Posts Tagged ‘Morrison v. National Australia’

Morrison at Four: A Survey of Its Impact on Securities Litigation

Posted by George T. Conway III, Wachtell, Lipton, Rosen & Katz, on Wednesday October 29, 2014 at 9:02 am
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Editor’s Note: George Conway is partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a recent essay by Mr. Conway, “Morrison at Four: A Survey of Its Impact of Securities Litigation.” Mr. Conway briefed and argued Morrison v. National Australia Bank in the Supreme Court.

My essay, Morrison at Four: A Survey of Its Impact on Securities Litigation, published by the U.S. Chamber of Commerce Institute for Legal Reform as part of a collection of essays on the shifting legal landscape governing federal claims involving foreign disputes, recounts the extraordinary impact of the Supreme Court’s landmark decision in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), in the realm of securities litigation.

…continue reading: Morrison at Four: A Survey of Its Impact on Securities Litigation

So Much for Bright-Line Tests on Extraterritorial Reach of US Securities Laws?

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 2, 2014 at 9:24 am
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Editor’s Note: The following post comes to us from Jonathan E. Richman, Partner in the Litigation Department and a co-head of the Securities Litigation Group at Proskauer Rose LLP, and is based on a Proskauer publication authored by Mr. Richman, Ralph C. Ferrara, Ann M. Ashton, and Tanya J. Dmitronow.

In its landmark 2010 decision in Morrison v. National Australia Bank, the Supreme Court articulated what seemed to be a bright-line test for determining the extent to which the U.S. securities laws apply to transactions with international elements. In so doing, the Court harshly rejected the fact-intensive “conduct/effects” tests propounded several decades ago by the Second Circuit and followed by many other courts throughout the country.

Last week, the Second Circuit got its revenge. In a long-awaited decision in ParkCentral Global Hub Limited v. Porsche Automobile Holdings SE, the court declined “to proffer a test that will reliably determine when a particular invocation of [the Securities Exchange Act's anti-fraud provision] will be deemed appropriately domestic or impermissibly extraterritorial.” Instead, the Second Circuit held that courts must carefully consider the facts and circumstances of each case to avoid the very result that the Supreme Court had hoped to prevent in Morrison: promiscuous application of the U.S. securities laws to transactions that have little, if any, relationship to the United States.

…continue reading: So Much for Bright-Line Tests on Extraterritorial Reach of US Securities Laws?

Back-to-Back Court of Appeals Decisions Apply Morrison

Posted by John F. Savarese and George T. Conway III, Wachtell, Lipton, Rosen & Katz, on Tuesday August 19, 2014 at 4:08 pm
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Editor’s Note: John F. Savarese and George Conway are partners in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton firm memorandum by Mr. Savarese and Mr. Conway.

In a one-two punch illustrating the continuing vigor of the presumption against extraterritoriality, the United States Court of Appeals for the Second Circuit, on consecutive days last week, issued important decisions applying Morrison v. National Australia Bank in two disparate but significant contexts under the federal securities laws. Last Thursday, in Liu v. Siemens AG, No. 13-4385-cv (2d Cir. Aug. 14, 2014), the court rejected the extraterritorial application of the whistleblower anti-retaliation provision of the Dodd-Frank Act. And on the very next day, in Parkcentral Global Hub Ltd. v. Porsche Automobil Holdings SE, No. 11-397-cv (2d Cir. Aug. 15, 2014), the court rejected the extraterritorial application of Rule 10b-5 to claims seeking recovery of losses on swap agreements that reference foreign securities.

…continue reading: Back-to-Back Court of Appeals Decisions Apply Morrison

Court Holds That US Bankruptcy Code Does Not Permit Recovery of Extraterritorial Transfers

Editor’s Note: George T. Conway III is partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton firm memorandum authored by Mr. Conway, Douglas K. Mayer, and Emil A. Kleinhaus.

In a decision that could significantly limit the power of U.S. bankruptcy trustees to challenge cross-border transactions, the United States District Court for the Southern District of New York has held that the trustee overseeing the Madoff liquidation may not recover transfers made by Madoff’s foreign customers to other foreign entities. SIPC v. Bernard L. Madoff Investment Securities LLC, No. 12-mc-115 (S.D.N.Y. July 7, 2014). The court held that recovery of such “purely foreign” transfers would run afoul of the presumption against extraterritoriality reaffirmed by the Supreme Court in Morrison v. National Australia Bank.

