United States: Recent Developments In Global Securities Litigation

I. INTRODUCTION

As the capital needs of global corporations continue to grow, such companies often tap capital markets on multiple exchanges across the globe. Securities markets have become increasingly interconnected, and alleged securities fraud frequently crosses borders and exchanges. Until recently, the federal courts of the United States have proven to be a friendly home with well-developed laws for these cross-border securities class actions.

As this process developed, however, a threshold legal issue came into focus. Foreign companies regularly argued that the U.S. securities laws are not applicable to securities fraud claims that were brought against foreign issuers on behalf of foreign investors who purchase securities on foreign exchanges. So-called "foreign-cubed" or "f-cubed" cases became commonplace, but not without resistance from the companies charged with wrongdoing under the securities laws.¹

Prior to the Supreme Court's landmark decision in Morrison v. National Australia Bank Ltd.,² the law with regard to f-cubed cases was in flux and not consistent in its application to seemingly similar fact patterns. However, the United States Supreme Court in Morrison has announced a new test for pursuing of redress for alleged violations of U.S. securities laws by foreign plaintiffs against foreign companies. While the U.S. traditionally led the world in addressing allegations of securities fraud, the Morrison decision has opened a new frontier for global securities litigation and has encouraged, or is in the process of encouraging, many countries around the world to reconsider their own legal structures as they relate not only to securities laws generally, but also to class actions, ligation funding, settlement procedures, and access to the courts by plaintiffs alleging injuries in the global marketplace. Now that investors who have purchased shares on foreign exchanges are no longer welcome in U.S. courts, those same investors may find the remedies available in other countries to be an attractive alternative.

This article will discuss the Morrison decision and focus on the changes now taking place in the global legal landscape to accommodate the types of cases that Morrison now bars from the U.S. courts.

II. THE SUPREME COURT'S DECISION IN MORRISON V. NATIONAL AUSTRALIA BANK

Prior to 2010, U.S. district and circuit courts generally framed the question of whether U.S. securities laws applied to f-cubed cases as one of jurisdiction.³ The U.S. Court of Appeals for the Second Circuit, for four decades, examined two factors when it considered whether it had jurisdiction over securities fraud claims brought by foreign investors: "(1) whether the wrongful conduct occurred in the United States, and (2) whether the wrongful conduct had a substantial effect in the United States or upon United States citizens."⁴ These factors were known as the "conduct" and "effects" tests.⁵

The Second Circuit regularly held that the conduct and effects tests were satisfied when: "(1) 'the defendant's activities in the United States were more than 'merely preparatory' to a securities fraud conducted elsewhere' and (2) the 'activities or culpable failures to act within the Unites States 'directly caused' the claimed losses.'"⁶ In practice, the test meant that in order to access U.S. courts, foreign investors were required to demonstrate that substantial acts in furtherance of the fraud were committed in the United States.⁷ Similarly, the Fifth and Seventh Circuits adopted an interpretation of the conduct test that closely followed the formulation set forth by the Second Circuit.⁸ Other circuit courts adopted a range of interpretations of the test as well. For example, the DC Circuit Court rigorously applied the test and required that "the domestic conduct [at issue] comprise[d] all the elements . . . necessary to establish a violation of section 10(b) and Rule 10b-5."⁹ On the other hand, the Third, Eighth, and Ninth Circuits were much less restrictive, requiring only that "at least some activity designed to further a fraudulent scheme occur[ed] within th[e U.S]."¹⁰

Until the Supreme Court's June 24, 2010 decision in Morrison v. Australia Nat'l Bank Ltd. ("Morrison"),¹¹ f-cubed cases proceeded apace by passing muster under the circuit courts' varying applications of the conduct and effects tests. The Supreme Court's decision in Morrison, however, substantially altered the law.

In Morrison, the defendant, National Australia Bank ("NAB"), was a foreign corporation whose ordinary shares were not traded on American exchanges.¹³ Petitioners were Australian citizens who purchased their stock on Australia's primary securities exchange and brought suit in U.S. District Court on behalf of a putative class of foreign investors alleging violations of § 10(b) of the Exchange Act.¹⁴

NAB had a U.S. subsidiary based in Florida, known as Homeside, that serviced residential mortgages. In NAB's public filings, it praised Homeside's performance, and executives of NAB made additional public statements while in the U.S. touting Homeside's success.¹⁵ NAB eventually announced, however, that it was writing down the value of Homeside's assets by $450 million and only two months later made a second announcement of another $1.75 billion write-down. Prices of NAB's ordinary shares dropped. Petitioners brought suit alleging that they, and the putative class members, were defrauded after relying on the allegedly misleading statements when making their purchases.¹⁶

At the lower court level, the Second Circuit, applying the conduct and effects tests, concluded that the actions, which took place in the U.S., were too insignificant to allow the plaintiffs' claims to proceed in U.S. courts.¹⁷ Plaintiffs appealed.

