protection from police attempts to see notes or tapes of interviews. But the New York Court of Appeals says that the protection is only for information passed on in confidence. The justices upheld a subpoena for videotapes of the full interview with the husband of a murder victim, despite pleas by a television station that all the prosecutor has a right to see is the one minute of the conversation that was aired.

Knight-Ridder v. Greenberg, July 7. You can't use certified mail to let a defendant know that you are suing him. The Federal Rules of Civil Procedure specify that a complaint is supposed to be mailed to the other side by first class mail, with a return envelope enclosed for the defendant to acknowledge getting notice of the suit. But a plaintiff handling his own case, without a lawyer, instead sent the notice by certified mail. Too bad, the U.S. District Court in Seattle said; the slip-up means that the entire case has to be thrown out. There was no doubt that the company being sued got the notice and knew about the case, but rules are rules, Judge Robert J. Bryan explained.Bryant v. Rohr Industries, July 14.Moskowitz covers legal affairs for McGraw-Hill World News.