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If there’s an MVP award for global securities class actions defendants, it has to go to George Conway III of Wachtell, Lipton, Rosen & Katz, who last year argued at the U.S. Supreme Court on behalf of the National Australia Bank. The Court’s ruling in Conway’s case, Morrison v. NAB, is fast becoming the bane of the plaintiffs bar, with judges continuing to reject shareholders’ attempts to evade the Supreme Court’s prohibition on U.S. securities suits against foreign issuers. On Tuesday Manhattan federal district court judge Deborah Batts dismissed most of a securities class action against the Royal Bank of Scotland, in a 29-page ruling that for the first time extends the Supreme Court’s Morrison reasoning to claims based on the Securities Act of 1933. (Here’s in-depth analysis of the decision from Kevin LaCroix at D&O Diary.) The plaintiffs, led by the Massachusetts Pension Reserves Investment Management Board and the Public Employees Retirement System of Mississippi, alleged that RBS and a long list of related defendants misrepresented RBS’s subprime exposure in the lead-up to a series of write-downs that caused enormous declines in the bank’s share price. Motions to dismiss were pending before Judge Batts when the Supreme Court ruled in Morrison; the judge requested additional briefing and both sides agreed that she should rule on the Morrison issues before considering other dismissal arguments. In their supplemental Morrison brief, co-lead class counsel from Cohen Milstein Sellers & Toll; Wolf Popper; and Labaton Sucharow made an argument similar to the one advanced by Vivendi shareholders last summer: Because RBS common shares are “listed” on the New York Stock Exchange via American Depository Receipts, claims against RBS are not barred by Morrison. (You’ll recall that Wachtell’s Conway told the Litigation Daily at the time that the ADR argument was “N-U-T-S.”) Judge Batts was equally unpersuaded, in the first ruling that squarely addresses the argument that common shares are “listed” on domestic exchanges via ADRs. “The idea that a foreign company is subject to U.S. securities laws everywhere it conducts foreign transactions merely because it has ‘listed’ some securities in the United States is simply contrary to the spirit of Morrison,” she concluded. “Plaintiffs seize on specific language without at all considering, or properly presenting, the context….Plaintiffs’ interpretation would be utterly inconsistent with the notion of avoiding the regulation of foreign exchanges.” The judge found that because the Massachusetts and Mississippi pension funds owned only common shares and thus had no claims against RBS under Morrison, they could not serve as lead plaintiffs. She dismissed the funds from the case with prejudice. (The ruling does not address claims of a subclass of investors in RBS preferred shares, whose case is going forward.) Co-lead class counsel Thomas Dubbs of Labaton told us that the judge’s ruling on Securities Act claims was “disappointing.” He said the plaintiffs are considering an appeal of Judge Batt’s conclusions with regard to the 1933 Act claims, as well as the potential for bringing suit in the U.K. courts. Dubbs was on the losing end of the Morrison case at the Supreme Court, so we asked him about the ruling’s deep impact on district courts overseeing securities class actions. “It’s not surprising, given the tone of the Supreme Court’s opinion, that district courts are rigorously applying Morrison,” Dubbs said. “That leads to the question of whether a legislative or administrative fix is necessary so U.S. investors can obtain redress for fraudulent activity by foreign issuers.” Paul Engelmayer of Wilmer Cutler Pickering Hale and Dorr was counsel to RBS. He didn’t return our call for comment.

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