…continue reading: Court Holds That US Bankruptcy Code Does Not Permit Recovery of Extraterritorial Transfers

Important Decisions regarding Morrison and Extraterritoriality

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday May 16, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Lawrence Portnoy, partner in the Litigation Department at Davis Polk & Wardwell LLP, and is based on a Davis Polk client memorandum by Michael S. Flynn. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On May 6, 2014, the United States Court of Appeals for the Second Circuit issued the following decision in the City of Pontiac Policemen’s & Firemen’s Ret. Sys. et al. v. UBS AG et al., No. 12-4355 (2d Cir. May 6, 2014). The decision is one of first impression in the Second Circuit with respect to two questions arising out of the Supreme Court’s decision in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010). First, does Morrison bar Exchange Act Section 10(b) claims with respect to the purchase or sale of securities on foreign exchanges when those same securities are cross-listed on a U.S. exchange? The Second Circuit answered with a “yes.” Second, is the mere placement of a buy order in the United States for the purchase of foreign securities on a foreign exchange sufficient to allege that a purchaser incurred irrevocable liability in the United States, such that the U.S. securities laws govern the purchase of those securities under the Second Circuit’s decision in Absolute Activist Value Master Fund Ltd v. Ficeto, 677 F.3d 60 (2d Cir. 2012)? The Second Circuit answered with a “no.”

…continue reading: Important Decisions regarding Morrison and Extraterritoriality

Court Curtails Territorial Reach of Criminal Liability Under Section 10(b)

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday September 11, 2013 at 8:56 am
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Editor’s Note: The following post comes to us from Jonathan R. Tuttle, partner in the litigation department at Debevoise & Plimpton LLP, and is based on a Debevoise & Plimpton client update.

On August 30, 2013, the United States Court of Appeals for the Second Circuit unanimously held that Section 10(b) of the Securities Exchange Act of 1934 (“Section 10(b)”) does not apply to extraterritorial conduct, “regardless of whether liability is sought criminally or civilly.” Interpreting the scope of the Supreme Court’s landmark ruling in Morrison v. National Australian Bank Ltd., [1] the Second Circuit’s significant decision in United States v. Vilar, et al. means that a criminal defendant may be convicted of fraud under Section 10(b) only if the defendant engaged in fraud “in connection with” a security listed on a United States exchange or a security “purchased or sold” in the United States. In reaching its conclusion, the court rejected the government’s attempts to distinguish criminal liability under Section 10(b) from the civil liability at issue in Morrison, holding that “[a] statute either applies extraterritorially or it does not, and once it is determined that a statute does not apply extraterritorially, the only question we must answer in the individual case is whether the relevant conduct occurred in the territory of a foreign sovereign.”

…continue reading: Court Curtails Territorial Reach of Criminal Liability Under Section 10(b)

2012 Year-End Securities Litigation Update

Posted by Robert F. Serio, Gibson, Dunn & Crutcher LLP, on Thursday February 7, 2013 at 9:24 am
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Editor’s Note: Robert F. Serio is head partner in the New York office of Gibson, Dunn & Crutcher and co-chair of the Securities Litigation Practice Group. This post is based on a Gibson Dunn client alert.

2012 proved to be a mixed year for defendants in securities litigation, with several open questions and rare causes for optimism. The raw statistics show a steady stream of new filings, increasing median settlement amounts, and relatively low dismissal rates for existing cases. The Supreme Court will decide an important case this coming term on the issue of class certification in securities class actions, while another important case on standing awaits the Court’s decision on a pending petition for certiorari. In the appellate courts, a number of trial court decisions dismissing class action suits were affirmed, but district courts continue to issue conflicting rulings on critical disclosure issues, including the application of the SEC’s Regulation S-K to private class actions-where several courts have allowed class claims to proceed on the basis of alleged failure to disclose “known trends.”

Trial courts are issuing divergent opinions on the application of the Supreme Court’s 2010 decision in Morrison v. Australia National Bank to claims involving the extraterritorial reach of the federal securities laws. District courts also are struggling to define who can be sued for primary liability for “making” an allegedly false statement, following the Supreme Court’s 2011 ruling in Janus Capital Group Inc. v. First Derivative Traders. We discuss each of these trends below. Finally, we summarize several notable decisions arising in the world of M&A litigation, an area of securities litigation that has shown explosive growth over the last few years. For a comprehensive review of related trends in the Securities Enforcement and the Foreign Corrupt Practices Act areas, please see our 2012 Year-End Client Alerts, here and here.

