Courts Repudiate Attempts to Find Loopholes in Supreme Court Foreign Cubed Decision

Via HLS Forum.

Citing the Supreme Court’s decision in Morrison v. National Australia Bank, on February 22 a federal district judge in New York threw out most of a securities class action jury verdict that plaintiffs’ lawyers had estimated was worth $9.3 billion. The jury’s verdict, rendered against the French media conglomerate Vivendi, S.A. thirteen months ago—before National Australia was argued and decided, and thus under now-overturned law—upheld claims that were predominantly “foreign-cubed” (asserted by foreign investors against a foreign issuer for losses on a foreign exchange) and “foreign-squared” (asserted by American investors against a foreign issuer for losses on a foreign exchange). In categorically dismissing all the claims of those investors, the decision in In re Vivendi Universal, S.A. Securities Litigation, No. 02 Civ. 5571 (RJH) (S.D.N.Y. Feb. 23, 2011), according to Vivendi and its counsel, eliminated at least 80%, and perhaps up to 90%, of the liability that the verdict could have produced.

...

The so-called “listed” securities theory. The most ambitious plaintiffs’ theory relied upon the statement in Morrison v. National Australia Bank that Section 10(b) of the Securities Exchange Act of 1934 applies “only in connection with the purchase or sale of a security listed on an American stock exchange, and the purchase or sale of any other security in the United States.” (Emphasis added.) Plaintiffs’ lawyers took this to mean that whenever the home-country security of a foreign issuer was “listed” on a U.S. exchange (as must often be done, for example, in order to issue and list American Depositary Receipts), trades in that security anywhere in the world would be subject to Section 10(b). Thus, if a foreign company sponsored even a small issue of ADRs, or if it dual-listed its home-country shares on an American exchange, global foreign-cubed and foreign-squared class actions would be fair game.

Click Here to Read: Courts Repudiate Attempts to Find Loopholes in Supreme Court Foreign Cubed Decision