Second Circuit Requires Increased Scrutiny Of Securities Class Actions Involving Off-Exchange Transactions

The Second Circuit held today that putative securities class actions involving transactions in non-U.S.-listed foreign securities require careful scrutiny to determine whether the class members' claims can be litigated on a classwide basis. The court's ruling in In re Petrobras Securities (No. 16-1914) will likely increase the difficulty of certifying securities class actions arising from transactions in non-U.S.-listed foreign securities.

The Petrobras decision involves the interplay between (i) the Supreme Court's pronouncement that the federal securities laws apply only to transactions in U.S.-listed securities and to other U.S. domestic transactions and (ii) the federal class-action rule's requirement that common issues predominate over individualized issues in order for a damages class action to be certifiable. The Petrobras appeal involved foreign securities that were not listed on a U.S. exchange, so the plaintiffs needed to show that they had purchased their