FIL ED U.S. COURT OF APPEAL S EL EVENTHCI RCUI T AUGUST 13, 2009 THOMAS K. KAH

N CL ERK [PUBLIS H]
IN THE UN ITED STATES COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

__ __ __ __ __ __ __ __ __ __ __ __ No. 0 8- 16 33 4

__ __ __ __ __ __ __ __ __ __ __ __ D. C. Dock etNo. 0 5- 01 65 6- MD-T-2 7- TBM InRe: CP SHIPS LTD. SECURITIES LITIGATION,

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ GEOFFREY GOTTFRIED, in di vi du al ly an d o n b eh al f of

all ot he rs si mil arl y si tu at ed , BILLY R. HOOD, JAM ES W . NELSON, in di vi du al ly an d o n b eh al f of

all ot he rs si mil arl y si tu at ed , RAYMOND TYLER, onbe ha lf o f hi m se lf a ndall ot he rs si mil arl y si tu at ed , KIRVIN HENDRIX, et a l., Pl ai nt iff s- App el le es , ve rs us ALLEN GERMAIN, In te res te d P arty -Ap pe ll an t, CP SHIP S LTD., RAY MILES,IAN W EBBER,

FRANK HALLIW ELL, Defen da nt s- App el le es .

__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co urt fo r th e Mi dd le Dis tri ctof F lo rid a

__ __ __ __ __ __ __ __ __ __ __ __ _ (Au gu st13 , 20 09 ) Befo re WILSON, KRAVITCH an d ANDERSON, Ci rcu itJu dg es . ANDERSON, Circ ui t J ud ge : Object or -Ap pe ll an t Al le n Germ ai n app eal s fr om th e d is tri ctco urt’s fi na l
or de r ap pr ov in g t he set tl em en t o f a s ecu rit ie s cl as s ac ti on laws ui t. Germ ai n, a c la ss
m em be r in th e in st an t ac ti on , is als o am em be r of a cl as s p ur su in g re la te d l it ig at io n in Can ad a (“ Can ad ian Act io ns ”). Germ ai n i s a C an ad ia n c it iz enwho pu rch as edhi s se cu rit ie s o n t he New YorkSto ckExch an ge (“NYSE”). Germ ai n a rg ue s tha t the di st ric t co urt l ack edsubjec t m at te r juri sd ic ti on ov er the cla im s o f fo rei gn st oc k pu rch as ers or, i n t he alt ern at iv e, sh ou ldha ve de cl in edjuri sd ic ti on as am at te r of
co m ity . In ad di ti on , Germ ai n a rg ue s tha t n ot ic e was in ad equa te an d t ha t the
se tt le m en t i s n otfai r, reas on ab le or a de qu at e. Fo r th e rea so ns setforth be lo w, we affi rm th e d eci si on of t he di st ric t co urt.

2FACTS

Defen da nt -Ap pe ll ee CP Sh ip s Lt d. (“ CP Sh ip s” or “ th e Co m pa ny”) is a pr om in en t co nt ai ne r sh ip pi ng co m pa ny. It o pe rat es insev eral co un tri es . The Co m pa ny is o rg an iz edun de r th e la ws o f Can ad a an d h ead qu art eredinLon do n o r Gatwi ck , Eng land . Alth ou gh off ic ia ll y he ad qu art eredinEng la nddu rin g the cla ss pe rio d (J anua ry

