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

One of the enduring questions following in the wake of the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank is whether transactions in a non-U.S. company’s unsponsored Level I American Depository Receipts (ADRs) can be the subject of a damages action under the U.S. Securities laws. As I noted in a blog post at the time (here), a prior federal district court decision in the long-running Toshiba securities class action lawsuit established that a non-U.S. company whose Level I ADRs trade in the U.S. can be the subject of a U.S. securities suit – even if the ADRs are unsponsored. However, a recent decision at the class certification stage in the same Toshiba case suggests that while claimants may well be able to plead a claim based on trading in unsponsored Level I ADRs, the claimants may or may not be able to sustain the claim as a class action – or, at a minimum, the question of whether the claim can go forward as a class action can depend on minute details about how the named plaintiffs’ ADR transactions actually took place.
Continue Reading U.S. Securities Law Claims Based on Unsponsored Level I ADRs Cannot Proceed as Class Action

It has been ten years since the U.S. Supreme Court issued its landmark opinion in Morrison v. National Australia Bank, in which the Court clarified that the U.S. securities laws applies only to securities transactions that take place in the United States, either on an exchange or otherwise. While the decision has had a significant impact on a wide range of cases, it has not yet “brought the predictability and consistency it promised” and it has “spawned a number of unintended consequences,” according to a recent memo from the Cleary Gottlieb firm. The September 24, 2020 memo, entitled “Foreign Securities Class Actions 10 Years After Morrison,” which details three specific problem areas that have emerged as the lower courts have interpreted and applied Morrison over the last decade, can be found here.
Continue Reading The Impact of the Morrison Decision After Ten Years

As discussed at length here, in January 2020, the U.S. District Court for the Central District of California ruled that the U.S. securities class action lawsuit brought against Toshiba by investors who had purchased the company’s unsponsored Level I American Depository Receipts (ADRs) in the U.S. can proceed. As discussed in the following guest post from the Norton Rose Fulbright law firm and AIG, this ruling has important implications for non-U.S. companies whose ADRs trade in the U.S., as well as for companies contemplating issuing ADRs in the U.S. For more background on the risk of securities class actions and public companies via ADRs please see AIG’s earlier white paper on the subject. I would like to thank Norton Rose Fulbright and AIG 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. The memo follows below.
Continue Reading Guest Post: Post-Toshiba U.S. Securities Litigation Risk for Non-U.S. Companies

In the course of my various foreign travels, I have had occasion to speak to many underwriters and brokers who place D&O insurance for non-U.S. companies whose American Depository Receipts (ADRs) trade in the U.S. There is a pervasive, inexplicable, and mistaken belief among some underwriters and brokers that companies whose Level I ADRs trade in the U.S cannot be subject to a U.S. securities suit. These individuals persist in this error despite the Toshiba case, in which the Ninth Circuit reversed a district court’s dismissal of the securities suit brought by investors in Toshiba’s unsponsored Level I ADRs. Because of the persistence of the error about the potential liability of companies with ADRs trading in the U.S., it is mandatory for every single underwriter or broker who places D&O insurance for a non-U.S. ADR company to read the latest court ruling in the Toshiba case. As discussed below, the U.S. securities lawsuit brought against Toshiba brought by purchasers of the company’s unsponsored Level I ADRs is going forward. 
Continue Reading U.S. Securities Suit of Toshiba’s Unsponsored ADR Investors to Proceed – Including Even Their Japanese Law Claims

As I noted in a recent post, the securities class action lawsuit pending against Toshiba raises the question of whether or not the U.S. securities laws apply to transactions in unsponsored American Depository Receipts (ADRs). The company’s petition to the U.S. Supreme Court posed the larger question of whether there are exceptions to the second-prong of the Morrison standard holding that the U.S. securities laws apply to domestic transactions in securities. A number of organizations and even governments filed amicus briefs urging the Court to take up the case. However, in a June 24, 2019, the Court denied the company’s petition, sending the case back to the lower courts and, as discussed below, leaving behind several unanswered questions.
Continue Reading U.S. Supreme Court Denies Cert in Toshiba Unsponsored ADRs Securities Suit

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