the journal of the dispute resolution section of dispute ... · the journal of the dispute...

The Journal of the Dispute Resolution Section of the International Bar Association

Dispute Resolution International

Vol 5 No 1 pp 1–122 ISSN 2075-5333 May 2011

The Limits of the Competence-Competence Doctrine in United States CourtsC Ryan Reetz

Extraterritorial Application of United States Law After Morrison v National Australia BankStephen R Smerek and Jason C Hamilton

After Morrison: The Case for a New Hague Convention on the Law Applicable to Securities FraudsEmmanuel Gaillard

Commentary on the Revised Text of the 2010 IBA Rules on the Taking of Evidence in International Arbitration1999 IBA Working Party and 2010 IBA Rules of Evidence Review

Subcommittee

When Bankruptcy and Arbitration Meet: A Look at Recent ICC PracticeSara Nadeau-Séguin

Arbitration and Bankruptcy: Bankruptcy of Arbitration?Laurent Lévy

Cross-Border Insolvency and Arbitration: A Collision of Spheres?Richard Millett QC

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Extraterritorial Application of United States Law After Morrison v National Australia BankStephen R Smerek and Jason C Hamilton*

In June 2010, the US Supreme Court revisited and confirmed the longstanding principle that, unless Congress expresses a contrary intent, US laws apply only within the territorial jurisdiction of the United States. (See Morrison v National Australia Bank Ltd.1) Although the Morrison decision dealt solely with the Securities and Exchange Act, the newly formulated ‘bright-line’ test adopted by the Court appears equally applicable in resolving the extraterritorial reach of any federal statute.

Following the Morrison decision, several lower courts have applied the Supreme Court’s bright-line test to other federal laws, including RICO, the Torture Act and the Lanham Act. These cases demonstrate the broad scope of the Morrison decision, necessitating courts to revisit the extraterritorial application of all federal laws. The decisions in these cases also reveal potential discrepancies regarding how the lower courts will interpret and apply Morrison when divining Congressional intent to extend the reach of US laws internationally. This article begins by examining the Supreme Court’s decision in Morrison and the impact of the subsequent amendments to the

* Mr Smerek is a litigation partner in Winston & Strawn’s Los Angeles office. He concentrates his practice on consumer and securities class actions, intellectual property matters, and other complex commercial litigation. Mr Hamilton is a litigation associate in the same office. He concentrates his practice on complex business and commercial litigation, including class actions. The authors may be contacted by email at [email protected] and [email protected].

1 130 S Ct 2869 (2010).

22 Dispute Resolution inteRnational Vol 5 No 1 May 2011

Securities and Exchange Act included as part of the Dodd-Frank Act enacted this past summer. The article next analyses several recent decisions from the US Courts of Appeals applying Morrison to revisit the extraterritorial reach of specific federal statutes. Finally, the article concludes by considering the potential impact of Morrison on the extraterritorial application of other US laws.

US laws apply only within the territorial jurisdiction of the United States

In Morrison v National Australia Bank Ltd, the US Supreme Court considered application of the United States Securities and Exchange Act in so-called foreign-cubed cases – where foreign plaintiffs sue foreign companies in connection with transactions on foreign exchanges. In Morrison, a large international bank based in Australia and listed on the Australian Stock Exchange acquired a majority interest in an American mortgage company. The American mortgage company calculated its profits using a flawed valuation model, causing the Australian bank to overstate its assets. After the valuation model was corrected, the bank was forced to write down its assets, causing its stock price to plummet.2 Arguing that allegedly fraudulent conduct by the American mortgage company subjected the bank to US securities laws, foreign shareholders brought a class action against the bank for violations of Section 10(b) of the United States Securities and Exchange Act of 1934 in the United States District Court for the Southern District of New York.3

National Australia Bank moved to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure (FRCP) 12(b)(1) and failure to state a claim under FRCP 12(b)(6). The district court granted the bank’s motion under FRCP 12(b)(1), finding the court lacked subject-matter jurisdiction. On appeal, the Second Circuit affirmed on similar grounds, finding that the ‘acts performed in the United States did not “compris[e] the heart of the alleged fraud.”’4 The Supreme Court granted certiorari to ‘decide whether §10(b) of the Securities and Exchange Act of 1934 provides a cause of action to foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign exchanges.’5

