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In re Petrobras Securities

United States Court of Appeals, Second Circuit

July 7, 2017

IN RE PETROBRAS SECURITIES
v.
PETER KALTMAN, individually and on behalf of all others similarly situated, DIMENSIONAL EMERGING MARKETS VALUE FUND, DFA INVESTMENT DIMENSIONS GROUP INC., on behalf of its series Emerging Markets Core Equity Portfolio, Emerging Markets Social Core Equity Portfolio and T.A. World ex U.S. Core Equity Portfolio, DFA INVESTMENT TRUST COMPANY, on behalf of its series The Emerging Markets Series, DFA AUSTRIA LIMITED, solely in its capacity as responsible entity for the Dimensional Emerging Markets Trust, DFA International Core Equity Fund and DFA International Vector Equity Fund by Dimensional Fund Advisors Canada ULC solely in its capacity as Trustee, DIMENSIONAL FUNDS PLC, on behalf of its sub-fund Emerging Markets Value Fund, DIMENSIONAL FUNDS ICVC, on behalf of its sub-fund Emerging Markets Core Equity Fund, SKAGEN AS, DANSKE INVEST MANAGEMENT A/S, DANSKE INVEST MANAGEMENT COMPANY, NEW YORK CITY EMPLOYEES' RETIREMENT SYSTEM, NEW YORK CITY POLICE PENSION FUND, BOARD OF EDUCATION RETIREMENT SYSTEM OF THE CITY OF NEW YORK, TEACHERS' RETIREMENT SYSTEM OF THE CITY OF NEW YORK, NEW YORK CITY FIRE DEPARTMENT PENSION FUND, NEW YORK CITY DEFERRED COMPENSATION PLAN, FORSTA AP-FONDEN, TRANSAMERICA INCOME SHARES, INC., TRANSAMERICA FUNDS, TRANSAMERICA SERIES TRUST, TRANSAMERICA PARTNERS PORTFOLIOS, JOHN HANCOCK VARIABLE INSURANCE TRUST, JOHN HANCOCK FUNDS II, JOHN HANCOCK SOVEREIGN BOND FUND, JOHN HANCOCK BOND TRUST, JOHN HANCOCK STRATEGIC SERIES, JOHN HANCOCK INVESTMENT TRUST, JHF INCOME SECURITIES TRUST, JHF INVESTORS TRUST, JHF HEDGED EQUITY & INCOME FUND, ABERDEEN EMERGING MARKETS FUND, ABERDEEN GLOBAL EQUITY FUND, ABERDEEN GLOBAL NATURAL RESOURCES FUND, ABERDEEN INTERNATIONAL EQUITY FUND, each a series of Aberdeen Funds, ABERDEEN CANADA EMERGING MARKETS FUND, ABERDEEN CANADA SOCIALLY RESPONSIBLE GLOBAL FUND, ABERDEEN CANADA SOCIALLY RESPONSIBLE INTERNATIONAL FUND, ABERDEEN CANADA FUNDS EAFE PLUS EQUITY FUND AND ABERDEEN CANADA FUNDS GLOBAL EQUITY FUND, each a series of Aberdeen Canada Funds, ABERDEEN EAFE PLUS ETHICAL FUND, ABERDEEN EAFE PLUS FUND, ABERDEEN EAFE PLUS SRI FUND, ABERDEEN EMERGING MARKETS EQUITY FUND, ABERDEEN FULLY HEDGED INTERNATIONAL EQUITIES FUND, ABERDEEN INTERNATIONAL EQUITY FUND, ABERDEEN GLOBAL EMERGING MARKETS EQUITY FUND, ABERDEEN GLOBAL ETHICAL WORLD EQUITY FUND, ABERDEEN GLOBAL RESPONSIBLE WORLD EQUITY FUND, ABERDEEN GLOBAL WORLD EQUITY DIVIDEND FUND, ABERDEEN GLOBAL WORLD EQUITY FUND, ABERDEEN GLOBAL WORLD RESOURCES EQUITY FUND, ABERDEEN EMERGING MARKETS EQUITY FUND, ABERDEEN ETHICAL WORLD EQUITY FUND, ABERDEEN MULTI- ASSET FUND, ABERDEEN WORLD EQUITY FUND, ABERDEEN LATIN AMERICA EQUITY FUND, INC., AAAID EQUITY PORTFOLIO, ALBERTA TEACHERS RETIREMENT FUND, AON HEWITT INVESTMENT CONSULTING, INC., AURION INTERNATIONAL DAILY EQUITY FUND, BELL ALIANT REGIONAL COMMUNICATIONS INC., BMO GLOBAL EQUITY CLASS, CITY OF ALBANY PENSION PLAN, DESJARDINS DIVIDEND INCOME FUND, DESJARDINS EMERGING MARKETS