29 , 20 03 to Aug us t 9 , 20 04 ) (“ Cl as s Pe rio d” ), cru ci al he ad qu art ers act iv it ie s –in cl ud in g t he rel ev an t o pe rat io ns an d p ers on ne l tha t wer e cen tra l t o t he frau d (i .e. th e acc ou nt in g d ep art m en t an d e xe cu ti ve off ic es ) – we re l oc at edin Tam pa , Flo rid a. Thes e acc ou nt in g o pe rat io ns were m ic ro m an ag edby D efen da nt Hall iwel l, fi rs t i n h is cap aci ty as Ch ie f Ope rat in g Off ic er an d l at er i n h is cap aci ty
as Ch ie f Exe cu ti ve Offic er. Hal li well was b as edin , andwork edou t o f, th e Tam pa of fic e dur in g t he Cla ss Peri od . Rou gh ly eig hty pe rcen t o f CP Sh ip s’ sh ares are tra de d o n t he Toro nt o S to ck Exch an ge (“ TSX”) an d ro ug hl y twen ty perce ntare tra de d o n t he NYSE. Fro m 19 93 to 20 03 , CP Sh ip s ac qu ire d n in e d iff eren t b us in es se s. Each bu si ne ss ret ai ne d i ts ownfin an ci al acco un ti ng syste m . In 2 00 4, CP Sh ip s i ns ti tu te d a si ng le acco un ti ng pl at fo rm (“ SAP”) o ve r m os t o f it s b us in es se s. Aft er the SAP im pl em en ta ti on , th e Co m

pa ny ann ounc edth atth e tr an si ti on ha d c au se d i t t o un de rs ta te it s o pe rat io na l co st s. Th e Co m pa ny’ s s to ckpri ce dro pp ed
3ap pr ox im at el y 22 .4 p erce nton th e NYSE an d 2 1.5 pe rcen t o n t he TSX. The al le ga ti on s i n t he in st an t ca se an d t he Can ad ia n Act io ns are b oth b as edon th is
oc cu rren ce. The in st an t cl as s ac ti onass ert s cl ai m s fo r se cu rit ie s fr au d i n v io la ti on of Sect io n 1 0( b) an d 2 0( a) o f th e Exc ha ng e Act . On Apr il 5, 2 00 7, the di st ric t co urt di sm is se d t he Co m

pl ai ntforfai lu re t o m eetth e h ei gh te ne d re qu ire m en ts for pl ead in g s ci en te r un de r th e Pri va te Secu rit ie s Li ti ga ti on Refo rm Act o f 19 95 (“ PSLRA”) . The p la in ti ffs ap pe al edto th is Co urt. Whil e th e ap pe al was p en di ng , th e p art ie s ag reedto set tl e fo r $1 .3 m il li on . This is a sm al l fr act io n o f th e o rig in al lo ss es of $ 13 0 t o $ 18 0 m il li on all eg edinth e Co m pl ai nt . The s et tl em en t cl as s in cl ud es th e cl ai m s o f so m e fo rei gn ers bu t s pe ci fic al ly excl ud es th e cl ai m s o f Can ad ian c it iz en s wh o p ur ch as edCP Sh ip s s to ckon th e TSX. Afte r no ti ces of s et tl em en t wer e p ub li sh ed , an o bjec to r, Earl Down ey , arg ue d th atth e se tt le m en t wo ul d p rev en t s om e m em be rs of t he Can ad ia n c la ss fro m pu rs ui ng th ei r act io n i n C an ad a. The d is tri ctco urt u lt im at el y is su edanord er co nc lu di ng th atDown ey

lac ke d s ta nd in g t o c ha ll en ge th e se tt le m en t. Non ethe le ss , th e p la in ti ffs is su eda supp le m en ta l n ot ic e (“ Supp le m en ta l No ti ce”) ad dr es si ng so m e o f hi s co nc ern s. Itin cl ud edad di ti on al in fo rm at io n abo utth e Can ad ia n Acti on s, i nc lu di ng th e co nt actin fo rm at io n o f th e co un se l i n t he Can ad ia n Act io ns . 4The re was anop po rtu ni ty to o ptou t o f th e cl as s af te r th e Supp le m en ta l No ti ce. On Se pt em

