The TEXPERS Blog

Global landscape continues to evolve in

 the wake of Morrison decision

By Mike Lange, guest columnist

The global scope of venues for group securities litigation continues to expand since a 2010 U.S. Supreme Court case ended two kinds of securities class-action claims that had propagated in the prior years. 

Morrison v. National Australia Bank was a Supreme Court case concerning the extraterritorial effect of U.S. securities legislation. The case ended class-action “foreign-cubed” claims, in which foreign plaintiffs sued foreign issuers for losses on transactions on foreign exchanges, and “foreign-squared” claims, brought by domestic plaintiffs against foreign issuers for losses on transactions on foreign exchanges.

Prior to the Morrison decision in June 2010, the U.S.’s jurisdiction over shareholder class actions was so broadly defined that complaints could be filed in U.S. courts on behalf of foreign companies, that involved trading foreign securities on foreign exchanges (so-called f-cubed cases). Only the most tenuous connection to the U.S. was required to grant U.S. jurisdiction. This opened the door for international investors to seek recoveries for their damages in U.S. courts, which historically have been more sympathetic to investors than some other countries.

However, in the years following Morrison, investors have been forced to seek out foreign jurisdictions as venues for their complaints. Suits brought under non-U.S. law in foreign courts have therefore become a prominent component in the effort to maximize recoveries from shareholder litigation.

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Accordingly, the global scope of venues for group securities litigation continues to expand. Many countries routinely host group actions, with the bulk of actions occurring in Australia and Taiwan. However, other jurisdictions have increasingly allowed such lawsuits. While each jurisdiction has its own nuances in how it allows its class action regime to operate, the majority of shareholder litigation matters outside the U.S. and Canada involve opt-out class actions or jurisdiction risk profiles comparable to U.S. passive claim filing.

With increased interest from investors in participating in global actions, fiduciaries have begun to view considering these cases an as an obligation to their clients. Excluding Taiwan, 75% of all non-U.S. matters between 2015-2017 either had claim filing processes, similar to the U.S., or were filed in countries with jurisdictional risk profiles comparable to that of the U.S. This has allowed institutions to establish policies and procedures to streamline the majority of matters while focusing time and effort on just those jurisdictions with higher risk profiles where more evaluation is appropriate before action is taken.

There are mechanisms to help institutions automate their participation in these matters, minimizing the amount of time and effort needed by investors to recover in lower risk jurisdictions. This leaves clients free to focus on the legal mechanisms for handling group actions in higher-risk, more complex jurisdictions with complicated structures for developing group actions, where it is necessary for investors to thoughtfully evaluate participation.

Download a full report to learn why it is important for investors to understand the nuances of their trading jurisdictions in order for them to begin to develop internal policies for foreign actions.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of Financial Recovery Technologies or TEXPERS. 

About the Author

Mike Lange, securities litigation counsel at Financial Recovery Technologies, is the senior member of FRT’s Legal & Research team responsible for global, direct, and antitrust case analysis and legal research. He has spent more than 20 years in practice. Before joining FRT, Lange was a Partner at Berman DeValerio & Pease, one of the country’s leading law firms prosecuting securities, consumer, and antitrust litigation. He personally identified and initiated cases recovering more than $200 million for investors. Lange led the firm’s business development, marketing, and government affairs efforts and was its primary media strategist and spokesperson, handling press calls and interviews. He was principal contact for a number of institutional investor clients, advising them on case merits, damages calculations, lead plaintiff or other involvement, and related strategies. He negotiated and oversaw settlements, working closely with administrators on all aspects, from allocation plans and claims notification through processing and distribution.