Contributions

Necessary or Sufficient? The Applicability of the Exchange Act to Domestic Securities Transactions Under Morrison v. National Australia Bank Ltd.

by William Bris­tow1

Today, more than ever, secu­ri­ties trad­ing is a glob­al indus­try. Accord­ing­ly, Amer­i­can courts are increas­ing­ly called upon to deter­mine when sec­tion 10(b) of the Secu­ri­ties Exchange Act of 1934, the Act’s gen­er­al anti-fraud pro­vi­sion, applies to trans­ac­tions involv­ing for­eign ele­ments.2 In Mor­ri­son v. Nation­al Aus­tralia Bank Ltd.,3 the Supreme Court held that Sec­tion 10(b) only applies to domes­tic secu­ri­ties trans­ac­tions because the Act does not apply extrater­ri­to­ri­al­ly. How­ev­er, Mor­ri­son did not explain whether the exis­tence of a domes­tic secu­ri­ties trans­ac­tion is a suf­fi­cient require­ment for the appli­ca­tion of Sec­tion 10(b) or mere­ly a nec­es­sary require­ment. Since Mor­ri­son, a cir­cuit split has emerged, with the Sec­ond Cir­cuit hold­ing that a domes­tic trans­ac­tion is nec­es­sary but not suf­fi­cient to per­mit appli­ca­tion of Sec­tion 10(b), and the Ninth Cir­cuit hold­ing that a domes­tic trans­ac­tion is suf­fi­cient in itself to per­mit appli­ca­tion of Sec­tion 10(b).

This arti­cle will argue that the exis­tence of a domes­tic secu­ri­ties trans­ac­tion is suf­fi­cient by itself to per­mit appli­ca­tion of Sec­tion 10(b) for sev­er­al rea­sons. First, this is con­sis­tent with the most straight­for­ward read­ing of Mor­ri­son. Sec­ond, a con­trary stan­dard would be incom­pat­i­ble with Mor­ri­son’s aims of pre­dictabil­i­ty and uni­for­mi­ty. Third, Mor­ri­son resolved poten­tial comi­ty con­cerns, and the law of per­son­al juris­dic­tion may serve to pro­tect for­eign cor­po­ra­tion from exces­sive liability.

* * * * *

Dur­ing the New Deal, Con­gress passed the Secu­ri­ties Act of 1933, which “reg­u­lates ini­tial dis­tri­b­u­tions of secu­ri­ties,” and the Secu­ri­ties Exchange Act of 1934, which “for the most part reg­u­lates post-dis­tri­b­u­tion trad­ing,” to cre­ate a reg­u­la­to­ry scheme for the secu­ri­ties indus­try.4 Sec­tion 10(b) is the “gen­er­al antifraud pro­vi­sion” of the 1934 Act.5 It pro­hibits, “in con­nec­tion with the pur­chase or sale of any secu­ri­ty reg­is­tered on a nation­al secu­ri­ties exchange or any secu­ri­ty not so reg­is­tered, or any secu­ri­ties-based swap agree­ment,” the use or employ­ment of “any manip­u­la­tive or decep­tive device or con­trivance in con­tra­ven­tion of such rules and reg­u­la­tions as the Com­mis­sion may pre­scribe as nec­es­sary or appro­pri­ate in the pub­lic inter­est or for the pro­tec­tion of investors.”6 Sec­tion 10(b) is enforced by both pri­vate par­ties and the gov­ern­ment under Secu­ri­ties and Exchange Com­mis­sion (“SEC”) Rule 10b‑5, which states:

It shall be unlaw­ful for any per­son, direct­ly or indi­rect­ly, by the use of any means or instru­men­tal­i­ty of inter­state com­merce, or of the mails or of any facil­i­ty of any nation­al secu­ri­ties exchange,

(a) To employ any device, scheme, or arti­fice to defraud,

(b) To make any untrue state­ment of a mate­r­i­al fact or to omit to state a mate­r­i­al fact nec­es­sary in order to make the state­ments made, in the light of the cir­cum­stances under which they were made, not mis­lead­ing, or

(c) To engage in any act, prac­tice, or course of busi­ness which oper­ates or would oper­ate as a fraud or deceit upon any per­son, in con­nec­tion with the pur­chase or sale of any secu­ri­ty.7