be r 4, 2 00 8, Ap pe ll an t-Ob jecto r All enGerm ai n fi le d t he in st an t ob jecti on s t o t he set tl em en t (“ Object io ns ”). The di st ric t co urt o ve rru le d t he Object io ns an d app ro ve d t he set tl em en t. Germ ai n app eal ed . W e fi rs t ad dr es s subjec t m at te r juri sd ic ti on , andth enad dr es s Germ ai n’s m eri ts ch al le ng es (i.e . to th e n ot ic e an d t o t he fai rn es s o f th e se tt le m en t). STANDARD OF REVIEW The ex is te nc e o f subjec t m at te r juri sd ic ti on is a qu es ti on of l aw we rev ie w de
no vo . Pin tand o v . Mia m i-Da de Hou s. Ag en cy , 50 1 F .3d12 41 , 12 42 (11 thCir
. 20 08 ) (p er cu ria m). Thi s C ou rt r ev ie ws a d is tri ctco urt’s ap pr ov al of aset tl em en t ag reem en t fo r anab us e o f di sc ret io n, Ch ris to v. Pa dg et t, 2 23 F.3d13 24 , 13 35 (11 th Ci r. 20 00 ), be ari ng inmin d t ha t “ [p ]rop on en ts of c la ss act io n s et tl em en ts be ar the bu rd enof d ev el op in g areco rdde m on st rat in g t ha t the set tl em en t d is tri bu ti on is fai r, reas on ab le an d a de qu at e,” Ho lm es v. Co nt in en ta l Ca n C o., 7 06 F.2d11 44 , 11 47 (1 1t h C ir. 1 98 3)
. DISCUSS ION

A. Sub ject M at te r Ju ris di ct io n Fi rs t, we m

us t d et erm in e whe th er Germ ai n ra is eda faci al or f actua l at ta ckon th e ex is te nc e o f subjec t m at te r juri sd ic ti on . Then , we wil l ad dr es s the qu es ti on of
5juri sd ic ti on it se lf. 1. A Fac ia l Ch al le ng e

“ A li ti ga ntge ne ral ly m ay rai se a co urt’s l ackof s ub ject- m at te r juri sd ic ti on at
an y ti m e in th e sa m e ci vi l ac ti on , eve n i ni ti al ly at th e h ig he stap pe ll at e in st an ce.” Kon tri ckv. Ryan, 5 40 U.S. 44 3, 4 55 , 12 4 S . Ct. 9 06 , 91 5 (2 00 4) . Howev er, “ th e pa rti es m ay

adm itth e ex is te nc e o f fac ts whi chsh ow juris di ct io n, an d t he co urts
m ay actjud ic ia ll y

up onsu chanadm is si on .” Ry . Co. v . Ram se y , 89 U.S. 32 2, 3 27 (1 87 5) ; s ee al so Uni te d S ta te s v . Harty, 930 F.2d12 57 , 12 61 (7t h C ir. 1 99 1) (“ Altho ug h c ha ll en ge s t o s ub ject m at te r juri sd ic ti on m ay be rai se d a t an y

ti m e, th e ap pe ll an ts ’ arg um en t . . . is a factua l ch al le ng e n otrai se d b efo re the di stric t co urt. Thi s co urt h as rep eat ed ly stat edth atarg um en ts rai se d fo r th e fi rs t t im e o n app eal are wai ve d.” ) (i nt ern al cit at io ns an d quo ta ti on s o m it te d)
. 1 Thu s, the re ar e two types of c ha ll en ge s t o t he ex is te nc e o f subjec t m at te r Acc ord Meyer v. B erkshire L ife Ins. Co., 372 F.3d 261, 265 (4th Cir. 2004) 1 (conc luding that de fenda

nt-appe llant could admit fac ts establishing that it was a n ERI SA fiduciar y , although that conclusion wa s inex tricably intertwined with the district cour t’s subject matter jurisdiction); Fe rguson v. Neighborhood Hous. Servs. of Cleveland, Inc., 780 F .2d 549, 551 (6th Cir. 1986) (“ The rule that jurisdictional fac ts which are admitted by the par ties may establish subject matter jurisdiction over a c ase is a sa lutory one that promotes spe edy and inexpensive lit igation.”); Verzosa v. Merrill Ly nch, Pierc e, F enner

& Smith, Inc., 589 F .2d 974, 977 (9th Cir. 1978) (pe r curiam) (“ It is well settled that one may stipulate to facts from which jurisdiction may

be infe rre d.”) ( quotation omitt ed).

