The Myth of Morrison: Securities Fraud Litigation Against Foreign Issuers

44 Pages Posted: 13 Nov 2018 Last revised: 16 Nov 2018

See all articles by Robert P. Bartlett

Robert P. Bartlett

University of California, Berkeley - School of Law; University of California, Berkeley - Berkeley Center for Law, Business and the Economy

Matthew D. Cain

Harvard Law School

Jill E. Fisch

University of Pennsylvania Law School - Institute for Law and Economics

Steven Davidoff Solomon

University of California, Berkeley - School of Law; University of California, Berkeley - Berkeley Center for Law, Business and the Economy

Date Written: November 13, 2018

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. 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 substantially change the type of litigation brought against foreign issuers, which both before and after Morrison focused on foreign issuers with a U.S. listing and substantial U.S. trading volume. While dismissal rates rose post-Morrison we find no evidence that this is related to the decision. Settlement amounts and attorneys’ fees actually rose 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 to include those that traded primarily on non-U.S. venues. When Morrison is placed in its true context it is justified as a decision in-line with prior administrative and court actions which have historically aligned firms’ U.S. liability to be proportional with their U.S. presence. While Morrison had this defining effect it did not change the litigation environment for foreign issuers, the oft-cited import of the decision. More generally, our analysis of Morrison also underscores how the decision has been mistakenly interpreted as a case primarily about extraterritoriality rather than about 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 (November 13, 2018). 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

Robert P. Bartlett

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

215 Boalt Hall
Berkeley, CA 94720-7200
United States
510-642-6646 (Phone)

University of California, Berkeley - Berkeley Center for Law, Business and the Economy

UC Berkeley School of Law
Berkeley, CA 94720

Matthew D. Cain

Harvard Law School ( email )

Cambridge, MA 02138

Jill E. Fisch

University of Pennsylvania Law School - Institute for Law and Economics ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-746-3454 (Phone)
215-573-2025 (Fax)

Steven Davidoff Solomon (Contact Author)

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

215 Boalt Hall
Berkeley, CA 94720-7200
United States

University of California, Berkeley - Berkeley Center for Law, Business and the Economy ( email )

Berkeley, CA 94720-7200

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