Is Canada the New Shangri-La of Global Securities Class Actions?
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lower courts have interpreted the case strictly to foreclose the claims of
foreign purchasers who do not satisfy either the letter or spirit of
Morrison.
Post-Morrison, it seems that the United States is no longer the
haven for global securities litigation that it had been for decades prior.
Just as the United States was exiting the global securities litigation
game, Canada was entering it. A statutory cause of action for
misrepresentation in connection with the primary offering of securities has
been available in Canada
since the 1970’s.
However given fee-shifting
enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-
Frank Act”). Section 929P(b) of the Dodd-Frank Act amended the Exchange Act to
essentially reinstate the “conduct and effects” test as it concerns actions brought by the SEC.
Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, §
929P(b), 124 Stat. 1376, 1841–49 (2010); see generally Genevieve Beyea, Morrison v.
National Australia Bank and the Future of Extraterritorial Application of the U.S. Securities
Laws, 72 OHIO ST. L.J. 537, 538 (2011) (noting that the amendment “seems intended to undo
the Court’s opinion in Morrison, at least as far as actions brought by the Securities and
Exchange Commission” but that such amendment “as drafted may be ineffective, due to a
procedural aspect of the Supreme Court’s holding in Morrison.”). Further, Section 929Y(a)
of the Dodd-Frank Act directed the SEC to solicit public commentary and to conduct a study
to determine whether, and to what extent, the Exchange Act should regulate transnational
securities fraud cases. For the SEC’s report, see SEC, STUDY ON THE CROSS-BORDER SCOPE
OF THE PRIVATE RIGHT OF ACTION UNDER SECTION 10(B) OF THE SECURITIES EXCHANGE ACT
OF 1934 (2012).
See, e.g., In re Royal Bank of Scotland Group PLC Sec. Litig., 765 F.Supp.2d 327
(S.D.N.Y. 2011); Cornwell v. Credit Suisse Group, 729 F.Supp.2d 620 (S.D.N.Y. 2010); In
re Société Générale Sec. Litig., No. 1:08-cv-02495 (RMB), 2010 WL 3910286 (S.D.N.Y.
Sept. 29, 2010). For discussion of the state of U.S. law post-Morrison, see Beyea, supra
note 46, at 538; George Conway et al., Harmony and Dissonance in Extraterritorial
Regulation, AM. SOC’Y 105TH ANNUAL MEETINGS PROCEEDINGS (2011); Elizabeth Cosenza,
Paradise Lost: § 10(B) After Morrison v. National Australia Bank, 11 CHI. J. INT’L L. 343
(2011); Roger W. Kirby, Access to U.S. Courts By Purchasers of Foreign Listed Securities
in the Aftermath of Morrison v. National Australia Bank Ltd., 7 HASTINGS BUS. L.J. 223
(2011); Richard Painter et al., When Courts and Congress Don’t Say What they Mean: Initial
Reactions to Morrison v. National Australia Bank and to the Extraterritorial Jurisdiction
Provisions of the Dodd-Frank Act, 20 MINN. J. INT’L L. 1 (2011); Silberman, supra note 1.
The mid-1990’s also saw the introduction of heightened pleading requirements in U.S.
securities litigation. See CHARLES ALAN WRIGHT ET AL., 5A FEDERAL PRACTICE &
PROCEDURE § 1301.1 (3d ed. 1998) (“As a result of the enactment of the [Private Securities
Litigation Reform Act of 1995], if a complaint asserts that the defendant made misleading
statements or omissions in an action under the securities law, the pleader must specify each
statement alleged to have been misleading and the reason or reasons why the statement is
misleading. The statute also specifies that if an allegation regarding the statement or
omission is made on information and belief, the complaint must state with particularity all
facts on which the pleader’s belief is formed. Finally, in a securities action in which the
plaintiff must establish that the defendant acted with a ‘particular state of mind,’ which in
most instances is a reference to the defendant’s having acted with ‘scienter,’ the plaintiff
must ‘state with particularity’ facts giving ‘rise to a strong inference’ that the defendant
acted with the required state of mind.”).
Note that in Canada securities are regulated provincially, not federally (as they