6juri sd ic ti on . “ A ‘ faci al att ack ’ on th e co m pl ai ntrequi res th e co urt m erel y to lo ok
an d s ee i f th e p la in ti ff h as su ffi ci en tl y all eg eda ba si s o f subjec t m atte r juri sd ic ti on , an d t he all eg at io ns inhi s co m pl ai ntare t ak enas t ru e fo r th e p ur po se s o f th e
m ot io n.” McEl m

urray v. Co ns ol . Gov ’t of Au gu st a-Ri ch m on d C ou nt y , 50 1 F .3d 12 44 , 12 51 (11 th Cir . 20 07 ) (i nt ern al qu ot at io ns an d a lt erat io ns om it te d) . “ ‘Factu al at ta ck s,’ onth e o th er h an d, ch al le ng e th e ex is te nc e o f subjec t m at te r juri sd ic ti on in fact , irre sp ect iv e o f th e p le ad in gs , andm at te rs ou ts id e th e p le ad in gs , su chas te st im on y an d a ffi da vi ts are co ns id ered .” Id . (in te rn al qu ot at io ns om it te d) . In a factua l ch al le ng e, “ th e d is tri ctco urt m us t g iv e th e p la in ti ff anop po rtu ni ty for di sc ov ery an d fo r a h eari ng th atis ap pr op ria te to th e n atur e o f th e m ot io n t o di sm is s.” Will ia m so n v . Tuck er, 6 45 F.2d40 4, 4 14 (5t h C ir. 1 98 1)
. 2 W e co nc lu de th atGerm ai n ra is edon ly a facia l ch al le ng e b efo re the di st ric t
co urt. Germ ai n d idno t ad vi se th e d is tri ctco urt tha t h e in te nd edto rai se a factua l ch al le ng e. Nor d idGerm ai n re qu es t d is co ve ry or an e vi de nt ia ry

he ari ng . It i s al so cl ear f ro m th e tr an sc rip t o f th e Fi na l Ap pr ov al Heari ng th atGerm ai n was rai si ng on ly a facia l ch al le ng e to th e Co m pl ai nt . Furth erm or e, th e d is tri ctco urt’s o pi ni on

3
Fifth Circuit dec isions is sued bef ore O ctober

1, 1981 are binding pr ece dent in this 2 Court. Bonne r v. City

of Prichar d, 661 F.2d 1206, 1209 ( 11th Cir. 1981) (en ba nc). The followingexcerpt fr om the Final Appr oval Hea ringis repre sentative of the 3 dialogue: 7ex pr es sl y

tre at s Germ ai n’s at ta ckas f aci al , andhe di d n otfil e a m ot io n fo r reco ns id erat io n s ta ti ng th athe in te nd edto m ou nta factua l at ta ckon th e Co m pl ai nt . 4 Furth erm or e, Germ ai n h as no t atan y ti m e ex pr es sl y

ch al le ng edan y

fact s de te rm in at iv e o f subjec t m atte r juri sd ic ti on . As di sc us se d b el ow, the all eg at io ns in th e Co m pl ai ntest ab li sh th atsubs ta nt ia l fr au du le ntact iv ity oc cu rredat C P Sh ip s’ Tam pa , Flo rid a, acc ou nt in g o ffi ce. On app eal , Germ ai n c ha ll en ge s o nl y fact s tang en ti al to th atco nc lu si on . There is no ev id en ce i n t he reco rdto su gg es t tha t the di st ric t co urt i n fa ctlac ke d s ub ject m at te r juri sd ic ti on . Cf. Rubi n v . Buc km an , 72 7 5 F.2 d 7 1, 7 2- 73 (3dCir . 19 84 ); Ei sl er v . Stri tz le r, 53 5 F .2d14 8, 1 50 -5 2 (1 stCir
. T H E C O U R T : And, obviously , the question is why are these a lleg ations not sufficie nt to satisfy

the conduc t part of that c onduct ef fec ts analy sis that the Be rg er c ourt discusses. [C O U N S E L F O R G E R M A I N ]: Yes, Your Honor. The problem with all of those alleg ations that were just recited, Your Honor, is that they

are not instances of fra udulent conduct he re in the U .S. (empha sis added).