The Supreme Court started its analysis by correcting a ‘threshold error in the Second Circuit’s analysis’, holding that the question presented was

2 Ibid, at 2875-76.3 Ibid, at 2876.4 Ibid. 5 Ibid, at 2875.

23extRateRRitoRial appliCation of uniteD states law

not an issue of subject-matter jurisdiction, but a merits question.6 The Court clarified that the power of the district court to hear the case – a question of subject-matter jurisdiction – was quite distinct from whether the allegations entitled plaintiff to relief under the law. The Court then easily dispatched the jurisdictional question in a single sentence, finding that the district court ‘had jurisdiction under 15 USC § 78aa’ to hear cases of extraterritorial application of §10(b).7 However, the Supreme Court did not end its review there, but proceeded to consider ‘what conduct §10(b) prohibits, which is a merits question’ focusing on ‘whether the allegations the plaintiff makes entitle him to relief’ based on the foreign activity of a foreign defendant.8

Addressing the question as reframed, the Court first reaffirmed the ‘longstanding principle of American law “that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.”’9 The Court continued, reiterating that ‘“unless there is the affirmative intention of the Congress clearly expressed” to give a statute extraterritorial effect, “we must presume it is primarily concerned with domestic conditions.”’10 Finding ‘no affirmative indication in the Exchange Act that §10(b) applies extraterritorially’, the Court ‘conclude[d] that it does not.’11

The Dodd-Frank Act: do subsequent amendments to the Securities and Exchange Act extend the reach of US securities laws?

Shortly after the US Supreme Court’s decision in Morrison, on 21 July 2010, President Obama signed the Dodd-Frank Act into law.12 Section 929P(b) of the Dodd-Frank Act amends the Securities and Exchange Act to give federal courts extraterritorial jurisdiction over actions brought by the SEC or the United States where ‘conduct within the United States… constitutes significant steps in furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors’ or ‘conduct occurring outside the United States… has a foreseeable substantial effect within the United States.’

While this language appears to express Congress’s intent to extend the reach of the Securities and Exchange Act overseas, whether it succeeds

6 Ibid, at 2877.7 Ibid, As it existed at the time, 15 USC § 78aa gave the district courts exclusive jurisdiction over

violations of federal securities laws and the rules and regulations promulgated thereunder.8 Ibid. 9 Ibid (quoting EEOC v Arabian Am Oil Co, 499 US 244, 248 (1991).10 Morrison, 130 S Ct at 2877.11 Ibid, at 2883.12 Pub L 111-203, HR 4173.


in this purpose is less than certain. The Dodd-Frank Act amendments regarding extraterritorial application of the Securities and Exchange Act are couched in jurisdictional language; the Act does not include explicit language providing a new or expanded substantive cause of action covering extraterritorial conduct. Because the Supreme Court found that the Securities and Exchange Act already provided subject-matter jurisdiction over foreign-cubed actions, it can be argued that the Dodd-Frank Act does nothing to augment the substantive scope of the Securities and Exchange Act or overturn the Supreme Court’s decision in Morrison.

On the other hand, Morrison makes clear that the legal presumption against the extraterritorial application of US law does not apply where ‘“there is the affirmative intention of the Congress clearly expressed” to give a statute extraterritorial effect.’13 Moreover, the Supreme Court expressly clarified that the statute need not state that it applies abroad and the legislative ‘context can be consulted as well’.14 It could thus be argued that the legal presumption upon which the Supreme Court relied in Morrison no longer applies because the Dodd-Frank Act demonstrates Congress’s clearly expressed intention that the Securities and Exchange Act apply extraterritorially, at least in actions brought by the SEC or the United States.

The broader context surrounding passage of the Dodd-Frank Act would seem to support this position. The new language concerning extraterritorial jurisdiction first appeared in the Congressional Record on 26 April 2010, just after the Supreme Court heard oral argument in Morrison.15 In addition, comments in the Congressional Record by Rep Paul Kanjorki (D-PA), a primary drafter of the Dodd-Frank Act, further evidence Congress’s intent:

‘This bill’s provisions concerning extraterritoriality, however, are intended to rebut [the] presumption [against extraterritoriality in Morrison] by clearly indicating that Congress intends extraterritorial application in cases brought by the SEC or the Justice Department.

