1 Transcript of Oral Argument at 7–8.
2 As to American practice before the United States Supreme Court, see Eugene Gressman et al (eds), Supreme Court Practice (9th edn, BNA 2007) (n 74).
3 In the United States, class actions are almost always ‘opt-out’ actions where a member of a defined class must affirmatively indicate their willingness not to become part of the class or else that person (although ‘absent’) is bound by any judgment or settlement. See generally, Rachel Mulheron, The Class Action In Common Law Legal Systems: A Comparative Perspective (Hart Publishing 2004) 1, at 29 (Mulheron).
4 Professor Linda Silberman’s accompanying chapter provides useful background plus analyses post-Morrison developments. Linda J Silberman, ‘Morrison v. National Australia Bank: Implications For Global Securities Class Actions’ 12 Yearbook of Private International Law 123 (2010) (Silberman).
5 561 US ___, 130 S.Ct 2869 at 2875 (2010).
6 New offerings which can lead to prospectus liability in the UK under s 90 of the Financial Services and Markets Act 2000 are covered by the roughly analogous s 11 or s 12 of the Securities Act of 1933.
7 The Court, referencing the Second Circuit opinion, states that, in addition to ‘Ordinary Shares—what in America would be called “common stock” … [t]here are listed on the New York Stock Exchange … National’s American Depository Receipts (ADRs), which represent the right to receive a specified number of National’s Ordinary Shares’. [citation omitted] 561 U.S. __, 130 S.Ct 2869 at 2875 (2010). An ADR is a separate security that may or may not be ‘supported’ or promoted by the issuer, which was the case here by National. An ADR is a security separately issued and traded that reflects shares of the issuer on deposit for this purpose in a custodial bank.
10 561 US ___, 130 S.Ct 2869 at 2876.
12 Citations to the Amended Complaint are from the Joint Appendix (J.A) to the Supreme Court beginning at page 38a and are cited as ‘Complaint at ¶__ J.A. at ___’, the latter blank being the page number of the Supreme Court Appendix as filed.
13 Complaint at para 47, J.A. at 53a.
14 Complaint at para 53, J.A. at 54a.
15 Complaint at para 2, J.A. at 39a.
16 499 US 244 (1991) (Aramco).
17 Complaint at para 102, J.A. at 72a.
18 See Ivor Ries, ‘Out of the Frying Pan’ The Bulletin at 46 (12 February, 2002).
19 Complaint at para 112, J.A. at 76a.
20 Complaint at para 112, J.A. at 76a.
21 Complaint at para 112, J.A. at 76a.
22 This may be relevant to the analysis of Stephen J Choi and Linda J Silberman, Transnational Litigation and Global Securities Class-Action Lawsuits (2009) Wisconsin Law Review 465, which puts great weight on investor expectations and who investors believe to be at fault in considering the ‘correct’ regime to provide for private civil remedies. See, Silberman (n 4) at 137. In this case, the Australians blamed the Americans at HomeSide (106) which suggests that Australian investors might very well have thought that the fault lay in Florida, not in Sidney. See, Complaint at ¶112, J.A. at 76a. (‘But so far no one is accepting blame at the bank’s Bourke Street headquarters.’)
23 The petitioners also submitted affidavits by experts at the trial court level that were part of the record before the Supreme Court who opined that those internal documents showed the interest rate assumptions used in calculating the capitalized MSR were inconsistent with industry practice.
24 See generally, William N Eskridge, Jr, ‘The New Textualism’ (1990) 37 UCLA Law Review 621; Antonin Scalia, ‘A Matter of Interpretation: Federal Courts and the Law’ (Amy Gutman (ed), Princeton University Press 1998)
26 ‘[I]t was a bit of a surprise that the “effects” test got trashed in Morrison.’ Comments of George T Conway III at ‘After Morrison’ seminar at the New York City Bar Association (24 April, 2011).
27 ‘Congress is primarily concerned with domestic conditions’ Foley Bros v Filardo, 336 U.S. 281, 285, 69 S.Ct 575, 577 (1949).
28 See Miller v Apex Marine Corp, 49 U.S. 19, 32 (1990) (‘We assume that Congress is aware of existing law when it passes legislation’).
29 That basic analysis is now generally recognized. Restatement (3d) Foreign Relations Law of the United States s 403 (1987). In the public international law arena the prescriptive jurisdiction principle depends on whether SS ‘Lotus’ (France v Turkey) 1927 PLIJ (Sec A) no 10 at 18–19, is interpreted as permitting application of a State’s law outside a State’s territory. See, the International Bar Association’s Report of the Task Force on Extraterritorial Jurisdiction (2008) at 8–9 (IBA Report).