Even on a ppeal, Ge rmain did not advise this Court of his intent to raise a fa ctual 4 challeng e to subject matter jurisdiction until he filed his Reply brief. At oral a rgument, Ger

main made much of

the fa ct that the hea dquarte rs of the 5 Company was in Eng land and that the f alse or mislea ding statements wer e disseminated f rom Eng land. Those f

acts, howe ver, a

re not inconsistent at a ll with the alleg ed fa cts that the Company ’s ac countingdepar tment, and the re levant oper ations and per sonnel ce ntral to the fra ud, wer e located in Tampa. Espe cially in light of the f

act that Ge rmain neve r advised the district court that he w as makinga fa ctual cha lleng e, the mer e asse rtion of such fa cts ca nnot be deeme d to have put the district cour t on notice that Ger

main was makinga fa ctual challeng e. 819 76 ). W e wil l n otrem an d s im pl y to all ow Germ ai n t o e m

barkon a “ fis hi ng 6
ex pe di ti on .” Acco rd in gl y , we tu rnto Germ ai n’s fa ci al att ackon th e ex is te nc e o f subjec t
m at te r juri sd ic ti on . Alth ou ghGerm ai n h im se lf, aCan ad ia n c it iz en , bo ug hthi s se cu rit ie s o n t he NYSE, he n oton ly chal le ng es th e d is tri ctco urt’s jur is di ct io n o ve r si mil ar p la in ti ffs , bu t al so ch al le ng es th e d is tri ctco urt’s jur is di ct io n o ve r ot he r fo rei gnin ve st or s wh o p ur ch as edon th e TSX.

2. Th e All eg at io ns inth e Co m pl ai nt

“ It i s wel l re co gn iz edth atth e Sec ur it ie s Ex ch an ge Act i s s il en t as to it s ex tra te rri to ria l ap pl ic at io n.” Ito baLtd . v. LEP Group P LC, 54 F.3d11 8, 1 21 (2d Ci r. 19 95 ). Thu s, [w]hen , as h ere, a c ou rt i s co nf ro nt edwith t ran sa ct io ns th aton an y vi ew are p red om in an tl y

for ei gn , itm

us t s eekto de te rm in e whe th er Co ng res s wo ul d h av e wis he d t he pre ci ou s re so ur ces of Un it edSta te s co urts an d l aw en fo rcem en t ag en ci es to be de vo te d t o t he m rathe r th an le av e th e p ro bl em

to for ei gn co un tri es .
In Rubin, the plaintiff revised his orig inal alleg ation that he wa s a citizen of Hong 6 Kongafte r the district cour t entere d summary

judgme nt in favor of

the def endant. 727 F .2d at 72-73. The r ecor d in fac t indicated that the plaintiff ha d a United States pa ssport. I d. at 73. Thus, the Third Circuit re manded f or the district cour

t to conduct furthe r discover y on the exis tence of diversity

jurisdiction. In Eisler, the de fenda

nt revised his orig inal admission that he was a citizen of Puerto Rico afte r the district cour

t entere d a def

ault judgme nt ag ainst him. 535 F.2d at 150-52. The defe ndant filed a

n aff idavit stating that he was a citizen of California at the time the a ction was brought. I d. at 151. Thus, the F irst Circuit remande d for a hearing on the exis tence of diversity jurisdiction. 9Bers chv. Drex el Fir es to ne , Inc ., 51 9 F .2d97 4, 9 85 (2dCir . 19 75 ). The p ro vi si on s

