The Supreme Court will for the first time consider whether the anti-fraud provisions of U.S. securities law extend to "foreign-cubed" securities lawsuits where foreign purchasers of securities sue foreign issuers for violations of American securities laws with respect to securities traded on a foreign exchange.
The grant of certiorari in Morrison v. Australian National Bank in November 2009 suggests that the court may resolve the three-pronged conflict among the circuits that currently exists in the jurisprudence.
What's interesting behind the scenes is the Obama Administration's position. The Solicitor-General filed an amicus brief at the court's request. The brief suggested that the plaintiff's claims would have been dismissed under any of the circuit tests.
The SEC joined in the government's brief, effecting a complete turnaround from its position before the 2nd Circuit, where it supported the plaintiff's argument that jurisdiction existed.
Indeed, the government and the SEC both took the position before the Supreme Court that the extent to which the impugned scheme took part inside or outside the U.S. was not a jurisdictional matter. Instead, they argued that the scheme's location went to two nonjurisdictional issues: whether a fraud in violation of U.S. law occurred and whether a private right of action was available.
Making these arguments, however, may well have been self-defeating.
"By throwing out these additional issues, the government may have made it more difficult for the Court to deny certiorari," says Chris Caparelli, a partner with Torys in New York. "Also, the government disagreed with numerous conclusions at which the 2nd Circuit arrived--despite agreeing with the result. To my mind, this may well have opened up Morrison for review by highlighting the uncertainties in the jurisprudence."