The Myth of Morrison: Securities Fraud Litigation Against Foreign Issuers

Using a sample of 388 securities fraud lawsuits filed between 2002 and 2017 against foreign issuers, we examine the effect of the Supreme Court’s decision in Morrison v. National Australia Bank. We find that the description of Morrison as a “steamroller” substantially ending litigation against foreign issuers is a myth. Instead, we find that Morrison did not substantially change the type of litigation brought against foreign issuers, which both before and after Morrison focused on foreign issuers with a U.S. listing and substantial U.S. trading volume. While dismissal rates rose post-Morrison we find no evidence that this is related to the decision. Settlement amounts and attorneys’ fees actually rose post-Morrison. We use these findings to theorize that Morrison was primarily a preemptive decision about standing that firmly delineated the exposure of foreign issuers to U.S. liability in response to the Vivendi case, which sought to expand the scope of liability for foreign issuers to include those that traded primarily on non-U.S. venues. When Morrison is placed in its true context it is justified as a decision in-line with prior administrative and court actions which have historically aligned firms’ U.S. liability to be proportional with their U.S. presence. While Morrison had this defining effect it did not change the litigation environment for foreign issuers, the oft-cited import of the decision. More generally, our analysis of Morrison also underscores how the decision has been mistakenly interpreted as a case primarily about extraterritoriality rather than about standing.