^* This text was reproduced and reformatted from the text available at the U.S. Supreme Court website (visited October 6, 2010) http://www.supremecourt.gov/opinions/09pdf/08-1191.pdf.

¹ 130 S. Ct. 2869 (2010).

² 15 U.S.C. § 78j(b) (2009). This provision states:

Rule 10b-5, a regulation adopted by the SEC, makes clear that the term “manipulative or deceptive device or contrivance” comprises fraudulent conduct. 17 C.F.R. 240.10b-5 (2009).

³ 499 U.S. 244 (1991).

⁴ Hartford Fire Ins. Co. v. California, 509 U.S. 764 (1993).

⁵ Justice Breyer, while generally concurring with the majority, indicated that he might take a different approach to the question of whether the Exchange Act applies to foreign transactions of securities that are listed on U.S. exchanges. Justices Stevens and Ginsburg argued that the lower court had applied the right test, as well as reaching the right result. Justice Sotomayor did not participate in the case, presumably because she was still a member of the Second Circuit when the case was before that court.

⁶ An ambiguity in Justice Scalia’s opinion seems to leave unresolved whether the Exchange Act applies to foreign transactions in securities that are eligible to be traded on a U.S. exchange. Some large multinational companies are listed both in the United States and abroad. Justice Breyer, in a separate opinion, noted the majority’s lack of clarity on this point and indicated that he would apply the Act to all transactions in U.S.-listed securities.

⁷ Although the drafters clearly intended to authorize lawsuits brought by the government with respect to extraterritorial conduct, the actual language of the Dodd-Frank Act is inartful. Section 929P(b) of the Dodd-Frank Act states that the federal courts of the United States “shall have jurisdiction” over lawsuits brought by the SEC or the Department of Justice alleging violations of the antifraud rules that meet the conduct or the effects test. Read literally, this provision addresses only adjudicative jurisdiction, that is the power of a court to entertain a case, and not prescriptive jurisdiction, the application of a statute to particular conduct. In Morrison, the Court ruled unanimously that U.S. courts had adjudicative jurisdiction to dispose of the plaintiffs’ claim. The question that the courts had jurisdiction to decide was whether the Exchange Act covered extraterritorial transactions; the majority stated categorically that it did not. One might argue that the Dodd- Frank Act only confirms that U.S. courts have jurisdiction over its violations and does not address whether courts have jurisdiction over extraterritorial fraud cases. On balance, however, it seems unlikely that courts will refuse to honor the intent of Congress to regulate extraterritorially, in spite of its failure to say what it meant in technically correct terms.

¹ Robert Morrison, an American investor in National’s ADRs, also brought suit, but his claims were dismissed by the District Court because he failed to allege damages. In re National Australia Bank Securities Litigation, No. 03 Civ. 6537 (BSJ), 2006 WL 3844465, *9 (SDNY, Oct. 25, 2006). Petitioners did not appeal that decision, 547F. 3d 167, 170, n. 3 (CA2 2008) (case below), and it is not before us. Inexplicably, Morrison continued to be listed as a petitioner in the Court of Appeals and here.

² The relevant text of §10(b) and SEC Rule 10b–5 are set forth later in this opinion. Section 20(a), 48 Stat. 899, provides: ‘‘Every person who, directly or indirectly, controls any person liable under any provision of [the Exchange Act] or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.’’

Liability under §20(a) is obviously derivative of liability under some other provision of the Exchange Act; §10(b) is the only basis petitioners asserted.

³ Section 78aa provides:

‘‘The district courts of the United States . . . shall have exclusive jurisdiction of violations of [the Exchange Act] or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by [the Exchange Act] or the rules and regulations thereunder.’’

⁴ The principal concurrence (see post, p. 1 (Stevens, J., concurring in judgment) (hereinafter concurrence)) disputes this characterization, launching into a Homeric simile which takes as its point of departure (and mistakes for praise rather than condemnation) then-Justice Rehnquist’s statement in Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 737 (1975) that ‘‘[w]hen we deal with private actions under Rule 10b– 5, we deal with a judicial oak which has grown from little more than a legislative acorn.’’ Post, at 3. The concurrence seemingly believes that the Courts of Appeals have carefully trimmed and sculpted this ‘‘judicial oak’’ into a cohesive canopy, under the watchful eye of Judge Henry Friendly, the ‘‘master arborist,’’ ibid. See post, at 2–3. Even if one thinks that the ‘‘conduct’’ and ‘‘effects’’ tests are numbered among Judge Friendly’s many fine contributions to the law, his successors, though perhaps under the impression that they nurture the same mighty oak, are in reality tending each its own botanically distinct tree. It is telling that the concurrence never attempts its own synthesis of the various balancing tests the Circuits have adopted.