In Morrison, the Supreme Court agreed with the Second Circuit's conclusion but flatly rejected the circuit court's analysis and its use and application of the conduct and effects tests, addressing what it called the "threshold error" of the Second Circuit in framing the question of the "extraterritorial reach" of § 10(b) as a jurisdictional issue.¹⁸ Instead, the Court viewed the question as a merits issue, which implicated only statutory interpretation, not whether a court had "the power to hear a case."¹⁹ The Court thus proceeded with a straightforward 12(b)(6) analysis of whether the plaintiffs had stated a claim under the Exchange Act.²⁰

Beginning its analysis, the Court determined that the Exchange Act is silent as to the extraterritorial application of § 10(b) and that a presumption against extraterritorial application, therefore, should apply.²¹ The Court observed that "[w]hen a statute gives no clear indication of an extraterritorial application, it has none."²² In this context, the Court concluded that § 10(b) should be given "the effect its language suggests, however modest that may be."²³ The Court next criticized the conduct and effects tests developed by the lower courts as one that improperly extended the statute and caused a "proliferation of vaguely related variations" and, moreover, summarily rejected the test as the result of "judicial-speculation-made-law."²⁴

The Court also addressed the investors' argument that § 10(b) should apply because the fraudulent scheme was advanced by actions taken in the U.S. In rejecting this argument, the Court concluded that "the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case."²⁵

Ultimately, the Court held that the "focus of the Exchange Act is not upon the place where the deception originated, but upon purchases and sales of securities in the United States" and that "section 10(b) does not punish [all] deceptive conduct, but only deceptive conduct 'in connection with the purchase or sale of any security registered on a national securities exchange . . . .'"²⁶

With this language, the Court has created what has quickly become known in the lower courts as a bright-line "transaction test."²⁷ According to the test, § 10(b) only reaches manipulative or deceptive conduct in the sale of securities if "the purchase or sale is made in the United States, or involves a security listed on a domestic exchange."²⁸ In applying its newly articulated test to the facts in NAB, the Court noted that the securities at issue were not traded on U.S. exchanges and easily concluded, therefore, that none of the transactions could have occurred in the U.S.²⁹ Thus, the transactional test was not satisfied, and the court affirmed dismissal of the case for failure to state a claim.³⁰

III. DISTRICT COURTS APPLY MORRISON STRICTLY AND EXPANSIVELY: MORRISON MEANS WHAT IT SAYS

In quick succession, district courts applying Morrison's transaction test have issued opinions in which they have had no trouble turning away foreign investors' Exchange Act claims against foreign issuers. Moreover, lower courts applying the test have dismissed not only f-cubed cases, but also cases in which the plaintiffs are Americans who have purchased shares of foreign companies on foreign exchanges. In addition, a district court recently applied Morrison to limit the reach of the SEC. The following district court opinions demonstrate the difficulties that the Morrison test presents for plaintiffs attempting to survive a motion to dismiss for securities fraud claims involving securities purchased on non-U.S. exchanges. In fact, given these opinions, it is hard to imagine a case in which a plaintiff who purchased securities on a foreign exchange could ever survive a motion to dismiss.

A. Cornwell V. Credit Suisse Group ET AL.

In Cornwell v. Credit Suisse Group,³¹ an opinion issued just a month after the Morrison decision, Judge Marrero of the Southern District of New York decisively rejected assertions by plaintiffs that remnants of the conduct and effects tests have survived Morrison. The district court held that under the new transaction test articulated by the Supreme Court, § 10(b) of the Exchange Act and Rule 10b-5 do not apply to transactions on foreign exchanges, regardless of where the plaintiff is located.³²

In Cornwell, lead plaintiffs were American purchasers of Credit Suisse securities on either the Swiss Stock Exchange ("SWX") or on the NYSE in the form of American Depository Shares ("ADSs").³³ Though the parties agreed that the action could proceed as to those plaintiffs who purchased on the NYSE, defendants moved for a partial judgment on the pleadings to dismiss plaintiffs who purchased Credit Suisse shares on the SWX.³⁴ In concluding that American plaintiffs who purchased on the SWX must be dismissed, the district court noted that:

Though plaintiffs argued that that when the purchaser is American, and the investment decision was made or initiated from the U.S., § 10(b) should apply, the district court concluded that Morrison left no "back doors, loopholes or wiggle room" and "manifested an intent to weed the [conduct and effects] doctrine at its roots and replace it with a new bright-line transactional rule . . .."³⁶ Thus, any doubt that Morrison foreclosed the possibility that investors could access U.S. courts if their purchases were made on foreign exchanges was summarily dispensed with in Cornwell. Moreover, other district courts to review the issue have agreed with this analysis.³⁷

