Ethics

The Supreme Court ruled today that foreign plaintiffs cannot sue a foreign defendant for securities fraud under 1934 Act Section 10(b) over securities purchased outside the United States (so called f-cubed securities litigation).

This holding does not directly pertain to legal ethics, but has a lot to do with how the U.S. legal profession is viewed by the rest of the world.  It is one thing for U.S. lawyers to earn a living handling disputes between persons in this country or involving securities purchased in this country.  Our litigation system may be too expensive, or our lawyers' fees too high, but that is our business.  It is another matter for the U.S. to set itself up at the forum for securities claims from around the world and therby impose our system on others.

I was the principal author of a law professors' amicus brief in support of NAB in this case. Twenty-one law professors signed the brief.  Douglas Dunham of Skadden Arps in New York was counsel of record for the law professors who signed the brief.  We urged the bright line rule that the Court adopted in its holding today --   "Amici respectfully submit that the Court should affirm the result reached by the Second Circuit and establish a bright line rule limiting the application of rule 10(b) to securities bought or sold in the United States."  Brief at 31.

The Court affirmed the Second Circuit ruling 8-0, but a majority of the Court did so on considerably broader grounds than the Second Circuit opinion.  Justice Scalia's opinion for the Court holds that Section 10(b) applies only to "transactions in securities on domestic exchanges, and domestic transactions in other securities," slip op. at 18 -- and not to transactions outside the United States. The opinion is on the Supreme Court web site:  

http://www.supremecourt.gov/opinions/09pdf/08-1191.pdf

The law professors' amicus brief is here:

Download Law Professors' Brief