The Supreme Court has held that Sec­tion 10(b) and Rule 10b‑5 imply a pri­vate right of action and thus may be enforced by both pri­vate plain­tiffs and by the SEC, although only the SEC may pros­e­cute claims against sec­ondary vio­la­tors, oth­er­wise known as “aiders and abet­tors.”8

In Mor­ri­son v. Nation­al Aus­tralia Bank Ltd., the Supreme Court held that Sec­tion 10(b) only applies to domes­tic secu­ri­ties trans­ac­tions because the Act does not apply extrater­ri­to­ri­al­ly.9 The Court explained that under the “pre­sump­tion against extrater­ri­to­ri­al­i­ty,” a canon of con­struc­tion, a statute does not apply extrater­ri­to­ri­al­ly unless “Con­gress clear­ly expressed” an “affir­ma­tive inten­tion” to that effect.10 When a statute does not apply extrater­ri­to­ri­al­ly, it may only be applied to domes­tic appli­ca­tions of the statute’s “focus.”11 Writ­ing for the major­i­ty, Jus­tice Scalia explained that Sec­tion 10(b)’s “focus” is “not upon the place where the decep­tion orig­i­nat­ed, but upon pur­chas­es and sales of secu­ri­ties in the Unit­ed States.”12 Thus, Sec­tion 10(b) and Rule 10b‑5 only apply to domes­tic secu­ri­ties trans­ac­tions and may not apply to secu­ri­ties trans­ac­tions occur­ring out­side of the Unit­ed States.

In Absolute Activist Val­ue Mas­ter Fund Ltd. v. Fice­to, the Sec­ond Cir­cuit held that a secu­ri­ties trans­ac­tion is “domes­tic” if “irrev­o­ca­ble lia­bil­i­ty is incurred or title pass­es with­in the Unit­ed States.”13 The Supreme Court has not yet artic­u­lat­ed a pre­cise def­i­n­i­tion for “domes­tic trans­ac­tion,” but the courts of appeals have gen­er­al­ly agreed upon the def­i­n­i­tion pro­vid­ed by the Sec­ond Cir­cuit.14 Under that inter­pre­ta­tion, the law is fair­ly clear with respect to “tra­di­tion­al” secu­ri­ties, such as a corporation’s com­mon stock sold on a nation­al exchange. If a share of a cor­po­ra­tion is sold and irrev­o­ca­ble lia­bil­i­ty is incurred or title pass­es with­in the Unit­ed States, the pur­chas­er may have a Sec­tion 10(b) claim assum­ing that all oth­er ele­ments can be proved.

In Mor­ri­son, the Court did not clear­ly state whether the domes­tic trans­ac­tion require­ment was a nec­es­sary con­di­tion or a suf­fi­cient con­di­tion. Thus, a cir­cuit split has devel­oped between the Sec­ond Cir­cuit and Ninth Cir­cuit as to whether the exis­tence of a domes­tic secu­ri­ties trans­ac­tion is suf­fi­cient by itself to per­mit appli­ca­tion of Sec­tion 10(b),15 or whether a court may decline to apply Sec­tion 10(b) to such a trans­ac­tion if it is “so pre­dom­i­nant­ly for­eign as to be imper­mis­si­bly extrater­ri­to­r­i­al.”16 Thus, the effect of Mor­ri­son is uncer­tain with respect to domes­tic finan­cial instru­ments that are val­ued based on the price of a secu­ri­ty that is not itself sold in the Unit­ed States.17

In Park­cen­tral Glob­al HUB Ltd. v. Porsche Auto­mo­bile Hold­ings SE, the Sec­ond Cir­cuit held that the exis­tence of a domes­tic secu­ri­ties trans­ac­tion is a nec­es­sary con­di­tion for the appli­ca­tion of Sec­tion 10(b), but that it is not suf­fi­cient to per­mit appli­ca­tion of Sec­tion 10(b) by itself. Specif­i­cal­ly, the court held that Sec­tion 10(b) did not apply to a claim aris­ing out of a domes­tic trans­ac­tion because it was “so pre­dom­i­nant­ly for­eign as to be imper­mis­si­bly extrater­ri­to­r­i­al.”18 Park­cen­tral involved “secu­ri­ties-based swap agree­ments,” where each “swap” was a “pri­vate con­tract [exchang­ing] cash flows that depend on the price of a ref­er­ence secu­ri­ty.”19 The Sec­ond Cir­cuit held that the exis­tence of a domes­tic secu­ri­ties trans­ac­tion is not suf­fi­cient in itself because “the [Mor­ri­son] Court did not say that such a trans­ac­tion was suf­fi­cient.”20 The court believed that to hold oth­er­wise “would inevitably place § 10(b) in con­flict with the reg­u­la­to­ry laws of oth­er nations.”21 But this con­clu­sion is dif­fi­cult to rec­on­cile with the “clear test” adopt­ed by the Court in Mor­ri­son.22