FUND, DESJARDINS GLOBAL ALL CAPITAL EQUITY FUND, DESJARDINS OVERSEAS EQUITY VALUE FUND, DEVON COUNTY COUNCIL GLOBAL EMERGING MARKET FUND, DEVON COUNTY COUNCIL GLOBAL EQUITY FUND, DGIA EMERGING MARKETS EQUITY FUND L.P., ERIE INSURANCE EXCHANGE, FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND, GE UK PENSION COMMON INVESTMENT FUND, HAPSHIRE COUNTY COUNCIL GLOBAL EQUITY PORTFOLIO, LONDON BOROUGH OF HOUNSLOW SUPPERANNUATION FUND, MACKENZIE UNIVERSAL SUSTAINABLE OPPORTUNITIES CLASS, MARSHFIELD CLINIC, MOTHER THERESA CARE AND MISSION TRUST, MTR CORPORATION LIMITED RETIREMENT SCHEME, MYRIA ASSET MANAGEMENT EMERGENCE, NATIONAL PENSION SERVICE, NPS TRUST ACTIVE 14, OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM, WASHINGTON STATE INVESTMENT BOARD, ABERDEEN LATIN AMERICAN INCOME FUND LIMITED, ABERDEEN GLOBAL EX JAPAN PENSION FUND PPIT, FS INTERNATIONAL EQUITY MOTHER FUND, NN INVESTMENT PARTNERS B.V., acting in the capacity of management company of the mutual fund NN Global Equity Fund and in the capacity of management company of the mutual fund NN Institutioneel Dividend Aandelen Fonds, NN INVESTMENT PARTNERS LUXEMBOURG S.A., acting in the capacity of management company SICAV and its Sub-Funds and NN (L) SICAV, for and on behalf of NN (L) Emerging Markets High Dividend, NN (L) FIRST, AURA CAPITAL LTD., WGI EMERGING MARKETS FUND, LLC, BILL AND MELINDA GATES FOUNDATION TRUST, BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM, TRUSTEES OF THE ESTATE OF BERNICE PAUAHI BISHOP, LOUIS KENNEDY, individually and on behalf of all others similarly situated, KEN NGO, individually and on behalf of all others similarly situated, JONATHAN MESSING, individually and on behalf of all others similarly situated, CITY OF PROVIDENCE, individually and on behalf of all others similarly situated, UNION ASSET MANAGEMENT HOLDING AG, Plaintiffs, UNIVERSITIES SUPERANNUATION SCHEME LIMITED, EMPLOYEES RETIREMENT SYSTEM OF THE STATE OF HAWAII, NORTH CAROLINA DEPARTMENT OF STATE TREASURER, Plaintiffs-Appellees,
v.
PETRÓLEO BRASILEIRO S.A. PETROBRAS, BB SECURITIES LTD., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, BANK OF CHINA (HONG KONG) LIMITED, BANCA IMI, S.P.A., SCOTIA CAPITAL (USA) INC., THEODORE MARSHALL HELMS, PETROBRAS GLOBAL FINANCE B. V., PETROBRAS AMERICA INC., CITIGROUP GLOBAL MARKETS INC., ITAU BBA USA SECURITIES, INC., J.P. MORGAN SECURITIES LLC, MORGAN STANLEY & CO. LLC, MITSUBISHI UFJ SECURITIES (USA), INC., HSBC SECURITIES (USA) INC., STANDARD CHARTERED BANK, BANCO BRADESCO BBI S.A., Defendants-Appellants, JOSE SERGIO GABRIELLI, SILVIO SINEDINO PINHEIRO, PAULO ROBERTO COSTA, JOSE CARLOS COSENZA, RENATO DE SOUZA DUQUE, GUILLHERME DE OLIVEIRA ESTRELLA, JOSE MIRANDA FORMIGL FILHO, MARIA DAS GRACAS SILVA FOSTER, ALMIR GUILHERME BARBASSA, MARIANGELA MOINTEIRO TIZATTO, JOSUE CHRISTIANO GOME DA SILVA, DANIEL LIMA DE OLIVEIRA, JOSE RAIMUNDO BRANDA PEREIRA, SERVIO TULIO DA ROSA TINOCO, PAULO JOSE ALVES, GUSTAVO TARDIN BARBOSA, ALEXANDRE QUINTAO FERNANDES, MARCOS ANTONIO ZACARIAS, CORNELIS FRANCISCUS JOZE LOOMAN, PRICEWATERHOUSECOOPERS AUDITORES INDEPENDENTES, Defendants.