Thus, the purpose of the language of Section 929P(b) is to make clear that in actions and proceedings brought by the SEC or the Justice Department, the specified provisions of the Securities Act, the Exchange Act and

13 Morrison, 130 S Ct at 2877.14 Ibid, at 2883.15 156 Cong Rec S2643-01 (26 April 2010). This timing would appear to explain why the

Dodd-Frank Act addresses the issue, as the Second Circuit had done, as a question of jurisdiction. However, a counterargument can be made that the statute was not actually passed by Congress and signed into law until after Morrison was decided. Accordingly, Congress had the benefit of the Supreme Court’s decision, correcting the Second Circuit’s error, but did nothing to amend or rewrite the relevant provisions of the Dodd-Frank Act.


the Investment Advisors Act may have extraterritorial application, and that extraterritorial application is appropriate, irrespective of whether the securities are traded on a domestic exchange or the transactions occur in the United States, when the conduct within the United States is significant or when conduct outside the United States has a foreseeable substantial effect within the United States.’16

With respect to claims by individual shareholders, Section 929Y of the Dodd-Frank Act commissions the SEC to ‘solicit public comment and thereafter conduct a study to determine the extent to which private rights of action under the antifraud provisions of the Securities and Exchange Act of 1934 should be extended to cover: (1) conduct within the United States that constitutes a significant step in the furtherance of the violation, even if the securities transaction occurs outside the United States and involves only foreign investors; and (2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.’ This language would seem to further support a finding that Congress expressly intended to extend the extraterritorial application of the Securities and Exchange Act for actions brought by the SEC and United States while studying whether to extend substantive claims for individuals.17

How the lower courts will interpret and apply the recent amendments to the Securities and Exchange Act, and when the extraterritorial application of Section 10(b) might next percolate up to the Supreme Court, remains to be seen. Early post-Morrison District Court decisions examining the exterritorial scope of the Securities and Exchange Act have construed the ‘transactional test’ strictly,18 but none have yet considered the impact of the Dodd-Frank Act in actions by the SEC or United States. The ultimate resolution of these issues will clearly impact the international scope of US securities laws and will also likely carry broader implications for Congressional efforts to extend the extraterritorial application of other US laws.

16 156 Cong Rec H5235 2010 (30 June 2010).17 The results of the SEC study are not due until January 2012. The SEC public

comment period closed on 18 February 2011. For more information see www.sec.gov/comments/4-617/4-617.shtml.

18 See, eg, Gannon Int’l, LTD v Blocker, No 4:10CV0835 JCH, 2011 WL 111885 (ED Mo 13 January 2011) (no cause of action exists for a foreign sale of foreign stock between US citizens); In re Royal Bank of Scotland Group PLC Sec. Litig, No 09 Civ 300 (DAB), 2011 WL 167749 (SDNY 11 January 2011) (the act of listing shares on a US market does not compel a cause of action for transactions everywhere a company conducts business); Elliott Assocs v Porsche Automobil Holding SE, Nos 10 Civ 0532(HB), 10 Civ 4155(HB), 2010 WL 5463846 (SDNY 30 December 2010) (the physical act of signing confirmations regarding foreign securities in the United States is not enough to confer a cause of action; the definition of ‘domestic transaction in other securities’ in the Securities and Exchange Act means, purchases and sales of securities explicitly solicited by the issuer in the US).


Morrison applied: the extraterritorial application of US laws after Morrison

While Morrison involved the careful examination of the language and history of the Securities and Exchange Act, the Supreme Court’s bright-line restatement regarding the extraterritorial application of US law has much more far-reaching implications. This bright-line reformulation would appear to necessitate that US courts revisit the extraterritorial application of most federal laws. In fact, federal courts have already begun doing so, with recent decisions interpreting the extraterritorial reach of the Racketeer Influenced and Corrupt Organisation Act (RICO), the Torture Act and the Lanham Act. While these cases demonstrate the broad scope of the Morrison decision, they also reveal potential discrepancies regarding how the lower courts will interpret and apply Morrison when divining Congressional intent to extend the reach of US laws internationally.

