Securities Litigation Alert: The Second Circuit Court of Appeals Declines the Invitation to Establish a Bright-Line Rule Barring Foreign-Cubed Securities Lawsuits

As the securities markets have expanded globally, investors are increasingly seeing their investments as part of a larger, international market. Foreign purchasers of securities have found the legal remedies afforded investors in American litigation an attractive alternative to their home-country systems, so that an increasing number of foreign purchasers have sought access to the US courts to redress claims relating to the securities they purchased, even when those foreign purchasers bought foreign securities on non-American exchanges. Such actions raise questions of subject matter jurisdiction. In the recent case of Morrison v. National Australia Bank, the Second Circuit refused to establish a bright line test barring jurisdiction over so-called foreign cubed securities cases -- involving foreign purchasers who purchased securities of foreign issuers on a non US exchange -- and instead adhered to an effects and conduct test in determining jurisdiction.