B. In Re Vivendi Universal S.A. Securities Litigation

In In re Vivendi Universal, S.A. Sec. Litig.,³⁸ a certified class included both foreign and American investors who purchased shares of Vivendi, a French corporation, on a foreign stock exchange, as well as foreign and American investors who purchased American Depository Receipts ("ADRs") on a U.S. exchange. Prior to the Supreme Court's announcement of the transaction test, the district court had allowed the Vivendi class to proceed with both foreign and domestic purchasers regardless of the location of the exchange on which the securities were purchased.³⁹ It did so after applying the conduct and effects tests and concluding that the conduct plaintiffs alleged to have occurred in New York was "'more than merely preparatory to the fraud . . . and directly caused losses to [foreign] investors abroad.'"⁴⁰ After the decision in Morrison came down, the district court instructed the parties to file additional briefs addressing Morrison's impact on the parties.⁴¹ The parties agreed that Morrison had no impact on the claims of ADR purchasers since Vivendi's ADRs were all listed and traded on the NYSE.⁴² But, as in Cornwell, the parties disagreed "over Morrison's impact on the claims of foreign and American purchasers of [Vivendi's] ordinary shares, transactions that necessarily took place on foreign exchanges."⁴³

With regard to foreign purchasers, plaintiffs constructed a more creative argument than was advanced in Cornwell. They argued that when ordinary shares of a foreign company are listed, but not traded on a domestic exchange as a result of the foreign issuer's domestic ADR program, such a company should not be subject to the Morrison holding.⁴⁴ The district court rejected this argument for two reasons. First, registration of a security with the Securities and Exchange Commission ("SEC") for purposes of a company's ADR program cannot be equated with registering a security for trading purposes on a U.S. exchange.⁴⁵ More importantly though, the district court concluded that the result plaintiffs sought could not possibly have been intended by the Morrison court because there was "no indication that the Court read Section 10(b) as applying to securities that may be cross-listed on domestic and foreign exchanges but where the purchase and sale does not arise from the domestic listing . . . [that is] for trading purposes," as opposed to just regulatory purposes.⁴⁶ In the district court's view, the argument plaintiffs asserted would have broadened the reach of § 10(b), not limited it, as was intended by the Court.⁴⁷

Plaintiffs next argued that Morrison does not require the dismissal of the claims of American purchasers of Vivendi's ordinary shares even though the ordinary shares were traded solely on foreign exchanges.⁴⁸ In response, the district court "join[ed] other lower courts that have rejected the argument that a transaction qualifies as a 'domestic transaction' under Morrison whenever the purchaser or seller resides in the United States, even if the transaction itself takes place entirely over a foreign exchange."⁴⁹ The district court further opined that while Morrison did not explicitly define the term "domestic transaction," there could "be little doubt that the phrase was intended to be a reference to the location of the transaction, not to the location of the purchaser . . . ."⁵⁰ Thus, the Vivendi court refused to allow the claims of both American and foreign purchasers to proceed where the purchases were made on foreign exchanges.

C. Elliot Assoc. V. Porsche Automobil Holding SE

In Elliot Assoc. v. Porsche Automobil Holding SE,⁵¹ plaintiffs alleged, among other things, that Porsche, its former Chief Executive Officer, and its former Chief Financial Officer violated § 10(b) of the Exchange Act by publicly misrepresenting their intent to take over Volkswagen ("VW"). Plaintiffs were hedge funds, which had alleged that once Porsche announced the extent of their holdings in VW, the price of VW shares rose rapidly, resulting in a massive "short-squeeze," forcing plaintiffs to cover their short positions at artificially high prices, and causing significant financial losses.⁵² Plaintiffs had allegedly obtained their short positions through security-based swap agreements that referenced VW ordinary shares and would have increased in value if the price of VW shares had declined.⁵³ Plaintiffs alleged that these swap agreements had been consummated in the United States and that they had taken all necessary steps to ensure that the agreements were covered by New York law.⁵⁴

Here, because there was no dispute that VW ordinary shares did not trade on a U.S. exchange, the court analyzed whether plaintiffs' swap agreements, which merely referenced the value of VW shares traded on foreign exchanges, constituted "domestic transactions" under Morrison.⁵⁵ The district court rejected plaintiffs argument that these were domestic transactions because to conclude otherwise would have been "inconsistent with the Supreme Court's intention in [Morrison] to curtail the extraterritorial application of § 10(b)."⁵⁶ The district court concluded that a ruling for plaintiffs "would extend extraterritorial application of the Exchange Act's antifraud provisions to virtually any situation in which one party to a swap agreement is located in the United States."⁵⁷ Thus, the district court refused to endorse "a rule that would make foreign issuers with little relationship to the U.S. subject to suits here simply because a private party in this country entered into a derivatives contract that reference[d] the foreign issuer's stock."⁵⁸ The Court ultimately held that "'domestic transaction[s] in other securities'" do not include "transactions in foreign-traded securities – or swap agreements that reference them – where only the purchaser is located in the United States."⁵⁹ Thus, once again, a district court reaffirmed the importance of Morrison by placing significant limitations on the application of the U.S. securities laws to non-U.S. transactions and issuers.

