Multinational Class Actions Under Federal Securities Law: Managing Jurisdictional Conflict

Abstract

This article examines a form of securities class action that is growing increasingly popular in U.S. courts: the foreign cubed action, brought against a foreign issuer on behalf of a class that includes foreign investors who purchased securities on a foreign exchange. These cases are becoming an important part of the regulatory landscape (as evidenced by recent high-profile lawsuits involving issuers such as Vivendi, Bayer and Royal Ahold), and they create the potential for particularly severe conflict with other countries on the question of how best to regulate global economic activity. Yet they point out quite clearly that the traditional conduct and effects tests for subject-matter jurisdiction are inadequate to the task of delimiting the reach of U.S. securities laws in the global capital markets. The article draws on a study of almost 50 foreign cubed claims. It analyzes the arguments made by foreign investors seeking to justify the application of U.S. law to their claims - arguments that base an expansive theory of regulatory jurisdiction on the interconnections among the world's capital markets. It then turns to judicial disposition of such claims, examining the various stages of litigation (including class certification) at which courts confront jurisdictional questions and identifying a series of assumptions that courts make in attempting to draw jurisdictional lines. It then uses those assumptions to predict how courts will respond to multinational class actions in the continued absence of legislative guidance regarding subject-matter jurisdiction under the securities laws.

Keywords: securities litigation, class action, class certification, jurisdiction, forum non conveniens, globalization, conduct, effects

JEL Classification: K22, K41