In con­trast, in Stoyas v. Toshi­ba Corp., the Ninth Cir­cuit flat­ly reject­ed Park­cen­tral, hold­ing that the exis­tence of a domes­tic secu­ri­ties trans­ac­tion is suf­fi­cient in itself for the appli­ca­tion of Sec­tion 10(b).23 Stoyas involved Amer­i­can Deposi­tary Receipts (“ADRs”), which “are nego­tiable cer­tifi­cates issued by a Unit­ed States deposi­tary insti­tu­tion, typ­i­cal­ly banks, [that] rep­re­sent a ben­e­fi­cial inter­est in, but not legal title of, a spec­i­fied num­ber of shares of a non-Unit­ed States com­pa­ny. The deposi­tary insti­tu­tion itself main­tains cus­tody over the for­eign company’s shares.”24

* * * * *

The Ninth Cir­cuit cor­rect­ly reject­ed Park­cen­tral because it is con­tra­dic­to­ry to both the text of Mor­ri­son and Sec­tion 10(b), as well as to the intent of Mor­ri­son. Mor­ri­son did not specif­i­cal­ly address whether the exis­tence of a domes­tic secu­ri­ties trans­ac­tion was a nec­es­sary require­ment or a suf­fi­cient require­ment for the appli­ca­tion of Sec­tion 10(b). How­ev­er, it did explain that the “focus” of Sec­tion 10(b) is on the loca­tion of a par­tic­u­lar trans­ac­tion and not on the loca­tion of the alleged­ly false state­ments or mis­rep­re­sen­ta­tions.25 More­over, the text of the Exchange Act broad­ly applies to the sale of “any secu­ri­ty reg­is­tered on a nation­al secu­ri­ties exchange or any secu­ri­ty not so reg­is­tered” and is facial­ly incom­pat­i­ble with Park­cen­tral’s hold­ing.26 More­over, sub­se­quent case law sug­gests that, under the pre­sump­tion against extrater­ri­to­ri­al­i­ty more broad­ly, a domes­tic appli­ca­tion of a statute’s “focus” is both a nec­es­sary and suf­fi­cient con­di­tion.27

Mor­ri­son’s hold­ing was an attempt to cre­ate uni­for­mi­ty and pre­dictabil­i­ty with a clear rule.28 Park­cen­tral’s stan­dard is to the con­trary.29 For decades pri­or to Mor­ri­son, the Sec­ond Cir­cuit used the “con­duct and effects” test to deter­mine whether a statute could apply extrater­ri­to­ri­al­ly.30 Gen­er­al­ly, the test asked: “whether the wrong­ful con­duct had a sub­stan­tial effect in the Unit­ed States or upon Unit­ed States cit­i­zens,” or “whether the wrong­ful con­duct occurred in the Unit­ed States.”31 Mor­ri­son reject­ed this regime, crit­i­ciz­ing it as “judi­cial-spec­u­la­tion-made-law,”32 and as “a col­lec­tion of tests for divin­ing what Con­gress would have want­ed, com­plex in for­mu­la­tion and unpre­dictable in appli­ca­tion.”33 In con­trast, Jus­tice Scalia explained that the new “trans­ac­tion­al test” would serve as a “clear test” in the future.34 How­ev­er, under Park­cen­tral, a court must engage in a rig­or­ous, fact-inten­sive inquiry to deter­mine whether a claim is “imper­mis­si­bly extrater­ri­to­r­i­al.”35

In Giun­ta v. Ding­man, the Sec­ond Cir­cuit ana­lyzed a secu­ri­ties trans­ac­tion with a set of both domes­tic and for­eign con­tacts. The court held that Sec­tion 10(b) could apply to a domes­tic trans­ac­tion with an entire­ly for­eign busi­ness because the com­plaint nonethe­less alleged “sub­stan­tial domes­tic con­tacts” relat­ed to the trans­ac­tion.36 Ding­man sug­gests that the Park­cen­tral test prop­er­ly focus­es on the trans­ac­tion, rather that the nation­al­i­ty of the par­ties or the loca­tion of the alleged false or mis­lead­ing state­ment.37 How­ev­er, Ding­man also demon­strates that Park­cen­tral will neces­si­tate courts to decide many cas­es in order to clar­i­fy the line between pre­dom­i­nant­ly domes­tic and “pre­dom­i­nant­ly for­eign as to be imper­mis­si­bly extrater­ri­to­r­i­al,”38 and thus is incon­sis­tent with Mor­ri­son.