D. Securities and Exchange Commission v. Goldman Sachs & Co.

In Securities and Exchange Commission v. Goldman Sachs & Co.,⁶⁰ the SEC brought a civil action against Goldman Sachs & Co. ("Goldman Sachs") and a Goldman Sachs Vice President, Fabrice Tourre ("Tourre"), for violations of Section 10(b) of the Exchange Act and Section 17(a) of the Securities Act. Prior to the district court's decision, Goldman Sachs settled the SEC charges for $550 million.⁶¹ The SEC alleged that Tourre had committed securities fraud by making false and misleading statements in the marketing and sale of synthetic collateralized debt obligations ("CDOs") to both foreign and U.S.-based entities.⁶² Tourre moved to dismiss under Morrison on the basis that the complaint did not allege a securities transaction taking place in the U.S.⁶³

Analyzing Morrison, the district court noted that Morrison "was largely silent regarding how lower courts should determine whether a purchase or sale is made in the United States."⁶⁴ Therefore, the court looked to other post-Morrison case law that interpreted a "purchase" or "sale" under the Exchange Act to have occurred when the buyer or seller incurs an "irrevocable liability" to pay for or deliver a security.⁶⁵ Applying the "irrevocable liability" standard, the court rejected the SEC's argument that it could state a claim under 10(b) for Tourre's "U.S.-based conduct" because the SEC failed to plead "sufficient facts that allow[ed] the Court to draw the reasonable inference" that the foreign entities incurred irrevocable liability in the United States.⁶⁶ The court, therefore, dismissed the section 10(b) and Rule 10b-5 counts relating to the sale of CDOs to the foreign entities.⁶⁷

Notably, the court also applied the Morrison test to the SEC's claims under Section 17(a) of the Securities Act. Applying the same reasoning as used with the 10(b) claims, the court dismissed the Section 17(a) claims to the extent that they relate[d] to the "sale" of securities outside the U.S.⁶⁸ However, the court recognized that "Section 17(a), unlike Section 10(b), applies not only to the 'sale' but also to the 'offer ... of any securities,'" and the focus of the "offer" under the Securities Act is on the person or entity making the offer.⁶⁹ Because the SEC alleged that Tourre had made the offer "acting in and from New York," it sufficiently pled a violation of the "offer prong" of Section 17(a).⁷⁰ Therefore, the court denied Tourre's motion to dismiss related to the "offer" of the CDOs to the foreign entities.⁷¹

The Goldman decision demonstrates that courts will apply Morrison to limit claims by the SEC and claims under Section 17(a) of the Securities Act. However, with the passage of the Dodd-Frank Act, it is possible that the impact of Morrison on SEC suits could be significantly reduced.

IV. SECURITIES LITIGATION GOES GLOBAL

As a result of the Morrison decision it seems clear that foreign and American investors are largely foreclosed from accessing American courts to litigate claims against foreign issuers whose shares do not trade on a U.S. exchange. Thus, plaintiff-investors are likely to take the option of asserting a securities claim in a foreign forum far more seriously. Moreover, defendants looking for finality in the settlement of securities disputes may also seek a forum in which all investors who may have been impacted by the alleged harms are able to settle as one class via a binding agreement. Thus, both plaintiffs and defendants are looking to courts in foreign jurisdictions to lead the way in providing the best possible forum to litigate alleged securities frauds. While some foreign countries, notably the Netherlands and Canada, appear ready to accept and litigate multi-national securities fraud claims, other countries have historically resisted implementation of U.S.-style class actions and related contingency fee agreements for plaintiff lawyers and are instead wrestling with how best to reform their legal structures to allow securities actions to proceed. The following section provides an overview of recent legal developments in several select foreign jurisdictions, which, in the wake of Morrison, may make foreign forums more appealing to plaintiff-investors than they have been in the past.

A. U.S. Class Actions v. The World

As obstacles like Morrison have made it more difficult for plaintiff-investors to access U.S. courts, courts in foreign countries have begun opening their doors to class actions and collective or aggregate litigation. Because the substantive and procedural rules of U.S. class actions are intended facilitate class-based litigation, however, it is generally easier to form a class in the U.S. than in other countries.⁷² Procedural mechanisms vary greatly between U.S. and European-style class action systems. Key differences include: (1) whether the jurisdiction requires class members to "opt-in" or "opt-out" of a class; (2) use of contingency fees; and (3) loser pays or "pay your own way" rules.⁷³

According to one survey, twenty-one countries have adopted some type of class action, and at least six countries have some form of group proceeding in addition to or instead of a class action.⁷⁴ In countries wrestling with how to introduce a legal structure capable of addressing the needs of numerous injured parties, the debate is often centered around how to avoid constructing a class system resembling the American model. For example, some European leaders have publicly declared that they do not want to import what they view as a culture of litigation in the U.S.⁷⁵ Nevertheless, a small number of countries have adopted a class structure that approaches the U.S. model, including Australia, Canada, and the Netherlands.⁷⁶ Unsurprisingly, the countries whose class-litigation systems resemble ours have seen an increase in securities litigation and have resolved, via settlement, complex securities litigation claims involving worldwide classes.

