Oral Argument in the Supreme Court's "F-Cubed" Securities Class Action Case Offers Multinational Corporations Reason for Hope
By Peter M. Stone, Alexander M.R. Lyon, and Igor V. Timofeyev
On March 29, 2010, the U.S. Supreme Court heard oral argument in Morrison v. National Australia Bank Ltd., No. 08-01191 (U.S. filed Mar. 25 2009), a so-called "F-Cubed" securities class action in which a foreign issuer is sued by foreign plaintiffs who bought their securities on a foreign exchange. Morrison is of major significance to multinational corporations, particularly those with subsidiaries in the United States, because it presents an opportunity for the Supreme Court to decide whether, and to what extent, the implied private right of action under Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder applies to instances of alleged transnational fraud.
While a decision is not expected until late Spring or early Summer, the oral argument provides considerable insight into the likely outcome of the case and the potential scope of the Court's opinion. Although there are several different rationales the Court may embrace, oral argument suggests that the Justices will most likely limit "F-Cubed" litigation and provide some form of workable guidance to lower courts as to the extraterritorial reach of the private right of action under Section 10(b).