Supreme Court Decision Spares America From Becoming International Magnet for Lawsuits

Washington, D.C., June 24, 2010 – The U.S. Supreme Court today saved this country from becoming a target-rich environment for international litigation, ruling against Australian investors who tried to sue an Australian bank in U.S. courts.

Statement of John Berlau, Director of CEI’s Center for Investors and Entrepreneurs, on Morrison v. National Australia Bank

It is gratifying that that the Supreme Court unanimously said no to an attempt to turn the U.S. into an international litigation magnet for cases and controversies that occur wholly outside our shores.

In this case, Australian investors bought shares in an Australian bank on an Australian exchange. But when they alleged fraud, they bypassed their own country and headed straight to the U.S. to file their lawsuit.

Had this lawsuit been allowed to proceed, the consequences for the U.S. economy would have been nothing short of disastrous.  Every foreign firm would think twice about forming a U.S. subsidiary that employs American workers, for fear of establishing what courts have called a “nexus” that could establish a tangential connection for litigation in U.S. courts.

That’s why the Competitive Enterprise Institute, filed an amicus, or friend-of-the-court, brief in this important case. Written by CEI General Counsel Sam Kazman and international law specialist Ernesto J. Sanchez, the brief urged the justices to establish a bright-line rule to bar U.S. courts from hearing what are cases such as these. The majority opinion laid out such a rule by affirming that the “presumption against extraterritoriality” applies to securities purchased abroad on a foreign exchange.

>  See also, “Aussie Securities Case May Make U.S. Litigation Magnet,” by John Berlau, March 31, 2010