an d p ur po se s o f th e Sec ur it ie s Ex ch an ge Act s erv e as a gu id e. The co urts ha ve reac he d t wo b ro adco nc lu si on s wi thres pe ctto tra ns na ti on al
se cu rit ie s fr au ds . Firs t, “ itis co ns is te ntwith t he st atut ory sch em e to in fer tha t Co ng res s wo ul d h av e wan te d t o re dr es s h arm s p erp etrat edab ro adwhi chha ve a subs tant ia l i m

pa cton in ve st or s o r m ark et s wi th inth e Uni te d S ta te s.” M orris on v. Nat’l Au st l. Ba nkLtd ., 54 7 F .3d16 7, 1 71 (2dCir . 20 08 ) (i nt ern al qu ot at io ns om itte d) . Seco nd , “ Co ng res s d idno t m eanth e Uni te d S ta te s t o b e u se d a s a b as e fo r frau du le ntsec ur it ie s s ch em es ev enwhen th e v ic ti m s ar e fo rei gn ers . . . .” Bers ch , 51 9 F .2dat 9 87
. The se pri nc ip le s h av e b eendi st il le d i nt o t wo juris di ct io na l t es ts : the

“ co nduc t t es t” an d t he “ effe ct s t es t.” S.E.C. v . Berg er, 3 22 F.3d18 7, 1 93 (2dCir
. 20 03 ). The co urt as ks : “ (1 ) whe th er the wron gf ul co nduc t o ccu rredinth e Uni te d St at es , and(2) whet he r th e wro ng fu l co nduc t h ada subs ta nt ia l ef fectinth e Uni te d St at es or upo n Un it edSta te s ci ti zen s.” I d. at19 2. “ Whe re ap pr op ria te , th e two pa rts of the tes t ar e ap pl ie d t og ethe r be cau se anadm ix tu re o r co m bi na ti on of t he two oft engi ve s a b ette r pi ctur e o f whe th er the re i s s uf fic ie ntUni te d S ta te s in vo lv em en t t o ju st ify the ex erci se of ju ris di ct io n b y anAm eri canco urt.” Mo rri so n, 5 47 F.3dat 1 71 (in te rn al qu ot at io ns om it te d) . W e co nc lu de th atth e 10Co m

pl ai ntall eg es am

pl e fac ts su ffi ci en t t o e st ab li sh subjec t m at te r juri sd ic ti on un de r th e “ co nduc t t es t” ov er u nn am edfor ei gn cla ss m em be rs who pu rch as edon th e TSX. Acco rd in gl y , we nee d n otad dr es s the “ effe ct s t es t.”

7 Ju ris di ct io n e xi st s u nd er the “ co nduc t t es t” when “ subs ta nt ia l ac ts in furth eran ce o f th e fraudwere co m m it te d wi th in th e Uni te d S tate s.” Berg er, 3 22 8 F.3 d a t 1 93 (in te rn al qu ot at io ns om it te d) . “ [T]he te stis m etwhen ev er (1 ) th e de fen da nt ’s act iv it ie s i n the Uni te d S ta te s wer e m or e th anm erel y pre pa rat ory

to a se cu rit ie s fr au d c on du ct edels ewh ere a nd(2) th e act iv it ie s o r cu lp ab le fai lu res to actwithi n t he Uni te d S ta te s d ire ct ly caus edth e cl ai m edlo ss es .” Id . (in te rn al qu ot at io ns om itte d)
. The Seco ndCir cu it ’s dec is io n i n B erg er i s i ns tru ct iv e. Defen da ntMi ch ael Berg er fo rm edanoff

sh or e in ve st m en t co m

pa ny (“th e Fu nd ”) o rg an iz edun de r th e laws o f th e Bri ti sh Virg inIsl an ds . Id. at18 8. Th e Fu ndm ai nt ai ne d abro ke rag e

