U.S. UPDATE: Morrison at Four: A Survey of Its Impact on Securities Litigation
The U.S. Chamber Institute for Legal Reform recently published an essay, as part of a report on the litigation of foreign disputes in the U.S. federal courts, detailing the extraordinary impact that the Supreme Court’s landmark decision in Morrison v. National Australia Bank has had on transnational securities litigation.
After describing how Morrison sprang from the Supreme Court’s increasing concern about the extraterritorial application of U.S. law, the essay explains how the lower courts have applied Morrison to preclude plaintiffs from recovering damages under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 for losses suffered on foreign securities exchanges. The essay goes on to explain how courts have determined what constitutes a domestic securities transaction under Morrison, and how courts applying Morrison have refused to allow claims seeking recovery of losses on foreign transactions in domestically cross-listed securities.
The essay also surveys the case law applying Morrison to other kinds of securities litigation—to claims involving derivative securities transactions, to cases under the Securities Act of 1933, to whistleblower-retaliation claims under the Sarbanes-Oxley and Dodd-Frank Acts, and to criminal prosecutions under Section 10(b). Finally, the essay discusses the ineptly and inaptly drafted “extraterritorial jurisdiction” provision of the Dodd-Frank Act, Section 929P(b)—a provision apparently intended to overrule Morrison in criminal and SEC enforcement cases—and explains why it is increasingly unlikely that this provision will have any effect at all.
This survey of the case law illustrates how Morrison—by reestablishing the traditional understanding that U.S. law ordinarily applies only to domestic, not foreign, matters, and by fashioning a standard that avoids the interference with foreign regulation that the extraterritorial application of U.S. law would produce—has enduringly changed the way the federal courts address transnational securities litigation.