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The Second Circuit held today that putative securities class actions involving transactions in non-U.S.-listed 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…

The U.S. Court of Appeals for the Second Circuit has allowed the defendants in the Petrobras securities litigation to pursue an immediate appeal from the District Court’s order certifying classes of investors who had purchased unlisted Petrobras securities in off-exchange transactions.  The appeal in In re Petrobras Securities Litigation could help resolve questions about whether claims arising from off-exchange transactions in unlisted securities can be litigated on a classwide basis even if the U.S. securities laws apply to those transactions (a separate controversial issue).

In re Petrobras Securities Litigation continues to produce interesting developments – this time on SLUSA preemption and Brazilian law.  On March 12, 2016, the U.S. District Court for the Southern District of New York held that the Securities Litigation Uniform Standards Act (“SLUSA”) does not preempt claims asserted under foreign law and that Brazilian law requires a plaintiff to have actually realized loss on the securities transactions at issue.

The United States District Court for the Southern District of New York yesterday certified two classes of investors who had purchased Petrobras securities on U.S. exchanges or in other U.S. transactions. The February 2, 2016 decision in In re Petrobras Securities Litigation held that potential questions about whether foreign courts would recognize a U.S. class-action judgment and whether individual off-exchange purchasers bought their Petrobras securities in U.S. transactions did not preclude class certification.

The narrowing of the federal securities laws’ applicability to non-U.S. transactions continues. On December 21, 2015, the U.S. District Court for the Southern District of New York held in In re Petrobras Securities Litigation that certain purchasers of Petrobras debt securities could not sue under the federal securities laws. In so ruling, the court held that settlements of transfers through the New York-based Depository Trust Company (the “DTC”) do not suffice in and of themselves to bring what would otherwise be non-U.S. transactions within the reach of the federal securities laws.

The travails of Petrobras have generated a lot of attention – and litigation – in the past year.  On July 30, 2015, District Judge Jed Rakoff, of the Southern District of New York, issued an opinion explaining his prior order largely denying the defendants’ motions to dismiss U.S. securities-law claims filed on behalf of a putative class of purchasers of Petrobras’s sponsored American Depository Shares, which are listed on the New York Stock Exchange.  In re Petrobras Securities Litigation.  But the court dismissed the claims of purchasers who – in addition to buying Petrobras securities on the NYSE or in other U.S. transactions – had also bought Petrobras securities on the Brazilian stock exchange (the “Bovespa”) and had sought to assert claims under Brazilian law as to those purchases.  The court ruled that the Brazilian-law claims were subject to a mandatory arbitration bylaw that Petrobras had adopted in 2002 by board resolution and shareholder vote.