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Monday, February 13, 2012

What Happens When Federal Law Is Limited?

For all the work on U.S. federal courts, a surprisingly understudied areas is what happens when federal courts close their doors or limit federal law.  In other words, when federal doctrine makes it harder to file cases in federal court, what do plaintiffs do?  This link provides an interesting case study.  In short, the Supreme Court in a recent case decided that the federal securities laws do not have extraterritorial effect because Congress did not specifically provide for such effect.  This means that many alleged foreign fraud cases cannot be pled in federal court under those laws.  As the link shows, plaintiffs are now trying to get around that federal rule by pleading the case under state fraud (and other) law.  Interestingly, while there is federal law limiting the extraterritorial effects of that law, many states do not have a similar rule for state law, which may raise due process concerns.  So, by closing federal doors to these cases, the Court may have left open a window for state law claims.  In so doing, I wonder if there is an even greater risk of extraterritorial application of U.S. law and the potential for conflicts between U.S. states and their law and foreign states and their regulatory interests?

Posted by Trey Childress on February 13, 2012 at 02:10 PM | Permalink


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I co-authored an article in the Executive Counsel Magazine that addressed the broader issue in the context of the antitrust laws. This practice-oriented article advised in-house counsel to pay more attention to state antitrust law as federal antitrust law recedes in certain areas. Here is the article: http://www.jdsupra.com/post/documentViewer.aspx?fid=68ecfc20-6b18-4449-90f8-caefd64cab76

Posted by: Jarod Bona | Feb 13, 2012 2:26:40 PM

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