Second Circuit Affirms Dismissal On Extraterritoriality Grounds of Securities Claims Based on Cross-Border Securities-Based Swap Agreements: Court Holds That, Under Morrison v. National Australia Bank, a Domestic Transaction Is Not Alone Sufficient To State a Section 10(b) Claim Involving Securities-Based Swaps When the Conduct Is Predominantly Foreign

Sullivan & Cromwell LLP - August 19, 2014

On August 15, 2014, in a case of first impression involving cross-border securities-based swap transactions, the Second Circuit held that the presumption against the extraterritorial application of Section 10(b), announced by the U.S. Supreme Court in Morrison v. National Australia Bank, 561 U.S. 247 (2010), applies even to claims involving supposedly “domestic” securities-based swap transactions if those claims are “so predominantly foreign as to be impermissibly extraterritorial.”  In this case, where the claims against a non-U.S. company were based on statements made abroad and were based on swap transactions that referenced securities trading “only on foreign exchanges,” the Court held that the application of Section 10(b) would “obviously implicate the incompatibility of U.S. and foreign laws.”

Sullivan & Cromwell represented Porsche in successfully briefing and arguing both this appeal and the earlier motion to dismiss before the district court.  Our team included Robert Giuffra, Suhana Han and Alexander Willscher.