In the inter­im, this uncer­tain­ty will make it oner­ous for cor­po­ra­tions to struc­ture their affairs. For exam­ple, imag­ine the sit­u­a­tion of a corporation’s gen­er­al coun­sel who must deter­mine the scope of her client’s poten­tial § 10(b) lia­bil­i­ty. Under Toshi­ba, she may rea­son­ably fore­cast lia­bil­i­ty by look­ing to trans­ac­tion loca­tions. While there may be some uncer­tain­ty, she can gen­er­al­ly pro­vide reli­able advice. In con­trast, under Park­cen­tral, she can­not fore­cast lia­bil­i­ty with­out expend­ing time and mon­ey inves­ti­gat­ing the facts of each indi­vid­ual trans­ac­tion. Even then, she can­not pro­vide her client with any degree of cer­tain­ty in any trans­ac­tion with any for­eign ele­ments because she can­not pre­dict whether those ele­ments will ren­der a claim “pre­dom­i­nant­ly for­eign.”39

Con­cur­ring in Park­cen­tral, Judge Lev­al sug­gest­ed that the analy­sis of whether “a par­tic­u­lar set of transna­tion­al facts would be imper­mis­si­bly extrater­ri­to­r­i­al has much in com­mon with the choice-of-law ques­tion that aris­es when a court must deter­mine which state or nation’s law most appro­pri­ate­ly gov­erns a case involv­ing inter­state or transna­tion­al facts.”40 Refer­ring to the mid-twen­ti­eth cen­tu­ry rev­o­lu­tion in the field of con­flict-of-laws, Judge Lev­al went on to state that:

Over the last half-cen­tu­ry, at least in the absence of a bind­ing con­trac­tu­al selec­tion by the par­ties, courts have over­whelm­ing­ly aban­doned bright-line tests in favor of more sub­tle and flex­i­ble inquiries for such ques­tions because their com­plex­i­ty does not lend itself to reli­able analy­sis by a bright-line test. [col­lect­ing cas­es].41

How­ev­er, it seems unlike­ly that Mor­ri­son’s crit­i­cism of “judi­cial-spec­u­la­tion-made-law,”42 and its acknowl­edge­ment that its hold­ing would pro­vide a “clear test,”43 could be under­stood as any­thing oth­er than a call for a bright-line rule.

The Park­cen­tral court’s comi­ty con­cern that hold­ing to the con­trary “would inevitably place § 10(b) in con­flict with the reg­u­la­to­ry laws of oth­er nations”44 is prob­a­bly over­stat­ed. A plain­tiff who sues under Sec­tions 10(b) and Rule 10b‑5 must also prove all oth­er ele­ments of their claim. Per­haps most impor­tant­ly, in order for a mis­rep­re­sen­ta­tion or oth­er pro­hib­it­ed con­duct to give rise to lia­bil­i­ty, there must be “a con­nec­tion between the [con­duct] and the pur­chase or sale of a secu­ri­ty.”45 This could be dif­fi­cult to prove in a case involv­ing the kind of finan­cial instru­ments that may have lit­tle to do with the asso­ci­at­ed com­pa­ny, such as an unspon­sored ADR.46 If a plain­tiff alleges that a for­eign cor­po­ra­tion made a mis­rep­re­sen­ta­tion in the sale of an unspon­sored ADR, they may be unable to demon­strate that the corporation’s mis­con­duct was con­nect­ed to the “pur­chase or sale of a secu­ri­ty” because the cor­po­ra­tion may have had lit­tle con­nec­tion with the ADR in the first place.47 On the oth­er hand, if a cor­po­ra­tion is involved in the cre­ation of an ADR, either because it is spon­sored or because they are suf­fi­cient­ly con­nect­ed in some way, and engages in con­duct oth­er­wise suf­fi­cient to vio­late the statute, then comi­ty issues are unlike­ly. This is because Sec­tion 10(b) can only apply to the ADRs under Mor­ri­son and a for­eign reg­u­la­to­ry regime will be free to reg­u­late the cor­po­ra­tion with respect to any secu­ri­ties issued in that country.

