The Myth of Morrison: Securities Fraud Litigation Against Foreign Issuers

44 Pages Posted: 13 Nov 2018 Last revised: 27 Feb 2020

See all articles by Robert P. Bartlett

Robert P. Bartlett

Stanford Law School

Matthew D. Cain

Berkeley Center for Law and Business

Jill E. Fisch

University of Pennsylvania Carey Law School; European Corporate Governance Institute (ECGI)

Steven Davidoff Solomon

University of California, Berkeley - School of Law; European Corporate Governance Institute (ECGI)

Date Written: 2019

Abstract

Using a sample of 388 securities fraud lawsuits filed between 2002 and 2017 against foreign issuers, we examine the effect of the Supreme Court's decision in Morrison v. National Australia Bank Ltd. We find that the description of Morrison as a steamroller, substantially ending litigation against foreign issuers, is a myth. Instead, we find that Morrison did not significantly change the type of litigation brought against foreign issuers, which, both before and after this case, focused on foreign issuers with a U.S. listing and substantial U.S. trading volume. Although dismissal rates rose post-Morrison, we find no evidence that this was related to the decision. Settlement amounts and attorneys' fees remained unchanged post-Morrison. We use these findings to theorize that Morrison was primarily a preemptive decision about standing that firmly delineated the exposure of foreign issuers to U.S. liability in response to the Vivendi case, which sought to expand the scope of liability for foreign issuers whose shares traded primarily in non-U.S. venues. When Morrison is placed in its true context, it is justified as a decision in line with administrative and court actions that have historically aligned firms' U.S. liability to be proportional to their U.S. presence. Although Morrison had this defining effect, it did not change the litigation environment for foreign issuers, which was the oft-cited import of the decision. More generally, our analysis of Morrison underscores how the decision has been mistakenly characterized as a case primarily about extraterritoriality rather than standing.

Keywords: Morrison v. National Australia Bank, Foreign Private Issuer, Extraterritorial Jurisdiction, transnational securities fraud litigation, class action, Supreme Court of the United States, SCOTUS, Securities Act of 1934, Rule 10b-5, jurisdiction, standing, In re Vivendi Universal, S.A.

JEL Classification: K22, G30

Suggested Citation

Bartlett, Robert P. and Cain, Matthew D. and Fisch, Jill E. and Davidoff Solomon, Steven, The Myth of Morrison: Securities Fraud Litigation Against Foreign Issuers (2019). Business Lawyer, Vol. 74, p. 1967, 2019, UC Berkeley Public Law Research Paper, U of Penn, Inst for Law & Econ Research Paper No. 18-34, Available at SSRN: https://ssrn.com/abstract=3283527 or http://dx.doi.org/10.2139/ssrn.3283527

Robert P. Bartlett

Stanford Law School

559 Nathan Abbott Way
Stanford, CA 94305-8610
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Matthew D. Cain

Berkeley Center for Law and Business ( email )

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Jill E. Fisch

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
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215-573-2025 (Fax)

European Corporate Governance Institute (ECGI) ( email )

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Belgium

Steven Davidoff Solomon (Contact Author)

University of California, Berkeley - School of Law ( email )

215 Law Building
Berkeley, CA 94720-7200
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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