Mandatory FINRA Arbitration Rules May Be Superseded

On August 21st, the Second Circuit affirmed district court orders enjoining FINRA arbitrations. In these two consolidated cases, appellants sought review of district court orders which granted a financial services firm’s motion to enjoin a FINRA arbitration brought against the firm by a public financing authority. The Second Circuit held that in each case, the FINRA arbitration rules had been superseded by forum selection clauses requiring “all actions and proceedings” related to the transactions between the parties to be brought in court. Goldman, Sachs & Co. v. Golden Empire Sch. Fin. Auth.

Domestic Injury Unnecessary for Private RICO Cases

On August 20th, the Second Circuit denied a petition seeking en banc review of a panel opinion which held that the Racketeer Influenced and Corrupt Organizations Act (“RICO”) can apply extraterritorially where, as here, liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate. The European Community alleges that RJR Nabisco participated in a global money-laundering scheme with organized criminal groups in violation of RICO. Denying the petition for en banc review, the Court held that the plaintiffs are not required to plead that their alleged injuries actually occurred in the United States. European Community v. RJR Nabisco. View the amended panel opinion here.

Dismissal of VW Short-Squeeze Suit is Affirmed

On August 15th, the Second Circuit affirmed the dismissal of a securities fraud lawsuit stemming from Porsche’s attempt to takeover Volkswagen. Plaintiffs purchased securities-based swaps pegged to the price of Volkswagen shares. They alleged that defendants made fraudulent statements and took deceptive actions to conceal Porsche’s intention to takeover VW in violation of Section 10(b) of the Securities Exchange Act. Applying the Supreme Court’s analysis in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), and its own precedent in Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012), the Court held that the relevant actions in this case were so predominantly German as to compel the conclusion that the complaint fails to invoke Section 10(b) in a manner consistent with the presumption against extraterritoriality. The Court noted the extremely fact intensive nature of cases involving the extraterritorial application of Section 10(b) and declined to draw a bright-line test for when the application of Section 10(b) will be considered extraterritorial. Because the Court recognized that plaintiffs might be able to draft an amended complaints that would invoke a domestic application of Section 10(b), the case was remanded to allow the district court to entertain a motion to amend the complaint. Parkcentral Global Hub Ltd. v. Porsche Automobile Holdings SE.