⁵ The concurrence urges us to cast aside our inhibitions and join in the judicial lawmaking, because ‘‘[t]his entire area of law is replete with judge-made rules,’’ post, at 3. It is doubtless true that, because the implied private cause of action under §10(b) and Rule 10b–5 is a thing of our own creation, we have also defined its contours. See, e.g., Blue Chip Stamps, supra. But when it comes to ‘‘the scope of [the] conduct prohibited by [Rule 10b–5 and] §10(b), the text of the statute controls our decision.’’ Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164, 173 (1994). It is only with respect to the additional ‘‘elements of the 10b–5 private liability scheme’’ that we ‘‘have had ‘‘to infer how the 1934 Congress would have addressed the issue[s] had the 10b–5 action been included as an express provision in the 1934 Act.’ ‘‘’ Ibid. (quoting Musick, Peeler & Garrett v. Employers Ins. of Wausau, 508 U. S. 286, 294 (1933)).

⁶ Rule 10b–5 makes it unlawful: ‘‘for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

The Second Circuit considered petitioners’ appeal to raise only a claim under Rule 10b–5(b), since it found their claims under subsections (a) and (c) to be forfeited. 547 F. 3d, at 176, n. 7. We do likewise.

⁷ This conclusion does not render meaningless the inclusion of ‘‘trade, commerce, transportation, or communication . . . between any foreign country and any State’’ in the definition of ‘‘interstate commerce.’’ 15 U. S. C. §78c(a)(17). For example, an issuer based abroad, whose executives approve the publication in the United States of misleading information affecting the price of the issuer’s securities traded on the New York Stock Exchange, probably will make use of some instrumentality of ‘‘communication . . . between [a] foreign country and [a] State.’’

⁸ The concurrence notes that, post-Aramco, Congress provided explicitly for extraterritorial application of Title VII, the statute at issue in Aramco. Post, at 6, n. 6. All this shows is that Congress knows how to give a statute explicit extraterritorial effect—and how to limit that effect to particular applications, which is what the cited amendment did. See Civil Rights Act of 1991, §109, 105 Stat. 1077.

⁹ The concurrence seems to think this test has little to do with our conclusion in Part III, supra, that §10(b) does not apply extraterritorially. See post, at 11–12. That is not so. If §10(b) did apply abroad, we would not need to determine which transnational frauds it applied to; it would apply to all of them (barring some other limitation). Thus, although it is true, as we have said, that our threshold conclusion that §10(b) has no extraterritorial effect does not resolve this case, it is a necessary first step in the analysis.

The concurrence also makes the curious criticism that our evaluation of where a putative violation occurs is based on the text of §10(b) rather than the doctrine in the Courts of Appeals. Post, at 1–2. Although it concedes that our test is textually plausible, post, at 1, it does not (and cannot) make the same claim for the Court-of-Appeals doctrine it endorses. That is enough to make our test the better one.

¹⁰ That is in our view the meaning which the presumption against extraterritorial application requires for the words ‘‘purchase or sale, of. . . any security not so registered’’ in §10(b)’s phrase ‘‘in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered’’ (emphasis added). Even without the presumption against extraterritorial application, the only alternative to that reading makes nonsense of the phrase, causing it to cover all purchases and sales of registered securities, and all purchases and sales of nonregistered securities—a thought which, if intended, would surely have been expressed by the simpler phrase ‘‘all purchases and sales of securities.’’