Fur­ther­more, Park­cen­tral’s comi­ty jus­ti­fi­ca­tion is pos­si­bly fore­closed by Mor­ri­son. Comi­ty con­sid­er­a­tions tend to belong to the relat­ed body of law known as “juris­dic­tion to prescribe”—the author­i­ty of a nation-state to extend its law to par­tic­u­lar con­duct, per­sons, prop­er­ty, or offens­es.48 Adding an “imper­mis­si­bly extrater­ri­to­r­i­al” analy­sis might be improp­er because Mor­ri­son poten­tial­ly resolved comi­ty con­cerns by con­clud­ing that Sec­tion 10(b) only applies to domes­tic trans­ac­tions,49 and because when “com­bin­ing oth­er comi­ty lim­i­ta­tions with the pre­sump­tion against extrater­ri­to­ri­al­i­ty, a court should take care not to dou­ble-count the legit­i­mate inter­ests of oth­er states.”50 In oth­er words, states should con­sid­er comi­ty con­cerns but need not accom­mo­date them twice. Regard­less, a judi­cial­ly cre­at­ed stan­dard to sat­is­fy comi­ty inter­ests, on top of the pre­sump­tion against extrater­ri­to­ri­al­i­ty, is emblem­at­ic of the judi­cial method­ol­o­gy that the Court took to task in Mor­ri­son.51

Final­ly, the law of per­son­al juris­dic­tion may pro­tect for­eign cor­po­ra­tions from exces­sive lia­bil­i­ty in the con­text of cross-bor­der secu­ri­ties trad­ing. Under the Four­teenth Amend­ment, a court can­not ren­der a judg­ment with­out per­son­al juris­dic­tion over the defen­dant.52 A forum has spe­cif­ic juris­dic­tion when “the lit­i­ga­tion results from alleged injuries that ‘arise out of or relate to’” the defendant’s forum-direct­ed activ­i­ties.53 Spe­cif­ic juris­dic­tion can­not be cre­at­ed by the “uni­lat­er­al activ­i­ty” of a third par­ty.54 Exer­cise of spe­cif­ic juris­dic­tion must be rea­son­able and “bur­dens placed upon one who must defend one­self in a for­eign legal sys­tem … have sig­nif­i­cant weight in assess­ing … rea­son­able­ness.”55 Alter­na­tive­ly, a forum has gen­er­al juris­dic­tion over a cor­po­rate defen­dant “only when [its] affil­i­a­tions with the [forum] are so con­stant and per­va­sive ‘as to ren­der [it] essen­tial­ly at home.’”56 Usu­al­ly these loca­tions will only be a cor­po­rate defendant’s “place of incor­po­ra­tion [or] prin­ci­pal place of busi­ness .…”57 Mor­ri­son was decid­ed dur­ing the era of expan­sive “doing busi­ness” gen­er­al juris­dic­tion which the Court has since put to a close.58

Amer­i­can courts may lack spe­cif­ic juris­dic­tion when a for­eign cor­po­ra­tion was unaware of the domes­tic trans­ac­tion because puta­tive juris­dic­tion would have been the result of the plaintiff’s “uni­lat­er­al activ­i­ty,”59 and because the exer­cise of juris­dic­tion may be unrea­son­able.60 Courts will like­ly lack gen­er­al juris­dic­tion because it is more dif­fi­cult to prove that for­eign defen­dants are “at home” in an Amer­i­can forum.61

Thus, for­eign cor­po­ra­tions are pro­tect­ed from being unfair­ly dra­gooned into an Amer­i­can court by the cre­ation of a secu­ri­ty by a third par­ty because Mor­ri­son instructs that the only rel­e­vant domes­tic con­tacts are those with respect to the secu­ri­ties trans­ac­tion,62 sub­stan­tive secu­ri­ties law requires that the cor­po­ra­tion be con­nect­ed with the pur­chase or sale,63 and per­son­al juris­dic­tion law bars juris­dic­tion based on the uni­lat­er­al act of a third par­ty64 or based sole­ly on “doing busi­ness” in the Unit­ed States.65

Under a straight­for­ward read­ing of Mor­ri­son, a domes­tic secu­ri­ties trans­ac­tion is suf­fi­cient to per­mit appli­ca­tion of Sec­tion 10(b) and thus Rule 10b‑5. This read­ing of Mor­ri­son is but­tressed by its aims of pre­dictabil­i­ty and uni­for­mi­ty. Final­ly, nei­ther comi­ty con­cerns nor fair­ness con­cerns jus­ti­fy an addi­tion­al lev­el of extrater­ri­to­ri­al­i­ty analy­sis in Sec­tion 10(b) cas­es. Con­gress can amend Sec­tion 10(b) if it so choos­es, but courts should not do Con­gress’ job for it.

