Morrison and Class Certification: The Second Circuit Petrobras Decision
Client Memorandum

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On July 7, 2017, the United States Court of Appeals for the Second Circuit vacated parts of the District Court’s class certification order in In re Petrobras Securities Litigation (“Petrobras”), holding that the District Court failed to address whether the need to establish the “domestic” nature of each class member’s purchase of Petrobras securities—as required under Morrison v. National Australia Bank Ltd.,—defeated the Rule 23 requirement that class issues “predominate” over issues unique to each class member.

The Second Circuit’s decision opens a new chapter in Morrison jurisprudence, extending the impact of the presumption of extraterritoriality to Rule 23’s predominance requirement.  Purported class actions arising out of the purchase of securities in the over-the-counter market or otherwise off-exchange now must grapple at the class certification stage with whether proof of “domesticity,” in the language of the Second Circuit, is not sufficiently common for putative class members to satisfy Rule 23’s predominance requirement.