¹¹ Discussed in Brief for United States as Amicus Curiae 22–23. The Solicitor General also cites, without description, a number of antitrust cases to support the proposition that domestic conduct with consequences abroad can be covered even by a statute that does not apply extraterritorially: Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U. S. 690 (1962); United States v. Sisal Sales Corp., 274 U. S. 268 (1927); Thomsen v. Cayser, 243 U. S. 66 (1917); United States v. Pacific & Arctic R. & Nav. Co., 228 U. S. 87 (1913). These are no longer of relevance to the point (if they ever were), since Continental Ore overruled the holding of American Banana Co. v. United Fruit Co., 213 U. S. 347, 357 (1909), that the antitrust laws do not apply extraterritorially. See W. S. Kirkpatrick & Co. v. Environmental Tectonics Corp. Int’l, 493 U. S. 400, 407–408 (1990). Moreover, the pre-Continental Ore cases all involved conspiracies to restrain trade in the United States, see Sisal Sales, supra, at 274–276; Thomsen, supra, at 88; Pacific & Arctic, supra, at 105–106. And although a final case cited by the Solicitor General, Steele v. Bulova Watch Co., 344 U. S. 280, 287–288 (1952), might be read to permit application of a nonextraterritorial statute whenever conduct in the United States contributes to a violation abroad, we have since read it as interpreting the statute at issue—the Lanham Act—to have extraterritorial effect, EEOC v. Arabian American Oil Co., 499 U. S. 244, 252 (1991) (quoting 15 U. S. C. §1127).

¹ See, e.g., IIT, Int’l Inv. Trust v. Cornfeld, 619 F. 2d 909 (CA2 1980); IIT v. Vencap, Ltd., 519 F. 2d 1001 (CA2 1975); Bersch v. Drexel Firestone, Inc., 519 F. 2d 974 (CA2 1975); Leasco Data Processing Equip. Corp. v. Maxwell, 468 F. 2d 1326 (CA2 1972).

² I acknowledge that the Courts of Appeals have differed in their applications of the conduct-and-effects test, with the consequence that their respective rulings are not perfectly ‘‘cohesive.’’ Ante, at 10, n. 4. It is nevertheless significant that the other Courts of Appeals, along with the other branches of Government, have ‘‘embraced the Second Circuit’s approach,’’ ante, at 9. If this Court were to do likewise, as I would have us do, the lower courts would of course cohere even more tightly around the Second Circuit’s rule.

³ It is true that ‘‘when it comes to ‘the scope of [the] conduct prohibited by [Rule 10b–5 and] §10(b), the text of the statute [has] control[led] our decision[s].’’’ Ante, at 12, n. 5 (quoting Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U. S. 164, 173 (1994); some brackets in original). The problem, when it comes to transnational securities frauds, is that the text of the statute does not provide a great deal of control. As with any broadly phrased, longstanding statute, courts have had to fill in the gaps.

⁴ Loss, In Memoriam: Henry J. Friendly, 99 Harv. L. Rev. 1722, 1723 (1986).

⁵ Even as the Court repeatedly declined to grant certiorari on cases raising the issue, individual Justices went further and endorsed the Second Circuit’s basic approach to determining the transnational reach of §10(b). See, e.g., Scherk v. Alberto-Culver Co., 417 U. S. 506, 529–530 (1974) (Douglas, J., joined by Brennan, White, and Marshall, JJ., dissenting) (‘‘It has been recognized that the 1934 Act, including the protections of Rule 10b–5, applies when foreign defendants have defrauded American investors, particularly when . . . they have profited by virtue of proscribed conduct within our boundaries. This is true even when the defendant is organized under the laws of a foreign country, is conducting much of its activity outside the United States, and is therefore governed largely by foreign law’’ (citing, inter alia, Leasco, 468 F. 2d, at 1334–1339, and Schoenbaum v. Firstbrook, 405 F. 2d 200, rev’d on rehearing on other grounds, 405 F. 2d 215 (CA2 1968) (en banc))).

⁶ And also one of the most short lived. See Civil Rights Act of 1991, §109, 105 Stat. 1077 (repudiating Aramco).

⁷ See also, e.g., Hartford Fire Ins. Co. v. California, 509 U. S. 764 (1993) (declining to apply presumption in assessing question of Sherman Act extraterritoriality); Smith v. United States, 507 U. S. 197, 201–204 (1993) (opinion for the Court by Rehnquist, C. J.) (considering presumption ‘‘[l]astly,’’ to resolve ‘‘any lingering doubt,’’ after considering structure, legislative history, and judicial interpretations of Federal Tort Claims Act); cf. Sale, 509 U. S., at 188 (stating that presumption ‘‘has special force when we are construing treaty and statutory provisions that,’’ unlike §10(b), ‘‘may involve foreign and military affairs for which the President has unique responsibility’’); Dodge, Understanding the Presumption Against Extraterritoriality, 16 Berkeley J. Int’l L. 85, 110 (1998) (explaining that lower courts ‘‘have been unanimous in concluding that the presumption against extraterritoriality is not a clear statement rule’’). The Court also relies on Microsoft Corp. v. AT&T Corp., 550 U. S. 437, 455–456 (2007). Ante, at 16. Yet Microsoft’s articulation of the presumption is a far cry from the Court’s rigid theory. ‘‘As a principle of general application,’’ Microsoft innocuously observed, ‘‘we have stated that courts should ‘‘assume that legislators take account of the legitimate sovereign interests of other nations when they write American laws.’’’ 550 U. S., at 455 (quoting F. Hoffmann-La Roche Ltd v. Empagran S. A., 542 U. S. 155, 164 (2004)).

