Oral argument in the National Australia Bank case took place this morning. By all accounts, it does not appear that the U.S. Supreme Court is likely to embrace the broad extraterritorial application of the antifraud provisions of the federal securities laws.
Already facing a tough battle, the petitioners could not have been happy to learn that in the Court's audience were several justices of the Supreme Court of Canada. And whether it was out of deference to their foreign guests, or genuine concern about the policy ramifications of allowing foreign investors access to the U.S. courts, the Court's questioning was hostile from the start.
A few highlights (based on the official transcript):
(1) The Court appeared uninterested in the petitioners' suggestion that it might be appropriate to remand the case to the Second Circuit without rendering a decision. Justice Scalia's verdict: "There is no reason to send it back."
(2) Justice Ginsburg started out the substantive questioning with what would turn out to be the quote of the day - "[T]his case is Australian plaintiff, Australian defendant, shares purchased in Australia. It has 'Australia' written all over it." The justices pressed this theme repeatedly, with questions about the existence of a United States interest, potential interference with the regulation of foreign securities markets, and the connection between the fraud and the United States.
(3) As for the respondents and the government (which received 10 minutes of argument time), the justices appeared interested in exploring the utility of a bright-line test - i.e., barring any claims based on transactions involving shares of foreign issuers purchased or sold on foreign exchanges. Counsel for the respondents was asked about the effect on Americans who purchased stock on foreign exchanges (J. Stevens) and given a hypothetical wherein the fraudulent conduct took place in the United States and the stock purchase took place overseas (J. Breyer). The government, which advocated a test focusing on whether "significant conduct material to the fraud's success occured in the United States," was asked about whether its test was simply too complicated to be workable (C.J. Roberts).Posted by Lyle Roberts at March 29, 2010 11:39 PM | TrackBack