Racketeer Influenced and Corrupt Organization Act – Norex Petroleum Ltd v Access Indus, Inc

The Second Circuit applied Morrison to evaluate the extraterritorial application of RICO in Norex Petroleum Ltd v Access Indus, Inc19 In Norex, a Canadian-based majority shareholder of a Russian oil company filed a suit against a large number of foreign defendants for violation of RICO.20 The plaintiff alleged that defendants participated in a widespread racketeering scheme to seize control over most of the Russian oil industry.21 The plaintiff further alleged that defendants engaged in numerous racketeering acts in the United States in furtherance of the alleged scheme, including mail and wire fraud, money laundering, bribery and violation of various other federal statutes.22 Defendants moved to dismiss for lack of subject-matter jurisdiction, arguing that the federal courts lacked jurisdiction because the principal actions and events underlying the plaintiff’s claims occurred outside the United States.23 The district court agreed, finding the allegations in the complaint insufficient to establish application of RICO.24

On appeal, the Second Circuit followed the Supreme Court’s reasoning in Morrison to find that the extraterritorial application of RICO did not implicate the jurisdiction of the federal courts but the scope of the conduct

19 631 F3d 29 (2d Cir 2010)20 Ibid, at 31.21 Ibid.22 Ibid.23 Ibid, at 32. 24 Norex Petroleum Ltd v Access Indus, Inc, 540 F Supp 2d 438 (SDNY 2007).


was prohibited.25 Reframed as a merits question, the Second Circuit applied the Supreme Court’s decision in Morrison to evaluate the extraterritorial application of federal statutes and articulated what it characterised as the Supreme Court’s new ‘bright-line rule: absent a clear Congressional expression of a statute’s extraterritorial application, a statute lacks extraterritorial reach’.26

The Second Circuit rejected the plaintiff’s arguments that the text of RICO overcame the presumption against extraterritorial application. Relying on the language in Section 1962, the plaintiff had argued that the statutory references to conduct affecting interstate or foreign commerce gave RICO extraterritorial application.27 Likewise, the plaintiff argued that because certain predicate acts expressly prohibited under RICO possess an extraterritorial reach, RICO should be applied extraterritorially.28 The Second Circuit summarily rejected both arguments, finding them analogous to arguments made to and rejected by the Supreme Court in Morrison.29

Relying on earlier case law, the Second Circuit concluded that RICO was silent as to any extraterritorial application, and thus applied the ‘bright-line rule’ from Morrison to find that RICO does not apply extraterritorially in private lawsuits.30 The Second Circuit’s decision in Norex confirms the broad application of the Supreme Court’s reasoning in Morrison: federal courts will not apply any US laws extraterritorially without a clear, statutory expression of Congressional intent.

Torture Act – United States v Belfast

The Eleventh Circuit considered the extraterritorial application of the Torture Act in United States v Belfast.31 Charles Emmanuel McArthur was charged with violations of the Torture Act for allegedly committing numerous acts of torture and other atrocities in Liberia between 1999 and 2003 – conduct that was wholly extraterritorial and committed against non-US citizens.32 Emmanuel moved to dismiss the charges, claiming that the Torture Act was unconstitutional and did not apply to extraterritorial

25 Norex, 631 F 3d at 32.26 Ibid.27 Ibid, at 33.28 Ibid.29 Ibid.30 Ibid, at 32-33. After a request for limited rehearing en banc joined by the United States

as amicus curiae, the Court withdrew publication of its original decision, 622 F 3d 148 (2nd Cir 2010), and issued an amended opinion explicitly reserving the question of ‘the extraterritorial application of RICO when enforced by the government’. Ibid, at 33.

31 611 F 3d 783 (11th Cir 2010).32 Ibid, at 793-801.


conduct.33 The district court concluded that Congress had the power to apply the Torture Act extraterritorially, had in fact done so, and that the Torture Act applied to Emmanuel’s conduct because he had committed a crime that could be prosecuted in the United States under the statute.34

On appeal, the Eleventh Circuit found that the ‘federal courts have jurisdiction [under the Torture Act] if the alleged offender is a national of the United States, or if the alleged offender is present in the United States, irrespective of the nationality of the victim or alleged offender.’35 After concluding that United States courts have jurisdiction, the Eleventh Circuit evaluated whether the Torture Act applies extraterritorially under the Supreme Court’s decision in Morrison.