⁸ Cf. Dodge, 16 Berkeley J. Int’l L., at 88, n. 25 (regardless whether one frames question as ‘‘whether the presumption against extraterritoriality should apply [or] whether the regulation is extraterritorial,’’ ‘‘one must ultimately grapple with the basic issue of what connection to the United States is sufficient to justify the assumption that Congress would want its laws to be applied’’).

⁹ By its terms, §10(b) regulates ‘‘interstate commerce,’’ 15 U. S. C. §78j, which the Exchange Act defines to include ‘‘trade, commerce, transportation, or communication . . . between any foreign country and any State, or between any State and any place or ship outside thereof.’’ §78c(a)(17). Other provisions of the Exchange Act make clear that Congress contemplated some amount of transnational application. See, e.g., §78b(2) (stating, in explaining necessity for regulation, that ‘‘[t]he prices established and offered in [securities] transactions are generally disseminated and quoted throughout the United States and foreign countries and constitute a basis for determining and establishing the prices at which securities are bought and sold’’); §78dd(b) (exempting from regulation foreign parties ‘‘unless’’ they transact business in securities ‘‘in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate to prevent the evasion of this chapter’’ (emphasis added)); see also Schoenbaum, 405 F. 2d, at 206–208 (reviewing statutory text and legislative history). The Court finds these textual references insufficient to overcome the presumption against extraterritoriality, ante, at 13–15, but as explained in the main text, that finding rests upon the Court’s misapplication of the presumption.

¹⁰ The Government submits that a ‘‘transnational securities fraud violates Section 10(b) if significant conduct material to the fraud’s success occurs in the United States.’’ Brief for United States as Amicus Curiae 6. I understand the Government’s submission to be largely a repackaging of the ‘‘conduct’’ prong of the Second Circuit’s test. The Government expresses no view on that test’s ‘‘effects’’ prong, as the decision below considered only respondents’ conduct. See id., at 15, n. 2; 547 F. 3d 167, 171 (CA2 2008).

¹¹ Given its focus on ‘‘domestic conditions,’’ Foley Bros., Inc. v. Filardo, 336 U. S. 281, 285 (1949), I expect that virtually all ‘‘‘foreign-cubed’’’ actions—actions in which ‘‘(1) foreign plaintiffs [are] suing (2) a foreign issuer in an American court for violations of American securities laws based on securities transactions in (3) foreign countries,’’ 547 F. 3d, at 172— would fail the Second Circuit’s test. As they generally should. Under these circumstances, the odds of the fraud having a substantial connection to the United States are low. In recognition of the Exchange Act’s focus on American investors and the novelty of foreign-cubed lawsuits, and in the interest of promoting clarity, it might have been appropriate to incorporate one bright line into the Second Circuit’s test, by categorically excluding such lawsuits from §10(b)’s ambit.

¹² The Court’s opinion does not, however, foreclose the Commission from bringing enforcement actions in additional circumstances, as no issue concerning the Commission’s authority is presented by this case. The Commission’s enforcement proceedings not only differ from private §10(b) actions in numerous potentially relevant respects, see Brief for United States as Amicus Curiae 12–13, but they also pose a lesser threat to international comity, id., at 26–27; cf. Empagran, 542 U. S., at 171 (‘‘‘[P]rivate plaintiffs often are unwilling to exercise the degree ofself-restraint and consideration of foreign governmental sensibilities generally exercised by the U. S. Government’’’ (quoting Griffin, Extraterritoriality in U. S. and EU Antitrust Enforcement, 67 Antitrust L. J.159, 194 (1999); alteration in original)).