ADRs

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Daniel J. Tyukody
Robert A. Horowitz

Ever since the U.S. Supreme Court’s March 2010 decision in Morrison v. National Australia Bank courts have struggled with application of the Morrison Court’s standard to securities lawsuits involving transactions in American Depository Receipts. As I noted in a prior blog post, one of the latest court rulings involving the application of Morrison to ADR transactions was the denial of the motion for class certification in the Toshiba case. In the following guest post, Daniel J. Tyukody and Robert A. Horowitz take a closer look that the class certification motion denial in Toshiba and consider the implications of the ruling.  Tyukody and Horowitz are Co-Chairs of Greenberg Traurig, LLP’s Securities Litigation Practice. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Here is the authors’ article.
Continue Reading Guest Post: The Elusive Search For Determining The Reach Of Section 10(b) Liability Following Morrison

As I have noted on this site (most recently here), many of the SPAC-related securities class action lawsuits filed in 2021 arose after the target company’s share price declined following a short-seller report. In the following guest post, Nessim Mezrahi, Stephen Sigrist, and Carolina Doherty review the extent to which plaintiffs’ lawyers generally are relying on short-seller research to try to substantiate fraud-on-the-market claims.  Mezrahi is cofounder and CEO, Sigrist is VP of data science, and Doherty is VP of business development at SAR. A version of this article previously was published on Law360. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading Guest Post: More Securities Class Actions May Rely On Short-Seller Data

I have been fortunate in recent years to be able to travel around the world and to speak to D&O insurance professionals in a wide variety of different countries. One recurring question I get in these meetings has to do with non-U.S. companies that have Level I American Depository Receipts (ADRs) trading in the U.S. The question is usually something along the lines of – “these Level 1 ADR companies don’t have U.S. securities litigation exposure, right?” This question always puzzles me, given the several high profile cases in recent years (discussed below) demonstrating that —  while there may be  an interesting question between sponsored and unsponsored ADRs — transactions in Level 1 ADRs certainly can be subject to the U.S. securities litigation.  
Continue Reading The U.S. Securities Litigation Exposure of Non-U.S. Companies with Level I ADRs

David Topol
maggie thomas
Margaret Thomas

In its June 2010 decision in Morrison v. National Australia Bank, the U.S. Supreme Court held that the U.S. securities laws do not apply extraterritorially. Since then, the lower U.S. federal district courts have struggled with applying Morrison in securities lawsuits involving foreign issuers. A host of recent U.S. lawsuits involving high-profile foreign companies has highlighted the important questions that can arise under Morrison. In the following guest post, David Topol and Margaret Thomas of the Wiley Rein law firm survey the post-Morrison case law, particularly as relates to lawsuits filed in U.S. courts under U.S. securities laws against companies domiciled outside the U.S. I would like to thank David and Maggie for their willingness to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is David and Maggie’s guest post.
Continue Reading Guest Post: Post-Morrison Application of U.S. Securities Laws to Foreign Issuers

gavelOne of the practical effects of the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank is that, as a result of the decision, it is more difficult to bring a class action in a U.S. court under the U.S. securities laws against a company based outside the U.S. The Court rejected earlier standards allowing U.S. courts to consider securities suits against non-U.S. companies if conduct relating to or effects of an alleged fraud took place in the U.S. Instead, the Court said that U.S. securities laws apply only to “transactions in securities listed on domestic exchanges, and domestic transactions in other securities.”

At the time of the Morrison decision, the expectation was that the number of U.S. securities class action lawsuits filed against non-U.S. companies would decline. As it has turned out however, the number of securities lawsuits filed against non-U.S. companies in each of the years since Morrison has been greater than the number filed in the years prior to the decision. Indeed, for the past several years, non-U.S. companies have been likelier to get hit with a securities class action lawsuit than domestic companies.
Continue Reading The Continuing Question of Morrison’s Applicability to ADR Transactions

toshibaIt has been nearly six years since the U.S. Supreme Court’s landmark 2010 decision in Morrison v. National Australia Bank, in which the Court restricted the ability of shareholders of non-U.S. companies who purchased their shares outside the U.S. to file securities fraud lawsuit in U.S. courts under the U.S. securities laws. In the intervening years, many of the issues questions that the Morrison decision presented have been resolved by the lower courts. However, one issue that has continued to percolate is the question of whether under Morrison the U.S. securities laws apply to transactions involving foreign companies’ unsponsored ADRs traded over-the-counter (OTC) in the U.S.

These issues were presented in the class action lawsuit filed in June 2015 in the Central District of California against Toshiba Corporation. The consolidated lawsuit purported to be filed on behalf of a class of investors who purchased unsponsored Toshiba American Depositary Shares (ADS) over-the-counter in the U.S., as well as on behalf of investors who purchased Toshiba shares on the Tokyo stock exchange. In an interesting May 20, 2016 opinion (here), Central District of California Judge Dean Pregerson held under Morrison that the U.S. securities laws do not apply to unsponsored OTC transactions in Toshiba’s ADSs. Judge Pregerson also granted the defendants’ motion to dismiss the claims of the investors who purchased Toshiba shares on the Tokyo stock exchange.
Continue Reading Under Morrison, U.S. Securities Laws Don’t Apply to Toshiba’s Unsponsored ADRs Purchased OTC in the U.S.

tescoIt has been over five years since the U.S. Supreme Court’s June 2010 decision in Morrison v. National Australia Bank restricted the ability of shareholders of non-U.S. companies who purchased their shares outside the U.S. to file securities fraud lawsuit in U.S. courts under the U.S. securities laws. During that five year period, the lower courts have sorted out many of the issues the Morrison decision raises. But one issue continues to percolate – that is, the question of Morrison’s effect on securities suits brought in U.S. court under U.S. law against non-U.S. companies by investors who purchased the companies’ unlisted ADRs over- the-counter in the U.S. The investor lawsuits filed in U.S. court just in the last few days by holders of unlisted Volkswagen ADRs raise this very issue.

The action filed in Southern District of New York in October 2014 by holders of unlisted ADRs of Tesco raise these same issues as well. The parties’ briefing in connection with the defendants’ motion to dismiss in the Tesco case present a detailed examination of the issues involved in the question of the applicability of Morrison to transactions in unlisted ADRs, as discussed below.
Continue Reading Tesco Securities Suit: Applicability of U.S. Securities Laws to Unlisted ADRs?