It follows, a fortiori, that the Complaint alleg es suffic ient fac ts to establish subject 7 matter jurisdiction over unna med fore ign c lass members who pur chase d on the NYSE. The pa rties agree d that the Second Circuit’s a rticulation of the c onduct test is 8 appropriate, and w e conc lude that it has bee n met. There fore , we ne ed not (a nd do not) dec ide if a less string ent formulation would also suff ice to esta blish subject matter jurisdiction. See, e.g ., Kauthar SDN BH D v. Sternberg , 149 F.3d 659, 666 ( 7th Cir. 1998) (“[T]he Third, Eighth a nd Ninth Circuits . . . to use the Fifth Circuit’s words, ‘ g ener ally require some lesser qua

ntum of conduct.’ ” (quoting Robinson v. TCI/US W est Commc’n Inc., 117 F .3d 900, 906 (5th Cir. 1997)))
. 11acco un t ata br ok er-d eal er l oc at edinOhi o andth e m ajor ity of i ts ass et s an d
se cu rit ie s wer e h el d i n t he Uni te d S ta te s. Id . Berg er, wo rk in g i n New Yo rk , crea te d fr au du le ntacco un t s ta te m en ts an d fo rward edth em to th e Fu nd adm in is tra to r in Berm

ud a. Id . at 1 89 . The Fu ndadm in is tra to r, op erat in g i n Berm ud a, rel ie d o n t he se frau du le ntcal cu la ti on s t o p rep are a ndm ai l m on th ly
acco un t s ta te m en ts to in ve st or s. App lying on ly the “ co nduc t t es t,” the Seco nd 9 Ci rcu ithe ld“ th atsubjec t m at te r juri sd ic ti oncle arl y ex is ts ov er Be rg er’s act io ns .” Id . at 1 94 . “ Cl earl y , th e fraudul en t s ch em e was m as te rm in de d a ndim pl em en te d b y Berg er i n t he Uni te d S ta te s.” Id
. The cir cu m st an ces of t he in st an t ca se are an al og ou s. CP S hi ps is a fo rei gn co rp or at io n. Ho wev er, the Co m pl ai ntall eg es th atth e SAP co nv ers io n p ro ject
oc cu rredinth e Co m

pa ny’ s Tam

pa , Flo rid a, acc ou nt in g o ffi ces , wher e p ers on ne l – in cl ud in g k ey

ex ecu ti ve s –kn owi ng ly caus edco st s t o b e und ers tate d. Th e Tam pa of fic es th entra ns m it te d t hi s fa ls e d at a to th e Co m pa ny’ s fo rei gn off

ic es , wher e it
was in co rp or at edin to all eg ed ly fals e an d m is le ad in g fi na nc ia l s tate m en ts th atwere di ss em in at edfro m

ab ro ad . Accor di ng ly, we co nc lu de th atsubjec t m at te r juri sd ic ti on ex is ts ov er CP Sh ip s’ act io ns . The al le ge dl y frau du le ntsch em e was

The F und had appr ox imately 280 investors, only

a small perc entag e of whom had 9 addre sses in the United States. I d. at 188. 12m as te rm in de d b y Hall iwel l an d o th er ex ecu ti ve s o pe rat in g o utof Tam pa , and im pl em en te d i n s ub st an ti al pa rt b y th os e ex ecu ti ve s i n Tam pa . Germ ai n s eek s t o d is su ad e u s. Un de r th e “ co nduc t t es t,” Germ ai n a ss ert s: (1 ) th e acc ou nt in g a ct iv ity inTam pawas m erel y

pre pa rat ory

to th e cre at io n a nd di ss em in at io n o f al le ge dl y fal se an d m is le ad in g s ta te m en ts ou ts id e th e Uni te d St at es ; an d (2 ) th e cre at io n anddi ss em in at io n o f al le ge dl y fal se an d m is le ad in g st at em en ts ou ts id e th e Uni te d S ta te s (r athe r th anth e m an ip ul at io n o f acc ount in g in fo rm at io n i n Tam