30 The European Court of Justice has held that Art 5(3) of the Convention of 27 September, 1968 on jurisdiction should be interpreted to confer jurisdiction both where the damage occurred and the place of the event giving rise to it. Case 21/76 Handelskwekerij GJ Bier NV v Mines de Potasse d’Alsace SA  ECR 1735 at paras 24–5; see, IBA Report at 93.
31 A hypothetical has been framed historically as that of a bullet being shot from one jurisdiction to another, and posing the issue of whether the jurisdiction where the trigger was pulled had any interest in the case.
32 Gulf Oil Corp v Gilbert, 330 U.S. 501 (1947).
33 See Choi and Silberman (n 22) at 136.
34 See generally, Verlinden BV v Central Bank of Nigeria, 461 U.S. 480, at 486 (1983) (citing Ex parte Peru, 318 U.S. 578, 586–90 (1943)); letter from Jack B Tate, Acting Legal Adviser, US Dept of State, to Acting US Attorney General Philip B Perlman (19 May, 1952), reprinted in 26 Dept State Bulletin 984–5 (1952) and in Alfred Dunhill of London, Inc v Republic of Cuba, 425 U.S. 682, at 711–15 (1976).
Under the Foreign Sovereign Immunities Act, courts continue to defer to the Executive Branch. See, eg Republic of Austria v Altmann, 541 U.S. 677, 689 (2004) (Supreme Court noted that ‘[t]hroughout history, courts have resolved questions of foreign service immunity by deferring to the “decisions of the political branches … on whether to take jurisdiction”’).
35 See ss 18.31 and 18.32 infra. The petitioners also imported into their analysis the suggestion made by the SEC that foreign investors would have to meet the more rigorous causation test of ‘direct causation’ rather than ‘foreseeability’.
36 See generally John H Knox, ‘A Presumption Against Extrajurisdictionality’ (2010) 104 Journal of the American Society of International Law 351 (Knox).
37 Microsoft Corp v AT&T Corp, 550 U.S. 437 (2007) (Microsoft); F. Hoffman-LaRoche v Empagran SA, 542 U.S. 1555 (2004) (Empagran).
38 In hindsight, it was clear from the opinion that the respondents insightfully understood that a strong showing by foreign governments would also make a dramatic impact on the Court.
39 Respondents’ Brief at 2.
40 Respondents’ Brief at 7.
41 Respondents’ Brief at 7.
42 Respondents’ Brief at 9, citing, inter alia, Australian Stock Exchange Limit ASX Listing Rules.
43 The respondents also relied on an article by Professor Margaret V Sachs, which stated ‘The legislative history of both statutes reflects that Congress ‘chose to protect only those investors whose trades occur inside the United States….’; Respondents’ Brief at 27, n 16 citing Margaret V Sachs, The International Reach of Rule 10b-5: The Myth of Congressional Silence (1990) 28 Columbia Journal of Transnational Law 677.
44 Murray v The Charming Betsy, 6 U.S. (2 Cranch) 64, at 118 (1804) (Marshall CJ).
Respondents’ Brief at 43, citing
Restatement (1st) of Conflicts of Law, S. 377 (1934). Like the petitioners, they relied on the 1934 Restatement as follows:
46 Respondents’ Brief at 55.
47 Government Brief at 6 (citation omitted).
48 By way of background, the government also suggested at an earlier stage of the proceedings that it was unnecessary for the Court to grant certiorari because of pending congressional legislation. This proposed bill was subsequently withdrawn. After the decision, however, that legislation was revived and Morrison overturned legislatively as to only the SEC. See 18.83 and 18.84 infra.
49 Government Brief at 6–7.
50 Government Brief at 7.
51 Government Brief at 14–15 (emphasis added).
52 Brief of the Government of the Commonwealth of Australia As Amicus Curiae in Support of the Defendants-Appellees, Morrison v Nat’l Australia Bank Ltd, 561 U.S. __, 130 S.Ct 2869 (2010) (Australia Brief).
53 Australia Brief (n 52) at 2.
54 Australia Brief (n 52).
55 Australia Brief (n 52) at 4.
56 Australia Brief (n 52) at 9.
57 Australia Brief (n 52) at 15.
58 It notes it took action against two other entities for breaches of disclosure obligations under the Australian Corporations Act.