1. William Bris­tow is a J.D. Can­di­date (2021) at New York Uni­ver­si­ty School of Law. This piece is a com­men­tary on the 2020 prob­lem at the Kauf­man Secu­ri­ties Law Moot Court Com­pe­ti­tion in New York, NY, host­ed by Ford­ham Uni­ver­si­ty School of Law. The issue in the prob­lem was whether a domes­tic secu­ri­ties trans­ac­tion is itself suf­fi­cient to per­mis­si­bly apply Sec­tion 10(b) of the Secu­ri­ties Exchange Act of 1934. The views expressed in this arti­cle do not nec­es­sar­i­ly rep­re­sent the views of the author on this point of law. Rather, this arti­cle is a dis­til­la­tion of one side of the argu­ments made by the team at the Kauf­man Secu­ri­ties Law Moot Court Competition.

2. See 15 U.S.C. § 78j(b) (“Sec­tion 10(b)”).

3. 561 U.S. 247, 265 (2010).

4. Cent. Bank of Den­ver, N.A. v. First Inter­state Bank of Den­ver, N.A., 511 U.S. 164, 170–71 (1994).

5. Id. at 171. See also 15 U.S.C. § 78j(b).

6. 15 U.S.C. § 78j(b).

7. 17 CFR § 240.10b‑5 (“Rule 10b‑5”).

8. Cent. Bank of Den­ver, 511 U.S. at 191 (pri­vate plain­tiffs can­not bring aid­ing and abet­ting claims); 15 U.S.C. § 78t(e) (pro­vid­ing that the SEC can bring aid­ing and abet­ting claims).

9. 561 U.S. 247, 265 (2010).

10. Mor­ri­son, 561 U.S. at 255 (cit­ing EEOC v. Ara­bi­an Amer­i­can Oil Co., 499 U.S. 244 (1991) (“Aram­co”) (inter­nal quo­ta­tions omitted)).

11. Id. at 266–67 (dis­cussing the “the ‘focus’ of con­gres­sion­al con­cern” (cit­ing Aram­co, 499 U.S. at 255)).

12. Id. at 266.

13. 677 F.3d 60, 67 (2d Cir. 2012).

14. See Stoyas v. Toshi­ba Corp., 896 F.3d 933, 949 (9th Cir. 2018) (adopt­ing Absolute Activist test); Unit­ed States v. Geor­giou, 777 F.3d 125, 136–37 (3d Cir. 2015) (same).

15. Stoyas, 896 F.3d at 949–50 (domes­tic trans­ac­tion is suf­fi­cient for Sec­tion 10(b)).

16. Park­cen­tral Glob­al HUB Ltd. v. Porsche Auto­mo­bile Hold­ings SE, 763 F.3d 198, 216 (2d Cir. 2014) (per curiam).

17. For exam­ple, “secu­ri­ties-based swap agree­ments,” see infra note 19 and accom­pa­ny­ing text, and “Amer­i­can Deposi­tary Receipts,” see infra note 23 and accom­pa­ny­ing text.

18. Park­cen­tral, 763 F.3d at 216.

19. Id. at 205 (inter­nal quo­ta­tions omitted).

20. Id. at 215 (empha­sis in original).

21. Id.

22. 561 U.S. at 269.

23. Stoyas, 896 F.3d at 949–50.

24. Id. at 940.

25. Mor­ri­son, 561 U.S. at 266 (“[T]he 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.” (empha­sis added)).

26. See Stoyas, 896 F.3d at 950 (explain­ing that “Park­cen­tral … carves-out ‘pre­dom­i­nant­ly for­eign’ secu­ri­ties fraud claims from Sec­tion 10(b)’s ambit, dis­re­gard­ing Sec­tion 10(b)’s text,” and not­ing that Sec­tion 10(b) refers to “any secu­ri­ty” (empha­sis in original)).