The Eleventh Circuit rejected Emmanuel’s contention that the Torture Act does not apply to the extraterritorial conduct of a United States citizen.36 The court reasoned:

‘Congress’s concern was not to prevent official torture within the borders of the United States, but in nations where the rule of law has broken down and the ruling government has become the enemy, rather than the protector, of its citizens. Finally, limiting the prohibitions of the Torture Act to conduct occurring in the United States would dramatically, if not entirely, reduce their efficacy.’37

The court then found that the language, ‘punish[ing] “[w]hoever outside the United States commits… torture”’ [emphasis added] in the Torture Act is ‘remarkably clear’ and evidences Congress’s intent to give the Torture Act extraterritorial application.38 The court further added that even if the language of the Torture Act was not so clear, it would infer extraterritorial application from 1) the nature of the harm being ‘quintessentially international in scope’ and 2) the statute’s ‘international focus’.39

Based on this analysis, the Eleventh Circuit affirmed that the Torture Act contains a clear Congressional expression of extraterritorial application. The Eleventh Circuit’s reasoning here further confirms the broad application of the Supreme Court’s reasoning in Morrison, and evinces a case demonstrating that courts will look, in addition to the explicit language, to the circumstances surrounding a statute to find extraterritorial intent.

33 Ibid, at 800-801.34 Ibid, at 801.35 Ibid, at 803 (internal quotations removed).36 Ibid, at 810.37 Ibid.38 Ibid, at 811.39 Ibid.


Lanham Act – Love v Associated Newspapers, Ltd

The Ninth Circuit considered the extraterritorial application of the Lanham Act in Love v Associated Newspapers, Ltd.40 In that case, an American musician brought a suit against a variety of parties involved in an advertising campaign on behalf of a former bandmate conducted entirely in the United Kingdom and Ireland.41 Plaintiff alleged, among other things, that the defendants’ distribution of CDs containing the band’s work and promotional materials containing pictures of the band violated the Lanham Act.42 The District Court dismissed the Lanham Act claims, in part because it found that the extraterritorial reach of the statute did not encompass the claims.43

On appeal, the Ninth Circuit considered whether American claims for relief under the Lanham Act can be asserted on the basis of solely extraterritorial conduct.44 Without addressing the question of the court’s jurisdiction to hear claims for extraterritorial application of the Lanham Act, the court proceeded to analyse whether the Lanham Act provided a cause of action based on extraterritorial conduct.

The Ninth Circuit rejected the plaintiff’s contention that the Lanham Act provided him a cause of action.45 The court held that the plaintiff could not state a claim under the Lanham Act because he could not establish that the foreign conduct of the defendants caused him harm in the United States.46 However, the court did find that the Lanham Act could apply extraterritorially.

Relying on earlier case law, the Ninth Circuit concluded that ‘the Lanham Act grants a civil right of action against any person who shall use in commerce, in any improper manner detailed therein, a registered trademark; and, for purposes of the Act, commerce is sweepingly defined as all commerce which may lawfully be regulated by Congress.’47 The Love court further reasoned:

‘Because this sweeping language contrasts so readily with the language in the Securities and Exchange Act, not merely referring to foreign commerce but expressly covering all commerce Congress can regulate, see Morrison, 130 S Ct at 2881-84, we see no need to revisit our case law regarding the extraterritorial application of the Lanham Act.’ 48

40 611 F 3d 601 (9th Cir 2010).41 Ibid, at 606-07.42 Ibid, at 607.43 Ibid.44 Ibid, at 608.45 Ibid, at 612.46 Ibid, at 612-13.47 Ibid, at 612 n 6 (internal citations and quotations omitted). 48 Ibid.


The Ninth Circuit thus reaffirmed the general extraterritorial application of the Lanham Act. However, rather than basing its reasoning on an express provision in the Lanham Act calling for its extraterritorial application, the Ninth Circuit instead found that the Lanham Act applied extraterritorially based on its broad definition of commerce.

While affirming dismissal, the Ninth Circuit’s decision in Love appears to be at odds with the Supreme Court’s reasoning in Morrison. In Morrison, the Supreme Court stated, ‘we have repeatedly held that even statutes that contain broad language in their definitions of “commerce” that expressly refer to “foreign commerce” do not apply abroad [emphasis added].’49 The Love court appeared to rely on just such a broad definition of commerce in affirming the extraterritorial application of the Lanham Act. Whether the Ninth Circuit’s reasoning will be the final word, whether other circuit courts will agree with the Ninth Circuit in other Lanham Act cases or cases applying other federal laws, and when the issue may be reviewed by the Supreme Court remains to be seen.

