|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Directors' And Officers' Liability, Foreign Investors And Securities Class Actions
Joseph M. McLaughlin
New York Law Journal. April 10, 2008
_________________________________________________________________________
EXCERPT: The globalization of financial markets and increased cross-border investment has resulted in foreign investors, both individual and institutional, that purchased securities of a foreign issuer on a foreign securities exchange increasingly seeking to assert federal securities law claims in United States courts. The U.S. forum is attractive to these 'foreign cubed' and other overseas investors because of, among other things, the potential availability of certification of a class of investors, contingency fee arrangements and broad discovery generally unavailable outside the United States. The inclusion of claims of foreign cubed investors in securities litigation brings into sharp relief the ongoing debate about the extent to which U.S. securities laws should reach alleged frauds perpetrated abroad and which damaged overseas investors. Judge Friendly memorably cautioned that when a federal securities fraud class action is brought on behalf of both domestic and foreign class members, 'a very small tail may be wagging an elephant.' [FN1] For a foreign issuer weighing whether to list perhaps one or two percent of its shares on a U.S. exchange through American Depositary Receipts, (ADRs), the prospect of certification in federal court of a multi-national class of shareholders, all but only one or two percent of whom purchased their shares on a foreign exchange, may present an unacceptable risk that tips its decision against a U.S. listing. That two of the largest securities class action settlements in recent years, each more than $1 billion, involved foreign companies on behalf of classes that included foreign investors (Nortel Networks and Royal Ahold) illustrates the financial exposure such cases may present. This column reviews recent case law addressing the three litigation events in which challenges to the participation of foreign investors, particularly foreign cubed investors, frequently are asserted: (i) challenges to a U.S. court's subject matter jurisdiction over the claims of foreign cubed investors; (ii) appointment of the lead plaintiff; and (iii) the motion for class certification. |
|
|
