U.S. Securities Litigation Against Non-US Issuers by Non-US Plaintiffs

In a unanimous opinion in Morrison v. National Australia Bank, the United States Court of Appeals for the Second Circuit limited the ability of U.S. courts to hear claims brought on behalf of non-U.S. investors who purchased shares of non-U.S. companies on non-U.S. exchanges. Referred to as “foreign-cubed claims,” they have become increasingly frequent over the past several years. While declining to adopt a “bright-line rule” precluding the exercise of subject matter jurisdiction over such claims, the Second Circuit held that, in general, a U.S. court does not have subject matter jurisdiction over foreign-cubed claims when the acts that constituted the alleged fraud and directly caused the alleged harm emanated from outside the United States. Under this approach, the court concluded, subject matter jurisdiction does not exist over a foreign-cubed claim when the non-U.S. company’s executives (a) made decisions concerning the content of alleged misstatements to investors from abroad and (b) issued those statements from abroad.

My firm recently issued a memorandum that analyzes the Court’s opinion and discusses its implications for non-U.S. companies. The memorandum is available here.