59 Australia Brief (n 52) at 17.
60 Australia Brief (n 52) at 18–19.
61 Australia Brief (n 52) at 22.
62 Australia Brief (n 52) at 19.
63 Australia Brief (n 52) at 24.
64 Brief of the United Kingdom of Great Britain and Northern Ireland as Amicus Curiae in Support of Respondents, Morrison v National Australia Bank Ltd, 561 U.S. ___, 130 S.Ct 2869 (2010) (UK Brief).
65 Hartford Fire Ins Co v California, 509 U.S. 764 (1993).
66 Subsequent to Morrison, a class action bill was passed by the House of Commons and was in its final stages before the House of Lords, but was pulled by the government before the last general election.
68 UK Brief (n 64) at 9–12.
69 UK Brief (n 64) at 15.
70 UK Brief (n 64) at 15–16.
71 UK Brief (n 64) at 16.
72 In the case of Morrison, all of the nine justices were present except Justice Sotomayor, who presumably recused herself because she was on the Court of Appeals for the Second Circuit at the time that Court decided Morrison below, although she was not on the panel that decided it.
73 Eugene Gressman, Kenneth S Geller, et al, Supreme Court Practice S. 749 (9th edn, BNA 2007), (‘Counsel are expected to engage in a dialogue with the Justices that will serve to clarify the facts and the issues in the case and that will make a decisive impression as to the merits of the dispute.’); John G Roberts, Jr, ‘Oral Advocacy and the Re-emergence of the Supreme Court Bar’ (2005) 30 Journal of Supreme Court History 68.
74 Silberman (n 4) at 131 suggests that the question of the application of foreign law raised by Justice Ginsburg was not answered. To the extent this is true, it was tactical. Collective redress under state or foreign law (eg Australian law) via a class action in the United States is challenging given Securities Litigation Uniform Standards Act of 1998 15 U.S.C. ss 77r, 78c(a)(16), 78bb(f)(1), (SLUSA) and the Class Action Fairness Act of 2005 (CAFA). For that reason, counsel attempted to keep the focus on the interpretation of s 10(b). Courts had held, prior to Morrison, that SLUSA bars securities class actions based on any non-federal law—foreign as well as state. See LaSala v TSB Bank PLC, 514 F.Supp. 2d 447, 472 (SDNY 2007), reconsideration denied, 2009 WL 874164 (SDNY 31 March, 2009); LaSala v UBS, AG, 510 F.Supp. 2d 213, 238 (SDNY 2007). See also Feiner Family Trust v Xcelera Inc, No. 10-cv-3431 (RPP), 2010 WL 3184482, at *4 (SDNY 9 August, 2010); but see LaSala v Bordier et Cie, 519 F.3d 121, 138–9 (3d Cir. 2008). See also, Merrill, Lynch, Pierce, Fenner & Smith, Inc v Dabit, 547 U.S. 71, 82–9 (2006).
75 The CAFA limits federal courts jurisdiction. 15 U.S.C. ss 77r(b)(1)(A), 28 U.S.C. ss 1332(d)(9). See also, In re Toyota Motor Corp Sec Litig, No CV 10-922 DSF (AJWx), 2011 WL 2675395, at *6 (CD Cal. 7 July, 2011) (finding no original jurisdiction, and declining to assert supplemental jurisdiction, over Japanese law claims of foreign class).
76 Morrison, 561 U.S. at____, 130 S.Ct 2869 at 2877, citing Aramco (n 16) 499 U.S. at 248.
77 Foley Bros Inc v Filardo, 336 U.S. 281 at 285 (1949); See Knox (n 36) at 370–3.
78 Morrison 561 U.S. __, 130 S.Ct 2869 at 2883–4.
81 Morrison 561 U.S. __, 130 S.Ct 2869 at 2884.
82 Morrison 561 U.S. __, 130 S.Ct 2869 at 2874 (emphasis added).
83 Morrison 561 U.S. __, 130 S.Ct 2869 at 2885 (emphasis added).
84 Morrison (n 83) (citation omitted).
86 The notion of conflict among regulatory regimes regarding disclosure and accounting presentation in particular often falls under the term ‘convergence’. ‘Convergence’ deals generally with different ‘regulatory regimes’ and differing interests of various sovereigns and whether these various regimes ‘converge’ or are sufficiently close so that ‘conflict’ is avoided. In the securities context, the discussion of ‘convergence’ has often focused on differing accounting or disclosure regimes. See generally, Iris HY Chiu, Regulatory Convergence in EU Securities Regulation (Khuener 2008); John C Coffee, Jr, The Future As History: The Prospects For Global Convergence In Corporate Governance and Its Implications (1999) 93 Northwestern University Law Review 641.