27. See RJR Nabis­co, Inc. v. Euro­pean Cmty., 136 S. Ct. 2090, 2101 (2016) (dis­cussing whether the Rack­e­teer Influ­enced and Cor­rupt Orga­ni­za­tion Act applies extrater­ri­to­ri­al­ly and stat­ing that where the “con­duct rel­e­vant to the statute’s focus occurred in the Unit­ed States, then the case involves a per­mis­si­ble domes­tic appli­ca­tion even if oth­er con­duct occurred abroad”).

28. See Mor­ri­son, 561 U.S. at 255, 261 (reject­ing the Sec­ond Circuit’s “con­duct and effects” test in favor of a rigid “pre­sump­tion against extraterritoriality”).

29. Com­pare Mor­ri­son, 561 U.S. at 261 (“Rather than guess anew in each case, we apply the pre­sump­tion [against extrater­ri­to­ri­al­i­ty] in all cas­es, pre­serv­ing a sta­ble back­ground against which Con­gress can leg­is­late with pre­dictable effects.”), and Stoyas, 896 F.3d at 950 (Park­cen­tral pro­vides “an open-end­ed, under-defined mul­ti-fac­tor test . . . .”), with Park­cen­tral, 763 F.3d at 217 (“We do not pur­port to prof­fer a test that will reli­ably deter­mine when a par­tic­u­lar invo­ca­tion of § 10(b) will be deemed appro­pri­ate­ly domes­tic or imper­mis­si­bly extrater­ri­to­r­i­al . . . . Nei­ther do we see any­thing in Mor­ri­son that requires us to adopt a ‘bright-line’ test. . . .”).

30. Mor­ri­son, 561 U.S. at 257.

31. Id. at 257 (inter­nal quo­ta­tions omit­ted) (cit­ing SEC v. Berg­er, 322 F.3d 187, 192 (2d Cir. 2003)).

32. Id. at 261.

33 Id. at 256; see also Stephen J. Choi & Lin­da J. Sil­ber­man, Transna­tion­al Lit­i­ga­tion and Glob­al Secu­ri­ties Class-Action Law­suits, 2009 Wis. L. Rev. 465, 467 (2009) (“Unfor­tu­nate­ly, much uncer­tain­ty sur­rounds the con­sid­er­a­tion of extrater­ri­to­r­i­al issues with­in secu­ri­ties class-action law­suits. The indi­vid­ual doc­trines applied with­in the courts–such as the con­duct and effects tests–are often ambigu­ous and dif­fi­cult to pre­dict.”) (cit­ed in Mor­ri­son, 561 U.S. at 260).

34. 561 U.S. at 269–70.

35. See 763 F.3d at 216.

36. 893 F.3d 73, 82–83 (2d Cir. 2018). In Ding­man, the defen­dant was “a per­ma­nent res­i­dent of the Bahamas,” the cor­po­rate “enti­ties were incor­po­rat­ed in the Bahamas by a Bahami­an lawyer,” the busi­ness “involved devel­op­ment and oper­a­tion of restau­rants, bars, and hotels in the Bahamas,” and the “wit­ness­es and the books and records [were] in the Bahamas.” Id. Nonethe­less, § 10(b) applied because of “sub­stan­tial domes­tic con­tacts” relat­ed to the under­ly­ing busi­ness agree­ment. Id. Specif­i­cal­ly, “[t]he [a]greement was entered into in New York,” the defen­dant “con­tin­ued to press . . . for fur­ther invest­ments in New York,” the defen­dants “were both U.S. cit­i­zens[,] the wire trans­fers orig­i­nat­ed from New York . . . and the con­fir­ma­tion let­ters were sent to New York.” Id. “The only for­eign com­po­nent present in the for­ma­tion of the Agree­ment was the even­tu­al reg­is­tra­tion of the shares ‘with the appro­pri­ate Bahami­an author­i­ties.’” Id.

37. See supra note 35 and accom­pa­ny­ing text; Mor­ri­son, 561 U.S. at 266 (“[T]he 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.”).

38. Park­cen­tral, 763 F.3d at 216.

39. See id.

40. Park­cen­tral, 763 F.3d at 220 (Lev­al, J., concurring).

41. Id.

42. Mor­ri­son, 561 U.S. at 261.

43. Id. at 269.

44. Park­cen­tral, 763 F.3d at 215 (“[A] rule mak­ing the statute applic­a­ble when­ev­er the plaintiff’s suit is pred­i­cat­ed on a domes­tic trans­ac­tion, regard­less of the for­eign­ness of the facts con­sti­tut­ing the defendant’s alleged vio­la­tion, would seri­ous­ly under­mine Mor­ri­son’s insis­tence that § 10(b) has no extrater­ri­to­r­i­al appli­ca­tion. It would require courts to apply the statute to whol­ly for­eign activ­i­ty clear­ly sub­ject to reg­u­la­tion by for­eign author­i­ties sole­ly because a plain­tiff in the Unit­ed States made a domes­tic trans­ac­tion, even if the for­eign defen­dants were com­plete­ly unaware of it. Such a rule would inevitably place § 10(b) in con­flict with the reg­u­la­to­ry laws of oth­er nations.”).

