Photo of Linda SilbermanPhoto of Stephen ChoiOn June 24, Associate Justice Antonin Scalia cited an article co-authored by Stephen Choi, Murray and Kathleen Bring Professor of Law, and Linda Silberman, Martin Lipton Professor of Law, in the United States Supreme Court’s 8-0 decision in the case of Morrison v. National Australia Bank. Their article, "Transnational Litigation and Global Securities Class Action Lawsuits," appeared in the University of Wisconsin Law Review in 2009. This was the second time in two months that Silberman's work was cited by the Court; in May, Justice Anthony Kennedy cited her scholarship in Abbott v. Abbott, a case about Ne Exeat Rights.

Morrison involved a question of the extraterritorial reach of section 10(b) of the Securities Exchange Act of 1934, specifically whether a class of foreign plaintiffs suing a foreign issuer for purchases of securities traded on a foreign exchange (an “f-cubed case”) could bring suit under the Act. In their article, Choi and Silberman argued that the traditional conduct and effects tests as applied to securities class-action lawsuits involving foreign issuers and foreign investors transacting abroad were uncertain in their applications and, as a result, unpredictable. They proposed that there be a uniform, bright-line exchange-based presumptive rule in determining the reach of the U.S. securities laws: “Courts should presume jurisdiction over all investors trading in a foreign issuer’s securities within the United States, and presume no jurisdiction over rule 10b-5 suits for foreign investors trading in the securities of a foreign issuer outside the United States.” They noted that such a rule would protect the interests of investors trading in the U.S. and at the same time give appropriate deference to the regulatory authorities in other countries. They also proposed that the SEC have the ability to rebut the presumption on a country-by-country basis.

In the majority opinion, Justice Scalia cited Choi and Silberman for their critique of the inconsistent and unpredictable application of section 10(b) in transnational securities cases. Although affirming the ruling below by the U.S. Court of Appeals for the Second Circuit, the Court went well beyond the f-cubed paradigm of Morrison. In rejecting the conduct and effects tests that had been used by courts for decades, the Supreme Court held that Section 10(b) and Rule 10b-5 of the Securities Exchange Act extend only to “transactions in securities listed on domestic exchanges...and domestic transactions in other securities.” However, the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act authorizes a broader extraterritorial reach for a securities fraud action brought by the SEC or the United States.

Shortly after the Morrison decision, Silberman presented a lecture to the British Institute of International and Comparative Law titled “Transnational Securities Class Actions in the Aftermath of Morrison v. National Australia Bank.” The July 6 lecture was chaired by Lawrence Collins, Justice of the Supreme Court of the United Kingdom. The week before, Silberman spoke at the Centre for Family Law and Practice at London Metropolitan University’s inaugural conference. Her lecture, “Taking Ne Exeat Rights Seriously: The U.S. Supreme Court's Abbott Decision,” followed up on Abbott v. Abbott. On June 12, Silberman spoke at the week-long Association of American Law Schools mid-year meeting in New York City during the plenary session "Recognition and Enforcement of Foreign-Country Judgments: Domestic and Comparative Perspectives."

Posted July 23, 2010