A month ago, when I wrote about the dismissal of a securities class action against UBS, George Conway III of Wachtell, Lipton, Rosen & Katz told me that the UBS case had been the last, best chance for plaintiffs lawyers to find a way around the U.S. Supreme Court’s June 2010 ruling in Morrison v. National Australia Bank. Morrison, as you know, barred U.S. courts from hearing securities fraud cases against companies whose shares aren’t listed on U.S. exchanges. In the 16 months since the Supreme Court issued its Morrison ruling, federal courts have made it indelibly clear that securities suits against foreign companies — whether they involve the 1933 Act, the Exchange Act, common stock, CDOs, or swaps — are a non-starter under Morrison’s strictures. (Here’s Sullivan & Cromwell’s Sept. 29 overview of Morrison’s impact on securities litigation.) “Now it’s all over,” Conway told me. “They don’t even bother to bring these cases anymore.”
But it turns out that securities litigation was only the beginning of the story of the Morrison v. NAB ruling. Morrison citations are now turning up in the darnedest places: not just racketeering cases, where Morrison has been invoked since it first came down, but in trade secrets litigation, bankruptcy clawback cases, antitrust and alien tort suits, even criminal defense. If you represent a foreign defendant — or even a U.S. defendant accused of overseas wrongdoing — and you’re not at least considering Morrison’s implications, you’re not thinking hard enough.
The ruling’s key sentence is this one: “When a statute gives no clear indication of an extraterritorial application, it has none.” In other words, unless Congress specifies in any law that the statute applies to conduct that took place overseas or to non-U.S. defendants, then the law simply doesn’t cover that conduct or those defendants. Foreign racketeering defendants were the first to capitalize on the broad language of Morrison, arguing that the federal Racketeering Influenced and Corrupt Organizations Act doesn’t apply outside of the U.S. In the biggest Morrison ruling in a RICO case, Washington, D.C., federal court judge Gladys Kessler found in March that under Morrison, the U.S. government has no racketeering case against British American Tobacco even though she’d already entered a final judgment against BAT.
What about trade secrets defendants, though? The question of whether Morrison bars trade secrets litigation against foreign defendants is just beginning to hit the court. Here’s one example. The U.S. International Trade Commission barred imports of steel train wheels from a Chinese company called TianRui because the company misappropriated a confidential manufacturing process developed by a U.S. competitor. TianRui’s lawyers at Adduci, Mastriani & Schaumber and McDermott Will & Emery appealed to the U.S. Court of Appeals for the Federal Circuit, arguing, among other things, that under Morrison, federal trade secrets laws don’t apply to overseas conduct. (TianRui’s alleged theft occurred in China.) In a ruling Tuesday, two judges on the Federal Circuit panel disagreed and upheld the ITC’s import ban because, they found, TianRui’s conduct affected the domestic market. In a forceful dissent, however, Judge Kimberly Moore invoked Morrison: “United States trade secret law simply does not extend to acts occurring entirely in China,” she wrote. “Absent clear intent by Congress to apply the law in an extraterritorial manner, I simply do not believe that we have the right to determine what business practices, conducted entirely abroad, are unfair.”
And in another case against a Chinese defendant accused of stealing a U.S. competitor’s confidential information, Sidley Austin and Morgan, Lewis & Bockius argued in a brief to the Fourth Circuit that under Morrison, the Lanham Act and the Copyright Act don’t apply to overseas conduct. (That appeal is pending.)