Morrison v. National Australia Bank Ltd

Morrison v. National Australia Bank Ltd (Decided June 24, 2010) US is a US Supreme Court case concerning the extraterritorial effect of US securities legislation.^[1] Its effect was to bar all federal securities fraud suits in the US for securities traded on a foreign stock exchange. However the impact of the decision was almost immediately reversed by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In late 2010 Fabrice Tourre of Goldman Sachs asked for dismissal of an SEC suit against him based on the repercussions of the Morrison v. National Australia Bank Ltd Supreme Court case, claiming his deals were outside the US and thus not subject to certain US laws.^[2][3][4]

Facts

The case concerned the 1998 purchase by National Australia Bank of a mortgage servicing company, HomeSide Lending, head-quartered in Florida. In July 2001, NAB announced a USD 450 million write-down in assets due to loses associated with HomeSide Lending; and a further USD 1.75 billion write-down in September of that year. The root cause of the write-down, was that the modelling done by HomeSide Lending to determine future revenues from mortgage fees was based on overly optimistic assumptions. The plaintiffs claimed that this was part of an intentional scheme to defraud committed by HomeSide's management. By the time the case reached the US Supreme Court, only Australian investors remained as plaintiff's, although a US investor (Morrison, for whom the case was named) participated in earlier proceedings, but his case was thrown out for unrelated reasons.

The plaintiffs argued that the fact the alleged fraud occurred in Florida meant that it should be subject to US securities laws. The defendants argued, that since the alleged fraud related to trading in Australian securities, US securities laws did not apply.

Judgment

The decision was unanimous in favour (albeit with Justice Sotomayor recusing herself, given that she had been involved in the case as Solicitor-General). However, different reasons were given. The majority opinion, by Scalia, held that since the plain language of section 10(b) only applies to US securities, it should not be read to apply to non-US securities, despite long-standing precedent, originating in the 2nd Circuit, and since adopted by other circuits also, that 10(b) also applies to non-US securities. Stevens filed a partial concurrence, which Ginsburg joined, rejecting the overturning of the existing jurisprudence on section 10(b); at the same time, he held that in this particular case, the defendants should prevail, since both the plaintiffs and defendants were Australian, and the case would be better dealt with by the Australian court system - but unlike the majority, he would apply 10(b) to cases involving non-US securities, where there was a closer connection to the US (e.g. US plaintiffs).

See also

• US corporate law
• Dodd-Frank Wall Street Reform and Consumer Protection Act

Notes

1. ^ Dwyer Arce (June 24, 2010). "Supreme Court rules no cause of action for foreign plaintiffs in securities fraud litigation". JURIST - Paper Chase. http://jurist.org/paperchase/2010/06/supreme-court-rules-no-cause-of-action-for-foreign-plaintiffs-in-securities-fraud-litigation.php. 
2. ^ Securities Ruling Limits Claims of Fraud By NATHAN KOPPEL And ASHBY JONES , SEPTEMBER 28, 2010, Wall Street Journal
3. ^ Goldman's Tourre says SEC suit should be dismissed September 30, 2010, Jonathan Stempel, Reuters, via foxbusiness.com
4. ^ Goldman Trader Seeks a Dismissal, Chad Bray, Wall Street Journal, 2010 9 30

External links

• Entry on SCOTUSwiki page