561 U.S. 247 (2010), Supreme Court of the United States
Morrison v. National Australia Bank is a landmark Supreme Court decision that reshaped the landscape of transnational securities litigation.
Does §10(b) of the Securities Exchange Act provide a private cause of action for foreign plaintiffs who bought shares of a foreign issuer on foreign exchanges, based on allegedly deceptive conduct that occurred in part in the United States?
Absent a clear, affirmative indication from Congress, federal statutes are presumed not to apply extraterritorially. Section 10(b) reaches only (1) transactions in securities listed on domestic exchanges and (2) domestic transactions in other securities. Questions about the geographic scope of §10(b) go to the merits (failure to state a claim), not to subject-matter jurisdiction.
No. Section 10(b) does not apply extraterritorially to foreign-cubed claims based on purchases of a foreign issuer's shares on foreign exchanges, even if some deceptive conduct occurred in the United States. The federal courts had subject-matter jurisdiction, but the complaint failed to state a claim under §10(b). The judgment was affirmed.
Morrison provides a clear, administrable test for the geographic scope of §10(b), supplanting decades of lower-court conduct-and-effects jurisprudence. It has three enduring impacts. First, it substantially limits private transnational securities fraud suits, curbing forum shopping and exposure of foreign issuers to U.S. litigation for foreign trades. Second, it clarifies that extraterritoriality is a merits, not jurisdictional, question, influencing civil procedure and federal courts analysis. Third, Morrison's robust use of the presumption against extraterritoriality has influenced cases across subject areas, including the Alien Tort Statute and RICO. In response, Congress enacted Dodd-Frank Act §929P(b), expanding extraterritorial reach for SEC and DOJ enforcement if significant U.S. conduct or effects are shown, while leaving Morrison's limitations in place for private actions. Post-Morrison litigation has focused on defining a 'domestic transaction' (e.g., where irrevocable liability is incurred or title passes) and on how the rule applies to ADRs and derivative instruments. For law students, Morrison is essential for understanding statutory interpretation, federal common lawmaking limits, and the interaction between securities regulation and transnational commerce.