          Argued: November 2, 2016

         Appeal from an order of the United States District Court for the Southern District of New York (Rakoff, J.) certifying two classes under Federal Rule of Civil Procedure 23(b)(3): one asserting claims under the Securities Exchange Act of 1934 (the "Exchange Act"), and the second asserting claims under the Securities Act of 1933 (the "Securities Act"). Appellants assert two challenges.

         First, Appellants challenge both class definitions insofar as they include all otherwise eligible persons who purchased debt securities in "domestic transactions, " as defined in Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010). Because the district court must verify the domesticity of individual over- the-counter transactions in globally traded notes, Appellants argue that both classes fail to satisfy the requirements for certification under Rule 23. We hold that the district court committed legal error by failing to address the need for such Morrison inquiries in its analysis of predominance under Rule 23(b)(3). We therefore vacate this portion of the district court's order and remand for further proceedings. In addition, we clarify the narrow scope of the "implied" Rule 23 requirement of "ascertainability."

         Second, Appellants assert that the district court erred in finding that the Exchange Act class was entitled to a presumption of reliance under Basic Inc. v. Levinson, 485 U.S. 224 (1988). We find no abuse of discretion in the district court's blended analysis of direct and indirect evidence of market efficiency. We therefore affirm as to this issue.

          Jeremy A. Lieberman, Mark I. Gross, Emma Gilmore, John A. Keho & Brenda F. Szydlo (on the brief), Pomerantz LLP, New York, NY, for the Plaintiffs-Appellees.

          Lewis J. Liman, Jared Gerber & Mitchell A. Lowenthal (on the brief), Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Defendants- Appellants Petróleo Brasileiro S.A. - Petrobras, Theodore Marshall Helms, Petrobras Global Finance B.V., and Petrobras America Inc.

          Jay B. Kasner, Boris Bershteyn, Scott D. Musoff & Jeremy A. Berman (on the brief), Skadden, Arps, Slate, Meagher & Flom LLP, New York NY, for Defendants-Appellants BB Securities Ltd., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of China (Hong Kong) Limited, Banca IMI, S.p.A., Scotia Capital (USA) Inc., Citigroup Global Markets Inc., Itau BBA USA Securities, Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Mitsubishi UFJ Securities (USA), Inc., HSBC Securities (USA) Inc., Standard Chartered Bank, and Banco Bradesco BBI S.A.

          Before: Hall, Livingston, Circuit Judges, and Garaufis, District Judge. [*]

          Garaufis, District Judge.

         This expedited appeal arises out of an order entered in the United States District Court for the Southern District of New York (Rakoff, J.) certifying two classes in this securities fraud action against Petróleo Brasileiro S.A. - Petrobras ("Petrobras") and various other defendants. See In re Petrobras Sec. Litig. (the "Certification Order"), 312 F.R.D. 354 (S.D.N.Y. 2016).

         Petrobras is a multinational oil and gas company headquartered in Brazil and majority-owned by the Brazilian government. Though Petrobras was once among the largest companies in the world, its value declined precipitously after the exposure of a multi-year, multi-billion-dollar money-laundering and kickback scheme, prompting a class action by holders of Petrobras equity and debt securities ("Plaintiffs") against multiple defendants ("Defendants"): Petrobras and certain wholly owned subsidiaries (the "Subsidiaries"; collectively with Petrobras, the "Petrobras Defendants"[1]); former officers and directors of the Petrobras Defendants; several underwriters of Petrobras debt securities (the "Underwriter Defendants"[2]); and Petrobras's independent auditor.

