‘Morrison’ Bars Claims Against Portuguese Bank Over Shares Bought Through Foreign Entities

By Robert A. O’Hare Jr. and Andrew C. Levitt, New York Law Journal - February 28, 2011

Horvath has a residence in Portugal and his wife is fluent in Portuguese. Through accounts with Banco Comercial Portugues S.A. (BCP), he invested $4.5 million in “HSH Shares” and “Snowball Notes” involving purchase of shares of German banks though Luxembourg and Island of Jersey entities. The securities were not listed on domestic exchanges nor bought or sold in the United States. Horvath lost $3.9 million. The court dismissed his securities fraud action against BCP. Claims that BCP violated the Securities and Exchange Act of 1934 were precluded by the U.S. Supreme Court’s ruling in Morrison v. National Australia Bank Ltd. that “only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which §10(b) [of the Securities Act of 1934] applies.” Applying the four-part test in Philips v. Audio Active Ltd., the court held that Horvath could not evade a mandatory forum selection clause providing for Portuguese courts’ exclusive jurisdiction over disputes arising from his investment agreement with BCP. Noting that Horvath signed multiple agreements containing the clause, including one in English, the court stated that he could not assert that he did not understand the contract’s language.
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