The U.S. Supreme Court’s ruling last term in Morrison v. National Australia Bank, which dismissed a securities fraud action against a non-U.S. issuer of securities registered on a non-U.S. exchange, has received a very warm welcome from judges in federal district courts.1 Courts have read the Morrison holding expansively, dismissing a surprising number of lawsuits brought in the U.S. against foreign issuers, based on the holding in Morrison that §10(b) of the Exchange Act applies only when the securities at issue are traded on a U.S. exchange or purchased in the U.S.
Just one month after Morrison came down, a judge in federal court in Manhattan danced gleefully on the grave of the old standard. Judge Victor Marrero observed that the Supreme Court had unceremoniously “trashed” the U.S. Court of Appeals for the Second Circuit’s “conduct and effects” test. Rejecting the effort by class-action lawyers to read Morrison narrowly, Judge Marrero stated that he was “not convinced that the Supreme Court designed Morrison to be squeezed, as in spandex, only into the factual strait jacket of its holding.”
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