         The district court certified two classes (the "Classes") for money damages under Federal Rule of Civil Procedure 23(b)(3): the first asserts claims under the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. §§ 78a et seq.; and the second asserts claims under the Securities Act of 1933 (the "Securities Act"), 15 U.S.C. §§ 77a et seq.[3] On appeal, the Petrobras Defendants and the Underwriter Defendants (collectively, "Appellants") contest the Certification Order on two grounds.

         First, Appellants challenge both class definitions insofar as they include all otherwise eligible persons who purchased Petrobras debt securities in "domestic transactions." Because Petrobras's debt securities do not trade on a domestic exchange, the district court must assess each class member's over-the-counter transactions for markers of domesticity under Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010). Appellants assert that the need for such assessments precludes class certification, particularly in light of concerns over the availability and content of the necessary transaction records. We first address Appellants' arguments regarding the "implied" Rule 23 requirement of "ascertainability, " taking this opportunity to clarify the scope of the contested ascertainability doctrine: a class is ascertainable if it is defined using objective criteria that establish a membership with definite boundaries. That threshold requirement is met here. However, we next hold that the district court committed legal error by finding that Rule 23(b)(3)'s predominance requirement was satisfied without considering the need for individual Morrison inquiries regarding domestic transactions. We therefore vacate this portion of the Certification Order.

         Second, with regard to the Exchange Act Class, the Petrobras Defendants[4]challenge the district court's finding that Plaintiffs were entitled to a presumption of reliance under the "fraud on the market" theory established in Basic Inc. v. Levinson, 485 U.S. 224 (1988). We find no abuse of discretion in the district court's determination that Plaintiffs met their burden under Basic with a combination of direct and indirect evidence of market efficiency. We therefore affirm as to this issue.

         For the reasons set forth below, we AFFIRM IN PART and VACATE IN PART the judgment of the district court and REMAND the case for further proceedings consistent with this opinion.

         BACKGROUND

         We provide here a brief summary of the proceedings below as relevant for the issues on appeal. For additional background on Plaintiffs' allegations and causes of action, see the district court's prior orders. See In re Petrobras Sec. Litig. (the "July 2015 Order"), 116 F.Supp.3d 368, 373-77 (S.D.N.Y. 2015) (summarizing the original consolidated complaint); In re Petrobras Sec. Litig. (the "December 2015 Order"), 150 F.Supp.3d 337 (S.D.N.Y. 2015) (discussing new allegations in the amended pleadings).[5]

         I. Factual Background

         A. Plaintiffs' Allegations of Corruption at Petrobras

         Plaintiffs' claims arise out of a conspiracy that began in the first decade of the new millennium, at which time Petrobras was expanding its production capacity. The company used a competitive bidding process for major capital expenditures, including the construction and purchase of oil refineries. Over a period of several years, a cartel of contractors and suppliers coordinated with corrupt Petrobras executives to rig Petrobras's bids at grossly inflated prices. The excess funds were used to pay billions of dollars in bribes and kickbacks to the corrupt executives and to government officials. In addition, the inflated bid prices artificially increased the carrying value of Petrobras's assets. Plaintiffs allege that Petrobras knew about the kickback cartel, and was complicit in concealing information from investors and the public.

         Brazil's Federal Police discovered the scheme during a money-laundering investigation, and ultimately arrested a number of the individuals involved. As details of the scandal emerged, Petrobras made corrective disclosures that, according to Plaintiffs, significantly understated the extent of incorrectly capitalized payments and inflated asset values. Even so, the value of Petrobras's securities declined precipitously. Plaintiffs allege that, "[a]t its height in 2009, Petrobras was the world's fifth-largest company, with a market capitalization of $310 billion"; by early 2015, its worth had allegedly declined to $39 billion. 4th Am. Compl. ¶ 2.

         B. Petrobras Securities

         Petrobras's common and preferred shares trade on a Brazilian stock exchange, the BM&F BOVESPA. The company sponsors American Depository Shares ("ADS")[6] that represent its common and preferred shares. Those ADS are listed and trade on the New York Stock Exchange ("NYSE").

