Testing the Limits of Morrison

On June 19, 2018, the Court of Appeals for the Second Circuit in Giunta v. Dingman, No. 17-1375-cv, 2018 WL 3028686 (2d Cir. Jun. 19, 2018), reversed and vacated the dismissal of Plaintiffs’ securities fraud complaint concerning a Bahamian resident and his Bahamian company, Out West Hospitality Ltd. (OWH), holding that there were sufficient allegations of connections with the United States to constitute a “domestic transaction.” The district court had dismissed, citing Morrison v. National Australia Bank, which held that Section 10(b) of the Securities and Exchange Act of 1934 does not apply extraterritorially. [1] Since Morrison was decided, plaintiffs’ lawyers have been testing the limits of what constitutes a “domestic” transaction for purposes of a federal securities fraud claim. The Second Circuit’s decision in Giunta provides additional guidance to practitioners regarding what constitutes a domestic transaction under the Exchange Act and further broadens the scope of what transactions involving foreign corporations can be considered “domestic” and subject to claims under US securities laws.

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