In Morrison v National Australia Bank Ltd, the US Court of Appeals for the Second Circuit held in a matter of first impression that foreign plaintiffs suing a foreign issuer based on losses the foreign plaintiffs allege they suffered in connection with securities transactions made on foreign exchanges could not assert claims under the Securities Exchange Act of 1934 (1934 Act), and Rule 10b-5 in particular, in a US District Court.
Rather than adopting a bright line rule that would have created a blanket prohibition on subject matter jurisdiction by a US court over these so-called foreign-cubed cases, however, the Second Circuit instead affirmed the District Court for the Southern District of New York's dismissal of plaintiffs' case using long-standing rules for determining the extraterritorial application of US securities laws.
The Morrison decision provides assistance in anticipating how a court would determine whether to exercise subject matter jurisdiction over a...