45. Stoner­idge Inv. Part­ners, LLC v. Sci.-Atlanta, 552 U.S. 148, 157 (2008).

46. ADRs are referred to as “spon­sored” or “unspon­sored” depend­ing on whether they are cre­at­ed with or with­out the coop­er­a­tion of the non-Unit­ed States Com­pa­ny. See Secu­ri­ties and Exchange Com­mis­sion, Investor Bul­letin: Amer­i­can Deposi­tary Receipts 1 (August 2012), https://www.sec.gov/investor/alerts/adr-bulletin.pdf (last vis­it­ed Octo­ber 30, 2020).

47. See Stoyas, 896 F.3d at 950–52 (remand­ing to the dis­trict court to deter­mine Toshiba’s con­nec­tion to cer­tain ADRs because the plain­tiffs had not plead­ed a suf­fi­cient con­nec­tion). But see Stoyas v. Toshi­ba Corp., 424 F. Supp. 3d 821, 828 (C.D. Cal. 2020) (On remand, the “Plain­tiffs . . . suf­fi­cient­ly alleged the ‘in con­nec­tion with’ element.”).

48. See Restate­ment (Fourth) of the For­eign Rela­tions Law of the Unit­ed States §§ 402–05 (dis­tin­guish­ing juris­dic­tion to pre­scribe from the pre­sump­tion against extraterritoriality).

49. See Mor­ri­son, 561 U.S. at 269–70 (explain­ing that its test resolves con­cerns regard­ing “inter­fer­ence with for­eign secu­ri­ties regulation”).

50. Restate­ment, supra note 40 at § 405, cmt. c.

51. Com­pare Mor­ri­son, 561 U.S. at 261 (reject­ing “judi­cial-spec­u­la­tion-made-law”) with Park­cen­tral, 763 F.3d at 216 (“[A]pplication of § 10(b) . . . would so obvi­ous­ly impli­cate the incom­pat­i­bil­i­ty of U.S. and for­eign laws that Con­gress could not have intend­ed it sub silen­tio.”).

52. E.g., Bris­tol-Myers Squibb Co. v. Supe­ri­or Ct., 137 S. Ct. 1773, 1779 (2017); Pen­noy­er v. Neff, 95 U.S. 714, 733 (1878); see also U.S. Con­st. amend. XIV, § 1 (Due Process Clause).

53. Burg­er King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (inter­nal cita­tions omitted).

54. Han­son v. Denck­la, 357 U.S. 235, 253 (1958).

55. Asahi Met­al Indus. Co. v. Supe­ri­or Ct., 480 U.S. 102, 113–14 (1987).

56. Daim­ler AG v. Bau­man, 571 U.S. 117, 122 (2014) (cit­ing Goodyear Dun­lop Tires Oper­a­tions, S.A. v. Brown, 564 U.S. 915, 919 (2011)).

57. Daim­ler, 571 U.S. at 137.

58. See gen­er­al­ly, Tanya J. Mon­esti­er, Where Is Home Depot “At Home”?: Daim­ler v. Bau­man and the End of Doing Busi­ness Juris­dic­tion, 66 Hast­ings L.J. 233 (2014) (overview­ing change).

59. See Denck­la, 357 U.S. at 253.

60. See Asahi, 480 U.S. at 114.

61. See Daim­ler, 571 U.S. at 137.

62. See Mor­ri­son, 561 U.S. at 266 (“[T]he 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.”).

63. See Stoner­idge Inv. Part­ners, 552 U.S. at 157 (2008).

64. See Denck­la, 357 U.S. at 253 (1958).

65. See Daim­ler, 571 U.S. at 136–39, 139, n.20 (hold­ing that “doing busi­ness” with­out “con­tin­u­ous and sys­tem­at­ic con­tacts,” is insuf­fi­cient for gen­er­al or “all-pur­pose” jurisdiction).