…continue reading: 2012 Year-End Securities Litigation Update

Recent Trends in US Securities Class Actions against Non-US Companies

Posted by Elaine Buckberg, NERA Economic Consulting, on Tuesday November 20, 2012 at 8:54 am
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Editor’s Note: Elaine Buckberg is Senior Vice President at NERA Economic Consulting. This post is based on a NERA publication by Robert Patton; the full publication, including footnotes, is available here.

The volume of US securities class action litigation targeting companies outside the US has recently reached record levels, despite a 2010 decision by the US Supreme Court, in Morrison v. National Australia Bank, which substantially restricted the extraterritorial reach of many such cases. This increase is attributable in large part to a wave of suits filed against Chinese companies listed on US stock markets. Even excluding Chinesecompany litigation, however, the pace of US securities class actions against non-US companies has not fallen below the levels observed prior to the Morrison decision.

On the other hand, Morrison may have had some effect on settlement sizes. In the past several years, there have been few very large settlements in US securities class actions against non-US companies, a development that, as discussed below, may be attributable in part to the decision. This article surveys recent trends in filings of US securities class actions against non-US company defendants, drawing upon data up to mid-2012. It also discusses trends in settlements, and concludes by reviewing the outlook for such litigation going forward.

…continue reading: Recent Trends in US Securities Class Actions against Non-US Companies

Defrauded Investors Deserve Their Day in Court

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Sunday May 6, 2012 at 11:07 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on a statement from Commissioner Aguilar; the full statement, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

The Commission has authorized that a Study be sent to Congress expressing the views of the Staff on the cross-border scope of the private right of action under Section 10(b) of the Securities Exchange Act of 1934. However, my conscience compels me to write separately to record my views on the Study. I write to convey my strong disappointment that the Study fails to satisfactorily answer the Congressional request, contains no specific recommendations, and does not portray a complete picture of the immense and irreparable investor harm that has resulted, and will continue to result, due to Morrison v. National Australia Bank, Ltd.

In the United States we have a strong belief that, whether rich or poor, we are all entitled to our day in court. Sadly, for many American investors this is no longer true.

If American investors are defrauded by a company that they have invested in – and that company is listed on a foreign exchange – investors may be unable to have their day in court and seek redress against this company for its lies and misrepresentations. Thus, investors have been stripped of a traditional American right.

This was not always the case. For decades, federal courts applied the same standard to determine whether U.S. federal securities law applied to frauds that took place, in whole or in part, outside of the United States. Under that standard, Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and other antifraud provisions applied “when there was ‘significant U.S. fraudulent conduct that directly caused the plaintiffs losses’ (the conduct test) or when there were ‘significant effects’ on the U.S. securities markets (the effects test).”

…continue reading: Defrauded Investors Deserve Their Day in Court

Limits on Extraterritorial Reach of State Law

Posted by George T. Conway III, Wachtell, Lipton, Rosen & Katz, on Tuesday May 1, 2012 at 9:49 am
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Editor’s Note: George Conway is partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum from Mr. Conway, Herbert M. Wachtell, Ben M. Germana, and Graham W. Meli.

Recently, in Global Reinsurance Corp.–U.S. Branch v. Equitas Ltd., the New York Court of Appeals, New York’s highest court, refused to apply the state’s antitrust statute, the Donnelly Act, to allegedly anticompetitive conduct in Great Britain that had only incidental effects in New York.  Reversing a divided decision of the intermediate appellate court, the Court of Appeals reasoned that state antitrust law could not have a broader extraterritorial reach than federal antitrust law; otherwise, statutory and judicial limitations on the federal Sherman Act “would be undone if states remained free to authorize ‘little Sherman Act’ claims that went beyond it.”

This rationale may have significant implications beyond the antitrust arena, as the Court of Appeals more broadly reaffirmed that “[t]he established presumption is, of course, against the extra-territorial operation of New York law.”  For example, the potential impact on securities claims under state common law is particularly notable.  In the wake of the United States Supreme Court’s decision in Morrison v. National Australia Bank, which held that Section 10(b) of the Securities Exchange Act applies only to domestic securities transactions (see our memo here), a number of plaintiffs have attempted to invoke state common law to recover losses on extraterritorial transactions.  One potential obstacle to such state-law suits appeared to have been removed late last year, when the Court of Appeals, in Assured Guaranty (UK) Ltd. v. J.P. Morgan Investment Management, rejected a line of lower-court and federal precedents that had held common-law securities actions preempted by New York’s securities statute, the Martin Act (see our memo here).

…continue reading: Limits on Extraterritorial Reach of State Law

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