Second Circuit Affirms Dismissal Of Securities Fraud Claims As Impermissibly Extraterritorial

In Parkcentral Global Hub Ltd. v. Porsche Automobile Holdings SE, the Court of Appeals for the Second Circuit construed the Supreme Court’s decision in Morrison v. National Australia Bank Ltd. as precluding the application of Section 10(b) to certain securities-based swap agreements executed in the U.S. In Morrison, the Supreme Court held that Section 10(b) applied only to transactions in securities listed on a U.S. exchange or to domestic purchases and sales of other securities. Parkcentral makes clear that the Morrison requirements are necessary for Section 10(b) to apply, but may not be sufficient. Indeed, even though the securities transactions at issue in Parkcentral were domestic, the Circuit held they were not within Section 10(b)’s reach because of the “predominant” role played by extraterritorial conduct. Thus, the Second Circuit elaborated on the strictures of Morrison requiring a domestic transaction but also established a further fact-intensive test that it viewed as consistent with the underlying thrust of the Supreme Court decision.