         In addition, Petrobras has issued multiple debt securities (the "Notes"; collectively with ADS, "Petrobras Securities") underwritten by syndicates of domestic and foreign banks. The Notes do not trade on any U.S. exchange. Investors trade Notes in over-the-counter transactions, whether in connection with an initial debt offering or in the global secondary market.

         II. Procedural History

         In December 2014 and January 2015, Petrobras investors filed five putative class actions asserting substantially similar claims against Petrobras and other defendants. The district court consolidated those actions in February 2015 and certified the Classes in February 2016. The district court also presided over several individual actions involving similar claims.[7]

         A. Plaintiffs' Causes of Action

         As relevant for this appeal, Plaintiffs assert a cause of action under the Exchange Act against the Petrobras Defendants, and three causes of action under the Securities Act against various Petrobras and Underwriter Defendants.

         1. Claims Under the Exchange Act

         Plaintiffs' Exchange Act claims are brought against Petrobras and the Subsidiaries on behalf of holders of Petrobras ADS and Notes. Plaintiffs assert that, during the class period of January 22, 2010, to July 28, 2015, the Petrobras Defendants made two types of false and misleading statements in violation of Section 10(b) of the Exchange Act and Rule 10b-5. See 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. First, the Petrobras Defendants produced financial statements with inflated asset values. Second, they assured Petrobras investors that the company adhered to ethical management principles and maintained strict financial controls to prevent fraud and corruption.

         2. Claims Under the Securities Act

         Plaintiffs rely on similar factual allegations in their claims under the Securities Act, brought on behalf of Petrobras Noteholders. Plaintiffs allege that the Petrobras Defendants and the Underwriter Defendants made materially false representations in registration statements and other documents connected with offerings of Petrobras Notes in May 2013 and March 2014 (the "Offerings"), thereby establishing liability under Sections 11, 12(a)(2), and 15 of the Securities Act. See 15 U.S.C. §§ 77k, 77l(a)(2), 77o.

         B. The Certification Order

         On February 2, 2016, the district court granted Plaintiffs' motion to certify two classes under Rule 23(b)(3), one asserting claims under the Exchange Act and the other asserting claims under the Securities Act. Certification Order, 312 F.R.D. 354.

         Because Petrobras Notes do not trade on any U.S.-based exchange, Noteholders in both Classes are only entitled to assert claims under the Exchange Act and the Securities Act if they can show that they acquired their Notes in "domestic transactions." Morrison, 561 U.S. at 267. To ensure compliance with Morrison, the district court limited both class definitions to "members [who] purchased Notes in domestic transactions." Certification Order, 312 F.R.D. at 360.

         The Exchange Act Class is defined, in relevant part, [8] as:

[A]ll purchasers who, between January 22, 2010 and July 28, 2015, . . . purchased or otherwise acquired [Petrobras Securities], including debt securities issued by [the Subsidiaries] on the [NYSE] or pursuant to other domestic transactions, and were damaged thereby.

Id. at 372.

         The Securities Act Class is defined, in relevant part, as:

[A]ll purchasers who purchased or otherwise acquired [Notes] in domestic transactions, directly in, pursuant and/or traceable to [U.S.-registered public offerings on May 15, 2013, and March 11, 2014] . . ., and were damaged thereby.[9]

Id. The Securities Act Class definition is temporally limited to purchases made "before Petrobras made generally available to its security holders an earnings statement covering a period of at least twelve months beginning after the effective date of the offerings." Id. This language conforms to the limitations inherent in Section 11, given the absence of any allegation that Plaintiffs relied on any such earnings statement.[10] See 15 U.S.C. § 77k(a).

         III. The Instant Appeal

         On June 15, 2016, a panel of this Court granted Appellants' timely filed petition for permission to appeal the Certification Order under Federal Rule of Civil Procedure 23(f) and Federal Rule of Appellate Procedure 5(a). On August 2, 2016, a separate panel granted Appellants' motion for a stay pending resolution of this expedited interlocutory appeal.