B. Netherlands Class Actions

The Netherlands is becoming an increasingly popular venue for pursuing international securities class actions claims because of its procedures for both opt-in class action suits and court-approved, opt-out class-settlements. As discussed further below, courts in the Netherlands have recently used a class settlement procedure, known as WCAM, to create legally binding multi-national settlements of class action suits alleging securities fraud. Therefore, following Morrison, the Netherlands may become an ideal forum for both plaintiffs seeking relief on behalf of a worldwide class, and defendants seeking a binding opt-out resolution of claims involving worldwide investors.

1. Collective Actions

Class action suits, or "collective actions" in the Netherlands, are governed by Article 3:305a BW of the Dutch Civil Code (Burgerlijk Wetboek), which allows collective actions to be filed by a representative organization (or "foundation") with legal capacity to sue on behalf of a group of injured individuals or entities that have "opted-in" to the foundation.⁷⁷ The foundation, in accordance with its articles of association, files the collective action to protect the specific interests of the group of individuals it seeks to represent.⁷⁸ The interests of these individuals in the foundation must be sufficiently similar so that they can be dealt with in one declaratory action.⁷⁹

Collective actions may only seek declaratory or injunctive relief, not money damages.⁸⁰ Generally, collective actions seek a declaratory judgment that the defendant acted wrongfully against the members of the representative organization.⁸¹ Since only declaratory relief is sought, the foundation does not need to establish causation or damages.⁸² Moreover, any judgment in the collective action is only binding between the foundation and the defendants.⁸³ In order to obtain monetary relief, members of the foundation must bring individual suits and establish causation liability and damages.⁸⁴

While the Netherlands's legal system does not allow contingency fees to fund litigation, lawyers are allowed to enter into arrangements to receive "success fees" if they win.⁸⁵ In addition, the winning party is entitled to recover a certain amount of its costs based on a fixed scale.⁸⁶ Therefore, in collective actions, the foundation, or its members, could be liable to fund the litigation and certain additional costs if its case fails.

2. Fortis (AGEAS NV/BV) Collective Action

The collective action recently filed in Utrecht Civil Court against Fortis N.V., currently known as Ageas NV/BV, provides a good example of how collective actions work in the Netherlands.⁸⁷ This collective action was brought by the Stitching Investor Claims Against Fortis foundation ("Stitching foundation") and sought a declaratory judgment against Fortis for fraud in connection with Fortis' 2007 rights offering used to raise funds to acquire ABN AMRO.⁸⁸ The Stitching foundation alleges that Fortis and its lead underwriter misled investors regarding the financial health of the bank and its exposure to certain risky investments.⁸⁹ It estimates that investor losses could total tens of billions of Euros as shareholder value in the company fell over €25 billion in a twelve-month period between 2007 and 2008.⁹⁰

The Stitching foundation seeks to represent shareholders who participated in the September 2007 rights offering, purchased shares of Fortis between May 29, 2007 and October 14, 2008, or participated in the June 2008 Accelerated Book-Building Offer.⁹¹ As of January 2011, the foundation was composed of more than 140 institutional investors and over 2,000 individual claimants from Europe, the Middle East, Australia, and the United States.⁹² The foundation claims it is being funded "in general by a consortium of law firm[s], who are representing and advising large institutional investors" that are presumably members of the foundation.⁹³

The collective action by the Stitching foundation in the Netherlands was filed more than two years after a similar class action suit against Fortis was filed in the U.S. District Court for the Southern District of New York.⁹⁴ The U.S. lawsuit, which alleged securities violations based on nearly identical alleged facts, was dismissed in February 2010 by the district court for lack of subject-matter jurisdiction.⁹⁵ The district court applied the old "conduct and effects" tests based on Second Circuit precedents pre-dating Morrison⁹⁶ and held that the plaintiffs did not allege sufficient U.S.-based "conduct" or "effects" to confer jurisdiction.⁹⁷ In addition, the district court denied plaintiffs leave to amend their complaint.⁹⁸

C. Settlement of Collective Actions Under Dutch Law

The Act on Collective Settlement of Mass Damages (Wet collectieve afhandeling massaschade or "WCAM") provides a mechanism for a defendant and foundation to enter into a legally binding, "opt-out" settlement agreement that, with court approval, disposes of all claims related to an international group of injured individuals.⁹⁹ As with other collective actions, the foundation or association must, in accordance with its articles of association, represent the interests of a group of individuals that suffered losses from a similar cause. While WCAM settlements could stem from a collective action brought under the Dutch Civil Code, parties may also petition the court to approve a settlement before any suit has been filed.¹⁰⁰

Under WCAM, after parties reach a settlement, they may jointly petition the Amsterdam Court of Appeal to make the settlement legally binding on all potential plaintiffs that do not opt-out of the settlement after receiving proper notice.¹⁰¹ The settling parties must provide adequate notice of the proposed settlement to potential participants.¹⁰² However, there may be significant problems in obtaining enforcement of settlements pursuant to WCAM in other countries of the European Union.¹⁰³