Looking ahead: the extraterritorial application of other federal laws after Morrison

As discussed above, in the brief time since the Supreme Court’s decision in Morrison, the lower courts have already reexamined the extraterritorial application of several federal statutes. While these cases demonstrate that the federal courts are carefully scrutinising Congressional intent before applying US laws to extraterritorial conduct, they also make clear that what evidence of intent will suffice, absent explicit statutory language, remains unsettled. Below is a brief analysis of the extraterritorial application of the Sherman Antitrust Act, federal employment laws, and federal environmental laws’ and the likely impact of the Morrison decision on each.

Antitrust laws

Given the Supreme Court’s decision in F Hoffman-La Roche Ltd v Empagran SA,50 it is unlikely that the Morrison decision will significantly impact that extraterritorial scope of US antitrust laws. In Hoffman-LaRoche, plaintiffs, several foreign companies, sued a group of foreign and domestic vitamin manufacturers alleging price-fixing.51 The issue before the Supreme Court was whether the Sherman Antitrust Act, as amended by the Foreign Trade Antitrust Improvement Act of 1982 (FTAIA), applied to claims made by

49 Morrison, 130 S Ct at 2882.50 542 US 155 (2004).51 Ibid, at 159.


foreign plaintiffs whose injuries resulted from conduct outside the United States.52 The FTAIA establishes that the Sherman Antitrust Act applies extraterritorially only if the challenged conduct has a ‘direct, substantial, and reasonably foreseeable effect’ on United States commerce or imports and exports.53 The Supreme Court reasoned that this language limits that applicability of the Sherman Antitrust Act when the adverse effect is independent of any domestic harm.54 Therefore, the Supreme Court held that foreign plaintiffs cannot maintain a claim for harm suffered outside the United States alleging violations of United States antitrust laws.55 Conversely, if the foreign actions of a foreign actor have a direct, substantial and foreseeable effect on US commerce, and actually causes harm within the US, Congress’s clear intent would be for the antitrust laws to apply.56 Because extraterritorial application is tied to the statutory text, the Supreme Court’s decision in Hoffman-LaRoche appears consistent with its reasoning in Morrison.

Employment laws

Title VII prohibits discrimination on the basis of race, colour, religion, sex, or national origin with respect to employment. As originally drafted, Title VII was held not to apply extraterritorially because its language did not contain an affirmative indicia of Congressional intent to apply extraterritorially.57 In Arabian American Oil, the Supreme Court stated the maxim reaffirmed in Morrison that ‘legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States’. Congress responded by amending Title VII to expressly provide for its extraterritorial application in certain situations to United States citizens employed in other nations. Likewise, the Third Circuit initially held in Cleary v United States,58 that the Age Discrimination in Employment Act (1967) (ADEA), which prohibits discrimination on the basis of age with respect to employment, did not apply extraterritorially. Here too, Congress amended the ADEA (and the Americans with Disabilities Act (1990) (ADA) as well) to confirm their extraterritorial application.

The amendments to Title VII, the ADA, and the ADEA each provide for similar, limited extraterritorial application. Foremost, these laws only protect United States citizens and only apply to employers incorporated

52 Ibid, at 158-59.53 15 USC § 6(a).54 Hoffman-LaRoche, 524 US at 164-73.55 Ibid, at 173.56 Ibid, at 160-63.57 EEOC v Arabian Am Oil Co, 499 US 244 (1991).58 728 F 2d 607 (3rd Cir 1984).


in the United States, having sufficient contacts with the United States, or employers controlled by a United States company.59 Because Congress has explicitly delineated the extent of extraterritorial application of these laws, the Supreme Court’s decision in Morrison is unlikely to change the extent to which they apply extraterritorially.

However, it remains to be seen whether other United States employment laws, such as the Worker Adjustment and Retaining Notification Act 1988 (WARN) and the Family Medical Leave Act 1993 (FMLA), will be given any extraterritorial application. Because these statutes contain no reference to extraterritorial application, a court applying the bright-line rule from Morrison would need to find sufficient indicia of Congressional intent for extraterritorial application from the circumstances surrounding their enactment.