87 Morrison 561 U.S. __, 130 S.Ct 2869 at 2884.
89 15 U.S.C. ss 78L(g)(3) (2010). See Richard M Phillips and Morgan Shipman, ‘An Analysis of the Securities Act Amendments of 1964’ (1964) Duke Law Journal 706, at 754–62. Regulation S, which the Court alludes to in order to buttress its exchange remedy, expressly provides that it is applicable only to the registration provisions and does not limit the anti-fraud provisions of s 10(b). See, Securities Act Rule 901, 17 C.F.R. § 230.901.
90 This effects test was set forth in the Restatement (Second) Foreign Relations Law of the United States Section s 402(1)(c); s 41(2)(a) (1965)). Leasco Data Processing Equipment Corp v Maxwell, 468 F.2d 1326 (2d Cir. 1972), is perhaps the most famous of the effects cases. See also, Straub v Vaisman & Co, 540 F. 2d 591, 595 (3d Cir. 1976).
91 Morrison 561 U.S. __, 130 S.Ct 2869 at 2886 (citation omitted).
93 Morrison (n 91) quoting 548 F.2d 109 (3d Cir.), cert denied, 431 U.S. 938 (1977). The Barbary Coast was, of course, the southern shore of the Mediterranean Sea around Libya, which in the late eighteenth and early nineteenth centuries was a hotbed of piracy, interfering with international trade. The United States’ first overseas military action, the Battle of Derne in 1805, attempted to eradicate the Barbary pirates. See generally, Frank Lambert, The Barbary Wars: American Independence in the Atlantic World (Hill and Wang 2005).
94 Morrison 561 U.S. __, 130 S.Ct 2869 at 2886.
95 Operating from his office in New York City, Bernard Madoff ran a Ponzi scheme that defrauded foreign as well as United States investors out of billions of dollars. See eg Joanna Chung, Half of Madoff Loss Borne by Foreigners, Financial Times (12 January, 2009), available at: www.ft.com/cms/s/0/8ed137ac-e015-11dd-9ee9-000077b07658.html#axzz1phHgYyIw; In re Optimal U.S. Litigation, No 10 Civ 4095 (SAS), 2011 WL 642988, at *5–6 (21 December, 2011).
96 Morrison 561 U.S. __, 130 S.Ct 2869 at 2886.
97 See, Tellabs v Makor Issues & Rights, Ltd, 551 U.S. 308 (2007); Ashcroft v Iqbal, 556 U.S. 62 (2009); Bell Atlantic Corp v Twombly, 550 U.S. 554 (2007).
98 Justice Scalia’s citation for this supposedly self-evident fact are the amicus briefs on behalf of Infineon Technologies and European Aeronautic Defense and Space Co, as well as a brief for the Securities Industry and Financial Markets Association, notwithstanding the latter is the trade association of the brokerage industry and Infineon and EADS were, at the time of Morrison, defendants in securities class actions.
99 Morrison 561 U.S. __, 130 S.Ct 2869 at 2879.
100 Finally, Justice Scalia makes short shrift of the principal case relied on by the Solicitor General, Pasquantino v United States, s 44 U.S. 349 (2005), given its interpretation as a transnational conspiracy case where all of the conduct comprising the conspiracy was supposedly within the United States, although the underlying crime was the evasion of Canadian taxes.
101 Morrison 561 U.S. __, 130 S.Ct 2869 at 2888.
102 Morrison 561 U.S. __, 130 S.Ct 2869 at 2888.
103 Morrison 561 U.S. __, 130 S.Ct 2869 at 2889, n 3.
105 Morrison 561 U.S. __, 130 S.Ct 2869 at 2890–1.
106 Morrison 561 U.S. __, 130 S.Ct 2869 at 2891. Justice Stevens cited elsewhere the Court’s decision in Musick, Peeler & Garrett v Employers Insurance of Wausau, 508 U.S. 286, at 294, 113 S. Ct. 2085 (1993), where the Court found that having recognized an implied private right of action under s 10(b) and r 10b-5, it had the authority to define the contours of that right of action, including, as in that case, a right to contribution.
107 Morrison (n 106). Justice Stevens also, in the context of a lengthy footnote concerning the presumption against extraterritoriality, explains that Hartford Fire declined to apply the presumption, and he ends with a retort to the brief reference of the Court to the Microsoft case. Morrison (n 106) at fn 7. That retort states ‘[y]et Microsoft’s articulation of the presumption is a far cry from the Court’s rigid theory ‘as a principle of general application’. Microsoft innocuously observed, ‘we have stated that Court’s should “assume that legislators take account of the legitimate sovereign interests of other nations when they write American laws”’ [citations omitted].