WCAM provides that settlement agreements must contain certain information, including: (1) a description of the class and potential number of persons affected; (2) the compensation that will be awarded to those persons; (3) the eligibility requirements for individuals to receive compensation; and (4) an independent assessment of the compensation to be paid pursuant to the agreement.¹⁰⁴ WCAM also provides that the court shall reject the settlement if the amount of the compensation is not reasonable, considering the extent of the harm suffered, the ease and speed at which the compensation can be obtained, and the possible causes of the damages.¹⁰⁵ In addition, the court may reject the settlement if the number of class members is not sufficient—although courts have not set a minimum threshold.¹⁰⁶ Finally, following notice, WCAM allows for individuals to challenge or object to the settlement before the court's approval.¹⁰⁷

Following approval of the settlement by the Amsterdam Court of Appeal, WCAM allows for an affected person to "opt-out" of the settlement within three months.¹⁰⁸ The eligible individuals who have not opted-out may collect their settlement payment within the time frames specified in the settlement agreement—up to one year—or risk forfeiting their rights.¹⁰⁹

The parties to the WCAM settlement may also negotiate an attorneys' fee award to the lawyers representing the foundation.¹¹⁰ In the Shell Petroleum settlement, discussed below, the law firms representing the foundation and two Dutch pension funds (on behalf of non-U.S. investors in Shell) reportedly negotiated a fee of $47 million for their role in negotiating the settlement.¹¹¹

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Footnotes

1. Morrison v. Nat'l Australia Bank, Ltd., 547 F.3d 167, 172 (2d Cir. 2008); In re Vivendi Universal, S.A. Sec. Litig., No. 02 Civ. 05571 (RJH) (HBP), 2011 WL 590915 (S.D.N.Y. Feb. 17, 2011); In re Alstom SA Sec. Litig., 741 F. Supp. 2d 469 (S.D.N.Y. 2010); In re NovaGold Resources Inc. Sec. Litig., 629 F. Supp. 2d 272, 305 (S.D.N.Y. 2009); In re Elan Corp. Sec. Litig., No. 1:08-cv-08761-AKH, 2009 WL 1321167, at *2 (S.D.N.Y. May 11, 2009).

2. 130 S. Ct. 2869 (2010).

3. Morrison, 547 F.3d 167, 170 (2d Cir. 2008); Bersch v. Drexel Firestone, Inc., 519 F.2d 974, 985 (2d Cir. 1975); Cont'l Grain (Austl.) Pty. Ltd. v. Pacific Oilseeds, Inc., 592 F.2d 409, 410 (8th Cir. 1979); In re CP Ships Ltd. Sec. Litig., 578 F.3d 1306, 1313 (11th Cir. 2009); In re Alstom SA Sec. Litig., 741 F. Supp. 2d 469 (S.D.N.Y. 2010); In re Vivendi Universal, S.A. Sec. Litig., 381 F. Supp. 2d 158, 169-70 (S.D.N.Y. 2003).

4. S.E.C. v. Berger, 322 F.3d 187, 192 (2d Cir. 2003); see also Consol. Gold Fields PLC v. Minorco, S.A., 871 F.2d 252, 261-62 (2d Cir. 1989); Psimenos v. E.F. Hutton & Co., 722 F.2d 1041, 1045 (2d Cir. 1983); IIT v. Vencap, Ltd., 519 F.2d 1001, 1016 (2d Cir. 1975); Schoenbaum v. Firstbrook, 405 F.2d 200, 206 (2d Cir. 1968).

5. Berger, 322 F.3d at 193.

6. Id.

7. Morrison v. Nat'l Australia Bank Ltd., 130 S. Ct. 2869, 2881 (2010).

8. Robinson v. TCI/U.S. West Commc'ns Inc., 117 F.3d 900, 905 (5th Cir. 1997); Kauthar SDN BHD v. Sternberg, 149 F.3d 659, 666-667 (7th Cir. 1998).

9. See Zoelsch v. Arthur Andersen & Co., 824 F.2d 27, 31 (D.C. Cir. 1987).

10. SEC v. Kasser, 548 F.2d 109, 114 (3d Cir. 1977); see also Cont'l Grain (Austl.) Pty. Ltd. v. Pacific Oilseeds, Inc., 592 F.2d 409, 421 (8th Cir. 1979) (asserting jurisdiction over Exchange Act claims when the domestic conduct was "in furtherance of a fraudulent scheme and was significant with respect to its accomplishment."); Grunenthal GmbH v. Hotz, 712 F.2d 421, 425 (9th Cir. 1983) (adopting the Eighth Circuit's requirement).

11. 130 S. Ct. 2869 (2010).

12. In re Vivendi Universal, S.A. Sec. Litig., No. 02 Civ. 05571 (RJH) (HBP), 2011 WL 590915 (S.D.N.Y. Feb. 17, 2011); In re Alstom SA Sec. Litig., 741 F. Supp. 2d 469 (S.D.N.Y. 2010).

