The U.S. Supreme Court’s recent decision in Morrison v. National Australian Bank Ltd. is a short study in judicial running in place. Morrison addressed the “vexing” question of whether the seminal anti-fraud provision of the U.S. securities laws, § 10(b) of the Securities Exchange Act of 1934, provides a private cause of action in “foreign-cubed” cases — cases in which foreign plaintiffs sue foreign defendants for misconduct in connection with securities traded on foreign exchanges. The Court held that it does not. So far, so good.

Unfortunately, though, in reaching its decision, the Court unnecessarily upended more than 40 years of lower court jurisprudence — unnecessarily because the Court affirmed the result reached by the U.S. Court of Appeals for the 2d Circuit. Rejecting lower court reasoning for trying to divine the core purpose of § 10(b) — what Justice John Paul Stevens’ concurrence rightly calls a “famously opaque” statute — the Court instead sought to divine the “focus” of the statute. Criticizing (almost to the point of lampooning) the lower courts for testing § 10(b)’s reach by a “conduct” and “effects” test because these words do not find textual support in the statute, the Court held that § 10(b) reaches frauds only when “the purchase or sale is made in the United States, or involves a security listed on a domestic exchange” — creating a nexus equally devoid of textual support.

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