In its Morrison decision, the U.S. Supreme Court held that Section 10(b) (the primary federal anti-securities fraud statute) only provides a private cause of action for claims based on " transactions in securities listed on domestic exchanges, and  domestic transactions in other securities." A number of subsequent lower court decisions have explored the scope of those two categories, with most of the decisions taking the view that they should be strictly construed to limit Section 10(b) claims to transactions that take place within the United States.
In the UBS securities litigation, for example, the court dismissed two sets of claims that Morrison arguably precluded. First, the court held that claims asserted by foreign plaintiffs who purchased UBS stock on a foreign exchange ("foreign-cubed claims") were barred even though UBS common stock is cross-listed on the New York Stock Exchange. Second, the court held that claims asserted by U.S. investors who purchased UBS stock on a foreign exchange ("foreign-squared claims") were barred even though the orders were placed from the United States.
On appeal, in a case of first impression at the appellate level, the Second Circuit has affirmed that decision. In City of Pontiac Policeman's and Firemen's Retirement System v. UBS AG, 2014 WL 1778041 (2d Cir. May 6, 2014), the court found that the plaintiffs' listing theory "is irreconciliable with Morrison read as a whole," in which the court "makes clear that the focus of both prongs was domestic transactions of any kind, with the domestic listing acting as a proxy for a domestic transaction." In addition, the Second Circuit test for whether a transaction is domestic is if "the parties incur irrevocable liability to carry our the transaction within the United States or when title is passed the United States." The fact that the purchaser is a U.S. entity or placed the order in the U.S. does not establish that it has met this test.
Holding: Dismissal of "foreign-cubed" and "foreign-squared" claims affirmed.