The Supreme Court's decision in Morrison v NAB curbs the extra-territorial operation of US securities laws.

The extra-territorial operation of US securities laws has been curbed by the United States Supreme Court in Morrison v National Australia Bank (08-1191), by requiring the purchase or sale of the security to be made in the United States, or involve a security listed on a domestic exchange.

The facts in Morrison v NAB

The plaintiffs are residents of Australia, who purchased National Australia Bank Limited's ("NAB") ordinary shares on an Australian exchange.

In February 1998, NAB acquired HomeSide Lending Inc., an American mortgage service provider. HomeSide calculated the present value of the fees it would generate from servicing mortgages in future years using a valuation method, booked that amount on its balance sheet as an asset called a Mortgage Servicing Right ("MSR"), and then amortised the value of the MSR over its expected life.

In 2001, NAB revealed that the interest assumptions and the valuation model used by HomeSide to calculate the MSR were incorrect and resulted in an overstatement in the value of its servicing rights. When NAB disclosed the error its share price fell.

Notwithstanding that they were Australian residents trading securities in an Australian company in Australia, the plaintiffs commenced their class action against NAB in the Southern District of New York.

They relied on section 10(b) of the Securities Exchange Act of 1934 which prohibits any manipulative or deceptive device or contrivance in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered.

The trial judge, upheld on appeal, dismissed the claims on the basis that the court did not have jurisdiction. The Supreme Court of the United States agreed to hear the appeal.

Supreme Court upholds decision but substitutes new test

The Supreme Court relied on the longstanding principle of American law that legislation of Congress is meant to apply only within the territorial jurisdiction of the United States, unless a contrary intent appears. The Court found that section 10(b) is not extra-territorial.

The US Supreme Court therefore adopted a transactional test for the application of section 10(b): whether the purchase or sale is made in the United States, or involves a security listed on a domestic exchange.

This replaced the previous tests for the application of section 10(b) that required either (1) an "effects test," ie. "whether the wrongful conduct had a substantial effect in the United States or upon United States citizens," or (2) a "conduct test," "whether the wrongful conduct occurred in the United States."

The Supreme Court's application of the presumption against extra-territorial operation was bolstered by the amicus briefs from a number of other countries, including Australia, which led the Court to observe:

Like the United States, foreign countries regulate their domestic securities exchanges and securities transactions occurring within their territorial jurisdiction. And the regulation of other countries often differs from ours as to what constitutes fraud, what disclosures must be made, what damages are recoverable, what discovery is available in litigation, what individual actions may be joined in a single suit, what attorney's fees are recoverable, and many other matters."

A $10 billion toxic tort class action lawsuit has been filed against BP over alleged emissions from its troubled Texas City oil refinery, alleging that workers and residents in the area were exposed to benzene and other chemicals.  

More than 2,200 workers at the refinery and residents from the surrounding area filed the BP class action lawsuit on August 3 in the Galveston Division of the Southern District of Texas. The complaint alleges that for 40 days earlier this year, the company illegally released the chemical benzene into the atmosphere.

The benzene lawsuit comes just as BP, formerly known as British Petroleum, was finally able to stop the flow of oil from a well a mile under the surface of the Gulf of Mexico, which has caused a massive oil spill that is expected to cost the company tens of billions of dollars in oil spill lawsuits and clean up costs.

Plaintiffs in the BP Texas City refinery class action lawsuit say the company has been releasing benzene into the atmosphere at the plant due to a hydrogen compressor that broke down on April 6. The 2,212 plaintiffs allege that they suffered serious injuries and illnesses from benzene exposure.

Benzene is an industrial chemical that has been linked to the development of cancer, leukemia and other life-threatening health problems. It is a known carcinogen used as an industrial solvent in the production of plastic and synthetic rubber, as well as drugs and dyes.

BP’s Texas City Refinery is the third-largest oil refinery in the United States, and has been the subject of several major safety incidents. As recently as September, the U.S. Occupational Safety and Health Administration hit BP with an $87.4 million fine for not complying with a safety agreement made after a March 23, 2005 explosion and fire that killed 15 workers and injured more than 170 others.

In Arizona, the shooting death of a rancher blew the lid off simmering anger over border security and helped solidify support for a tough new immigration law. A similar eruption threatens in Virginia following the death of a Catholic nun in a car accident involving a man in the country illegally and accused of drunken driving.

The Benedictine Sisters of Virginia tried to discourage using the death of Sister Denise Mosier as a "forum of the illegal immigration agenda" and pleaded for a focus on "Christ's command to forgive."

"The sisters' mission is peace and love," said Corey Stewart, chairman of Prince William County's Board of Supervisors. "My mission is law enforcement and the protection of public safety."

Prince William County, about 25 miles southwest of Washington, D.C., stepped up its immigration enforcement in 2007 amid explosive growth of its Hispanic and immigrant populations. Under Stewart's leadership, the county implemented a local policy requiring police to determine the immigration status of all people arrested on suspicion of violating state or local laws.

The push for gay marriage in New Jersey suffered a setback Monday when the state Supreme Court said six gay couples who claim New Jersey has denied them the rights granted to married heterosexual couples must argue their case through the lower courts.
The court was split, 3-3, in the decision; four affirmative votes are needed for a motion to be granted.

Chief Justice Stuart Rabner and Justices Roberto Rivera-Soto and Helen Hoens said in an order that the issue "cannot be decided without the development of an appropriate trial-like record," and denied the plaintiffs' motion without prejudice.

They added that they reached no conclusion on the merits of the plaintiffs' allegations that the Civil Union Act violates their constitutional rights.

Goldman Sachs Group Inc. said Tuesday its second-quarter net income dropped 83 percent to $453 million as its trading revenue fell and it booked a charge for its settlement of civil fraud charges with the Securities and Exchange Commission.

The company's revenue fell short of expectations and helped send the stock market falling. Goldman followed IBM Corp. and Texas Instruments Inc., which late Monday reported revenue that disappointed investors.

Goldman's stock dropped $1.89 to $143.79 in morning trading.

Goldman took a $550 million charge to cover the cost of the settlement with the SEC that was announced last week. Earnings were also reduced by a one-time, $600 million charge tied to a new tax on bonuses in Britain.

Excluding the one-time costs, net income after payment of dividends on preferred stock came to $2.75 per share, easily topping the $2.08 analysts forecast. Analysts typically exclude one-time charges from their estimates.

Revenue fell 36 percent to $8.84 billion, short of the $8.94 billion predicted by analysts.

The drop in revenue that a number of companies have reported is unnerving investors, who see it as a sign that the economic recovery is stalling. Banks, however, have their own revenue issues. Goldman's trading revenue fell along with that of competitors including JPMorgan Chase & Co. and Bank of America Corp. that were hit hard by the spring plunge in the stock market. The drop in their revenue is adding to investors' concerns about how new federal regulations will affect banks' ability to profit from trading operations.