         DISCUSSION

         A plaintiff seeking certification of a Rule 23(b)(3) class action bears the burden of satisfying the requirements of Rule 23(a)-numerosity, commonality, typicality, and adequacy of representation-as well as Rule 23(b)(3)'s requirements: (1) that "the questions of law or fact common to class members predominate over any questions affecting only individual members" (the "predominance" requirement); and (2) that "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy" (the "superiority" requirement). Fed.R.Civ.P. 23(a), (b)(3); In re U.S. Foodservice Inc. Pricing Litig., 729 F.3d 108, 117 (2d Cir. 2013) ("To certify a class, a district court must . . . find that each [Rule 23] requirement is 'established by at least a preponderance of the evidence.'" (quoting Brown v. Kelly, 609 F.3d 467, 476 (2d Cir. 2010))). This Court has also "recognized an implied requirement of ascertainability in Rule 23, " which demands that a class be "sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member." Brecher v. Republic of Argentina, 806 F.3d 22, 24 (2d Cir. 2015) (internal quotation marks and citations omitted).

         Appellants do not challenge the district court's findings with regard to the class certification elements under Rule 23(a). Rather, they assert two arguments under Rule 23(b)(3). Appellants first argue that both Classes fail to satisfy ascertainability, predominance, and superiority because putative class members must establish, on an individual basis, that they acquired their securities in "domestic transactions." The Petrobras Defendants assert a second predominance challenge specific to the Exchange Act Class: they argue that the district court erred in finding that Plaintiffs successfully established a class-wide presumption of reliance under the "fraud on the market" theory.

         I. Standard of Review

         "We review a district court's conclusions as to whether the requirements of Federal Rule of Civil Procedure 23 were met, and in turn whether class certification was appropriate, for abuse of discretion."[11] In re Vivendi, S.A. Sec. Litig., 838 F.3d 223, 263 (2d Cir. 2016) (citations omitted). "While we review the district court's construction of legal standards de novo, we review the district court's application of those standards for whether the district court's decision falls within the range of permissible decisions." Roach v. T.L. Cannon Corp., 778 F.3d 401, 405 (2d Cir. 2015) (citing Myers v. Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010)). "To the extent that the district court's decision as to class certification is premised on a finding of fact, we review that finding for clear error." UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121, 130-31 (2d Cir. 2010) (citing In re Initial Pub. Offering Sec. Litig. ("In re IPO"), 471 F.3d 24, 40-41 (2d Cir. 2006)); see also In re Vivendi, 838 F.3d at 263.

         II. "Domestic Transactions" as a Condition for Class Membership

         The two certified Classes include all claims arising out of Petrobras Notes purchased in "domestic transactions" during the class period, thereby capturing the broadest membership possible under Morrison. Appellants argue that the difficulties inherent in assessing putative class members' transaction records make the Classes uncertifiable for several reasons, the most important of which, for our purposes, are (1) the ascertainability doctrine, which has seen recent developments in this Circuit and others; and (2) predominance. We hold that both class definitions satisfy the ascertainability doctrine as it is defined in this Circuit. We further hold, however, that the district court erred in conducting its predominance analysis without considering the need for individualized Morrison inquiries. On that basis, we vacate the district court's certification decision and remand for further proceedings.

         A. Extraterritoriality and Federal Securities Law

         1. Defining "Domestic Transactions": Morrison and Absolute Activist

         "It is a 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." Morrison, 561 U.S. at 255 (internal quotation marks and citation omitted). Based on that presumption against extraterritoriality, the Supreme Court held in Morrison that the reach of U.S. securities law is presumptively limited to (1) "transactions in securities listed on domestic exchanges, " and (2) "domestic transactions in other securities." Id. at 267 (discussing Section 10(b) of the Exchange Act); see also id. at 268 (noting that "[t]he same focus on domestic transactions is evident in the Securities Act").[12]

         As noted in the margin, we assume that a purchase of Petrobras ADS qualifies under Morrison's first prong as long as the transaction occurs on the NYSE, a "domestic exchange." See City of Pontiac Policemen's & Firemen's Ret. Sys. v. UBS AG, 752 F.3d 173, 180-81 (2d Cir. 2014) (holding that mere listing on a domestic exchange is not sufficient to establish domesticity if the relevant securities transaction did not occur on a domestic exchange). The Notes, however, do not trade on any domestic exchange.[13] Therefore, to assert claims under ...


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