108 Morrison 561 U.S. __, 130 S.Ct 2869 at 2892.
109 Morrison 561 U.S. __, 130 S.Ct 2869 at 2892.
113 Morrison 561 U.S. __, 130 S.Ct 2869 2892, n 10.
114 Morrison 561 U.S. __, 130 S.Ct 2869 at 2886, n 11.
115 Morrison 561 U.S. __, 130 S.Ct 2869 at 2894.
116 Morrison (n 115). The first hypothetical is a variant of the facts In re Vivendi Universal SA Securities Litigation, 381 F.Supp. 2d 158 (SDNY 2003), except that Justice Stevens does not address whether or not recovery would be precluded under the Second Circuit’s Morrison decision. The hypothetical also does not track Vivendi in that Vivendi had a large ‘float’—indeed the largest float of any major overseas company—of ADRs, which it was using as ‘acquisition currency’ to purchase United States companies within the United States.
117 Morrison 561 U.S. __, 130 S.Ct 2869 at 2894.
118 Morrison (n 117). In part III of Justice Stevens’ concurrence he concludes that the SEC could bring an enforcement proceeding with respect to the allegations of fraudulent misconduct present in Morrison that occurred in Florida. He goes on to say that, ‘it does not follow that shareholders who have failed to allege that the bulk or the heart of the fraud occurred in the United States … may maintain a private action to recover damages they suffered abroad’ Morrison 561 U.S. __, 130 S.Ct 2869 at 2895.
119 See eg Letter to SEC from Professor G. Andrew Karolyi, dated 18 February, 2011, File No 4-617; Letter to SEC from Consolidated Retirement Fund, dated 18 February, 2011, File No 4-617.
120 Yee v City of Escondido, 503 U.S. 519, 538 (1992) (O’Connor J).
121 Wall Street Reform and Consumer Protection Act of 2009, H.R. 4173, 111 Cong. § 7216 (2009).
122 Originally, Dodd-Frank Act, Pub. L. No. 111-203, § 929P, 124 Stat. 1376, 1862 (2010).
124 The Dodd-Frank Act reviving the SEC’s authority was immediately attacked by counsel for National because it apparently had not considered the opinion in Morrison, so it spoke only in terms of jurisdiction, and thus was proclaiming a nullity.
125 One commentator has suggested that a vehicle for modifying Morrison to include US investors is rule-making under s 30(b) of the Exchange Act. Genevieve Beyea, ‘Morrison v. National Australia Bank and the Future of Extraterritorial Application of the U.S. Securities Laws’ (2011) 72 Ohio State Law Journal 537, at 572. See also, Martin E Goldman and Joseph L Magrino, Jr, ‘Some Foreign Aspects of Securities Regulation: Towards a Re-Evaluation of Section30(b) of the Securities Exchange Act of 193’ (1969) 55 Virginia Law Review 1015, at 1027.
126 Study by the Staff of the SEC, Study on the Cross-Border Scope of Private Rights of Action under Section 10(b) of the Securities Exchange Act of 1934 (April 2012).
127 See Press Release, ‘Stichting Investor Claims against FORTIS, International Investors Join Forces in Support of Lawsuit against FORTIS over Massive Misrepresentation ahead of Bank’s Collapse in 2008’ (PR Newswire, 10 January, 2011), stating, ‘The foundation’s actions marks an important new avenue for pursuing international securities claims in the wake of last year’s United States Supreme Court decision in Morrison …’. Available at: http://www.prnewswire.com/news-releases/international-investors-join-forces-in-support-of-lawsuit-against-fortis-over-massive-misrepresentation-ahead-of-banks-collapse-in-2008-113195084.html 20 January, 2012; see also Kevin LaCroix, ‘Dutch Court Holds Collective Securities Settlement to Be Binding’ (DEO Diary 19 January 2012). Available at: http://www.dandodiary.com/2012/01/articles/securities-litigation/dutch-court-holds-collective-securities-settlement-to-be-binding/ 19 January, 2012 (‘There is some irony that one of Morrison’s consequences is that [it] has spurred investors to seek remedies elsewhere…’); Silver, et ano v ImaxCorp, et al, No CV-06-3257-00, Ontario Supreme Court of Justice (14 December, 2009) (certification of global class in securities case).