13. Morrison, 130 S. Ct. at 2875.

14. Id. at 2876.

15. Id. at 2875.

16. Id. at 2875-76.

17. See Morrison v. Nat'l Australia Bank Ltd., 547 F.3d 167, 176 (2d Cir. 2008).

18. Morrison, 130 S. Ct. at 2876-77.

19. Id. at 2877.

20. Id.

21. Id. at 2881.

22. Id. at 2878.

23. Id. at 2886.

24. Id. at 2880-81.

25. Id. at 2884.

26. Id. (internal citations omitted).

27. Id. at 2886; see also In re Vivendi Universal, S.A. Sec. Litig., No. 02 Civ. 05571 (RJH) (HBP), 2011 WL 590915 (S.D.N.Y. Feb. 17, 2011); Cornwell v. Credit Suisse Group, 729 F. Supp. 2d 620 (S.D.N.Y. 2010).

28. Morrison, 130 S. Ct. at 2886.

29. Id. at 2888.

30. Id.

31. See generally 729 F. Supp. 2d 620 (S.D.N.Y. 2010).

32. Id. at 622-23.

33. Id. at 621.

34. Id. at 621-22.

35. Id. at 625-26.

36. Id. at 623-24.

37. In re Vivendi Universal, S.A. Sec. Litig., No. 02 Civ. 05571 (RJH) (HBP), 2011 WL 590915 (S.D.N.Y. Feb. 17, 2011) (narrowing the plaintiff class to exclude those who purchased Vivendi common stock from non-U.S. exchanges); In re Royal Bank of Scotland Group PLC Sec. Litig., No. 09 Civ. 300 (DAB), 2011 WL 167749 (S.D.N.Y. Jan. 11, 2011) (dismissing claims of purchasers of RBS shares on a non-U.S. exchange); Elliott Assoc. v. Porsche Automobil Holding SE, 759 F. Supp. 2d 469 (S.D.N.Y. 2010) (dismissing claims of fraud in the purchase of security swap agreements despite the fact that the swaps did not trade on any exchanges and all of the steps to the swap agreement transactions were conducted in the United States); Plumbers' Union Local No. 12 Pension Fund v. Swiss Reinsurance Co., 753 F. Supp. 2d 166 (S.D.N.Y. 2010) (rejecting a claim involving the purchase of securities on a Swiss stock exchange from a U.S. location); In re Société Générale Sec. Litig., No. 08 Civ. 2495 (RMB), 2010 WL 3910286 (S.D.N.Y. Sept. 29, 2010) (finding no cause of action for U.S. purchasers of non-U.S. issued securities on the Euronext Paris stock exchange despite purchasing them while in the United States); In re Alstom SA Sec. Litig., 741 F. Supp. 2d 469 (S.D.N.Y. 2010) (dismissing claim where plaintiffs purchased non-U.S. issued shares on the Euronext exchange that were also available for purchase as ADRs on a U.S. exchange); Terra Sec. Asa Konkursbo v. Citigroup, Inc., 740 F. Supp. 2d 441 (S.D.N.Y. 2010) (rejecting claim where plaintiff had purchased a Norwegian securities firm's fund-linked notes that had been arranged by a U.S. bank for sale to U.S. investors); Sgalambo v. McKenzie, 739 F. Supp. 2d 453 (S.D.N.Y. 2010) (dismissing claim where plaintiff purchased Canadian issued shares on Toronto Stock Exchange despite registration of the non-U.S. issuer with the SEC and on the NYSE); Cornwell v. Credit Suisse Group, 729 F. Supp. 2d 620 (S.D.N.Y. 2010) (finding no cause of action for U.S.-based purchasers of Swiss issued shares traded on the Swiss Stock Exchange).

38. No. 02 Civ. 05571 (RJH) (HBP), 2011 WL 590915 (S.D.N.Y. Feb. 17, 2011).

39. Id. at *1.

40. Id. (internal citation omitted).

41. Id. at *4.

42. Id. at *7.

43. Id.

44. Id.

45. Id. at *8.

46. Id. at *9 (emphasis added).

47. Id.

48. Id.

49. Id. at *10 (citing Cornwell v. Credit Suisse Group, 729 F. Supp. 2d 620, 627 (S.D.N.Y. 2010); Harry Stackhouse v. Toyota Motor Co., No. 10 Civ. 0922 (DSF), 2010 WL 3377409, at *1 (C.D. Cal. July 16, 2010); In re Royal Bank of Scotland Group PLC Sec. Litig., No. 09 Civ. 300 (DAB), 2011 WL 167749, at *7-8 (S.D.N.Y. Jan. 11, 2011).

50. In re Vivendi, S.A. Sec. Litig., 2011 WL at *10.

51. 759 F. Supp. 2d 469, 470 (S.D.N.Y. 2010).

