The Global Lawyer: The Global Securities Case of the Decade (So Far)

In September 2003, George Conway of Wachtell, Lipton, Rosen & Katz e-mailed colleagues with a head-scratcher about a client matter that just came in the door. An Australian bank had been hit with a U.S. securities action by Australian plaintiffs on the foundation of shares bought in Australia. “Can they do that???” asked Conway.

This question marked the birth of a case that was destined to sharply curtail the overseas reach of U.S. law: Morrison v. National Australia Bank. The textbook answer when Conway asked it was yes: Given sufficient U.S. effects or conduct, a U.S. court could hear a “foreign-cubed” suit, brought by foreign plaintiffs against a foreign defendant on the basis of foreign securities. But in the U.S. Supreme Court’s Morrison ruling of June 2010, Conway persuaded Justice Antonin Scalia to scrap the conducts and effects tests. The new rule is that U.S. courts can’t hear any claim based on a security sold on a foreign stock exchange, because a statute doesn’t apply extraterritorially without saying so expressly, lest the United States become a plaintiffs’ paradise. In the eighteen months since the Supreme Court finally answered Conway’s question, Morrison’s progeny have spread through the federal courts like rabbits in the outback.