Environmental laws

In decisions prior to Morrison, several federal courts have applied environmental laws consistently with the Supreme Court’s reasoning in Morrison. For instance, the Magnuson-Stevens Act has been held to apply extraterritorially based on express language in its provisions,60 and the Resource Conservation and Recovery Act has been held not to apply extraterritorially because neither its statutory language nor legislative history evince any Congressional intent for it to apply extraterritorially.61 On the other hand, other environmental laws, such as the National Environmental Policy Act, the Endangered Species Act and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), have been applied beyond the borders of the United States, even though they do not contain explicit language regarding such extraterritorial application.62 Whether these extraterritorial applications are appropriate under Morrison is an open issue.

For example, the Ninth Circuit previously held that CERCLA, a US law designed to clean up sites contaminated with hazardous substances, can apply extraterritorially based on the domestic effects of a business operating

59 For a more detailed discussion of the extraterritorial application of employment laws, see D Mishkin, P Richardson and S Barber, ‘Extraterritorial Application of US Employment Laws and Their Possible Conflict With Applicable Foreign Laws,’ (2010) 23 Bna emp DisCRimination Rep 536.

60 Blue Water Fishermen’s Ass’n v Nat’l Marine Fisheries Serv, 158 F Supp 2d 118, 123 & n 19 (D Mass 2001) (citing 16 USC §§ 1801(c)(5),1826(g) (2006)).

61 Amlon Metals, Inc v FMC Corp, 775 F Supp 668 (SDNY 1991).62 See, eg, Envtl Def Fund v Massey, 986 F 2d 528 (DC Cir 1993); Natural Resources Def Council v

United States Dep’t of the Navy, No CV-01-07781, 2002 WL 32095131 (CD Cal 17 September 2002); Defenders of Wildlife v Norton, 257 F Supp 2d 53 (DDC 2003).


entirely outside of the United States.63 In Pakootas v Teck Cominco Metals, Ltd,64 plaintiffs filed a suit to enforce a US Environmental Protection Agency (EPA) order against a Canadian corporation.65 Plaintiffs had petitioned the EPA to conduct an assessment of contamination in and along a portion of the Columbia River entirely within the United States, which resulted in a finding that the defendant, operating only within Canada, was causing significant pollution to the US portion of the river. The defendant moved to dismiss the complaint for failure to state a cause of action under FRCP 12(b)(6) and lack of subject-matter jurisdiction in FRCP 12(b)(1).66 The district court held that it possessed subject-matter jurisdiction under CERCLA and that Congress intended for the CERCLA to have extraterritorial effect.67

On appeal, the Ninth Circuit considered the defendant’s argument that, ‘in absence of a clear statement by Congress that it intended CERCLA to apply extraterritorially, the presumption against extraterritorial application of United States law precludes CERCLA from applying to Teck in Canada’.68 The Ninth Circuit sidestepped the extraterritorial question, concluding that the application in this case was wholly domestic because the effects of the defendants’ actions forming the operative elements of the CERCLA claim occurred entirely within the United States.69

Absent of clear expression of Congressional intent to apply CERCLA to foreign conduct, the Ninth Circuit’s decision to apply CERCLA against a foreign company operating wholly outside the United States arguably runs afoul of Morrison. Absent of express statutory language, following Morrison, the appropriate inquiry would appear to be whether the circumstances surrounding passage of CERCLA evidence an intent that the law be applied against foreign corporations that operate entirely outside the United States but are responsible for pollution in the United States. How this issue is resolved could obviously have critical consequences.

Conclusion

The bright-line rule articulated by the Supreme Court in Morrison for evaluating the extraterritorial application of US laws has already begun to curtail the expanded international reach of US law. The decision has significantly curtailed the extraterritorial application of US securities laws

63 Pakootas v Teck Cominco Metals, Ltd, 452 F 3d 1066 (2006).64 452 F 3d 1066 (2006).65 Pakootas, 452 F 3d at 1068.66 Ibid, at 1070.67 Ibid, at 1070-71.68 Ibid, at 1073.69 Ibid, at 1073-79.


in private actions, and it has prompted the lower courts to reevaluate extraterritorial application of other federal statutes. With the subsequent amendment to the Securities and Exchange Act, the effect of Morrison on government enforcement efforts is still an open issue. Ultimately, how Morrison will impact the extraterritorial reach of individual statutes, and what evidence of Congressional intent will prove sufficient, remain to be further developed in the lower courts.

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