52. Id. at 471-73.

53. Id. at 470.

54. Id. at 471.

55. Id. at 474-75.

56. Id. at 474.

57. Id.

58. Id. at 476.

59. Id.

60. No. 10 Civ. 3229 (BSJ) (MHD), 2011 WL 2305988 (S.D.N.Y. June 10, 2011).

61. Id. at *1.

62. Id.

63. Id.

64. Id. at *8 (internal quotations omitted).

65. Id. (citing Plumbers' Union Local No. 12 Pension Fund v. Swiss Reinsurance Co., 753 F. Supp. 2d. 166, 177 (S.D.N.Y. 2010)).

66. Id. at *10-*11 (internal citations omitted). The district court noted that Tourre submitted trade confirmations relating to the foreign entities in an effort to show that the purchases were foreign transactions. However, because the SEC failed to plead sufficient facts, the court made no finding regarding the weight these confirmations should receive in the Morrison analysis. Id.

67. Id. at *10.

68. Id. at *14.

69. Id. at *15.

70. Id.

71. Id. The court allowed all Section 10(b) and Section 17(a) claims to proceed against Tourre relating to the offer and sale to the U.S.-based entity without any discussion of the Morrison factors. See generally id.

72. Elizabeth Cosenza, Paradise Lost: § 10(b) After Morrison v. National Australia Bank, 11 CHI. J. INT'L. L. 343, 370 (2011).

73 Id.

74. Deborah R. Hensler, The Future of Mass Litigation: Global Class Actions and Third-Party Litigation Funding, 79 GEO. WASH. L. REV. 306, 307 (2011).

75. See Gregory L. Fowler, Marc Shelley & Silvia Kim, Emerging Trends in International Litigation: Class Actions, Litigation Funding and Punitive Damages, 3 Nos. 2 DISP. RESOL. INT'L. 101, 106-07 (2009).

76. Hensler, supra note 67.

77. Burgerlijk Wetboek [BW] art. 3:305a (1).

78. BW art. 3:305a (1).

79. M.-J. van der Heijden, Class Actions, 14.3 ELECTRONIC J. COMP. L., Dec. 2010, at 6.

80. Hensler, supra note 67, at 312.

81. BW art. 3:305a(3).

82. M.-J. van der Heijden, supra note 72, at 6.

83. Id.

84. Id. at 6-7.

85. Hensler, supra note 67, at 311-312.

86. M.-J. van der Heijden, supra note 72, at 63; Hensler, supra note 67, at 312.

87. Press Release, PRE Newswire, International Investors Join Forces in Support of Lawsuit Against Fortis Over Massive Misrepresentation Ahead of Bank's Collapse in 2008 (Jan. 10, 2011) (on file with author).

88. Id.

89. The collective action also alleged claims against Merrill Lynch International as the lead underwriter of the offering.

90. Press Release, PRE Newswire, International Investors Join Forces in Support of Lawsuit Against Fortis Over Massive Misrepresentation Ahead of Bank's Collapse in 2008 (Jan. 10, 2011) (on file with author).

91. Participate: Who Should Participate?, STITCHING INVESTOR CLAIMS AGAINST FORTIS, http://investorclaimsagainstfortis.com/participate.php (last visited June 23, 2011).

92. Press Release, PRE Newswire, International Investors Join Forces in Support of Lawsuit Against Fortis Over Massive Misrepresentation Ahead of Bank's Collapse in 2008 (Jan. 10, 2011) (on file with author).

93. Frequently Asked Questions and Answers, investorclaimsagainstfortis.com, http://investorclaimsagainstfortis.com/frequently_question.php (last visited June 23, 2011).

94. See Copeland v. Fortis et al., 685 F. Supp. 2d 498 (S.D.N.Y. 2010).

95. Id. at 506.

96. Id. at 501.

97. Id. at 503.

98. Id. at 507.

99. BW art. 7:907. The WCAM Act is not limited to securities claims. In fact, it was originally designed to address the numerous tort cases relating to the DES drug.

100. Hensler, supra note 67, at 312; see also BW art. 3:305a(2) (requiring that the foundation, before filing a collective action, first attempt to reach a settlement with the defendants regarding the claims of its members).

101. BW art. 7:907; M.-J. van der Heijden, supra note 72, at 10.

102. Hensler, supra note 67, at 311.

103. See Council Regulation 44/2001, art. 58, 2000 O.J. (L 012) (EC). The Dutch settlement procedure is for an opt-out class action structure. Most EU countries have an opt-in class structure and thus may find the Dutch procedure to raise strong public policy concerns, bringing into question the enforceability of such Dutch settlements in EU countries.

104. BW art. 7:907.

105. BW art. 7:907.

106. M.-J. van der Heijden, supra note 72, at 8.

107. Hensler, supra note 67, at 311; M.-J. van der Heijden, supra note 72, at 12.

108. BW art. 7:908(2); Hensler, supra note 67, at 311.

109. BW art. 7:907(6).

110. Hensler, supra note 67, at 311.

111. Hensler, supra note 67, at 318.

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