pa ) di rect ly caus edth e cl ai m edlo ss es . For s up po rt, Germ ai n rel ie s o n t he Seco ndCir cu it ’s dec is io n i n M orris on v. Nat ’l Aus t. Ba nkLtd ., 54 7 F.3 d 1 67 (2dCir . 20 08 ). InMo rri so n, the pl ai nt iff s b ro ug hta cl as s ac ti on ag ai ns t, i nt er al ia , Nati on al Aus tra li a Ban k (“NAB”) an d i ts who ll y own edAm eri cansubs id ia ry Hom eSi de Len di ng Inc . (“ Hom eSi de ”). The pl ai nt iff s al le ge d t ha t Ho m eSi de , a m ortg ag e se rv ic e p ro vi de r, m an ip ul at edit s i nt ern al bo ok s an d re co rd s an d s en t fa ls e num be rs fro m Hom eSi de ’s Flo rid a h ead qu art ers to NAB’ s Au st ral iahe ad qu art ers – wh ere th e al le ge dl y

fal se nu m

be rs were i nc or

po rat edin to publ ic st at em en ts an d di ss em in at edfro m

Aus tra li a. Id . at 1 68 -7 9, 1 71 . The Se co ndCir cu ithe ld : The act io ns tak enan d the act io ns no t t ak enby NAB in Aus tra li a were, in ou r vi ew, si gn ifi can tl y m or e cen tra l t o t he frau d a ndm or e d ire ct ly res po ns ib le forth e h arm

to in ve st or s tha n t he m an ip ul at io n o f th e

13nu m

be rs inFlo rid a. Id . at 1 76 . After n ot in g tha t Ho m eSi de was m erel y a who ll y own ed , op erat io na l
subs id iary , th e co urt el ab or at ed : The res po ns ib il it ie s o f NAB’s Aus tra li anco rp or at e h ead qu art ers , on th e o th er h an d, i nc lu de d o ve rs eei ng op erat io ns , in cl ud in g tho se of the subs id iarie s, an d re po rti ng to sh areh ol de rs an d t he fin an ci al co m m un ity . NAB, no t Ho m eSi de , is th e p ub li cl y tra de d c om

pa ny, and it s ex ecu ti ve s –ass is te d b y lawyers, ac co un ta nt s, an d b an ke rs – t ak e pr im ary res po ns ib il ity

forth e co rp or at io n’s p ub li c fi li ng s, fo r it s rel at io ns with i nv es to rs , andforit s s ta te m en ts to th e o ut si de worl d.

. . . NAB’s ex ecu ti ve s p os se ss th e res po ns ib il ity to pre se ntaccu rat e in fo rm at io n t o t he in ve st in g p ub li c an d t o t he ho ld ers of i ts ord in ary sh ares inacco rd an ce wi th a ho stof a cco un ti ng , leg al an d re gu la to ry st an dard s. Whena st at em en t o r publ ic fil in g fa il s t o m eetth es e st an dard s, the res po ns ib il ity , as apra ct ic al m atte r, li es inAus tra li a, no t Fl or id a.

. . . Inot he r wor ds , whi le Hom eSi de m ay ha ve be enth e o rig in al so ur ce o f th e p ro bl em at ic nu m

be rs , th os e num

be rs ha d t o p as s thr ou gh a nu m be r of ch eckpo in ts m an ne d b y

NAB’ s Au st ral ia n p ers on ne l b efo re reac hi ng in ve st or s. Whil e Hom eSi de ’s rig gi ng of the nu m be rs m ay ha ve co nt rib ut edto th e m is in fo rm at io n, a n um be r of si gn ifi can t ev en ts ne ed edto oc cur be fo re thi s m is in fo rm at io n c au se d l os se s t o i nv es to rs . Thi s l en gt hy chai n o f cau sa ti on be twee n wh atHom eSi de di d a ndth e ha rm to in ve st or s wei gh s ag ai ns t o ur ex erci si ng subjec t m at te r juri sd ic ti on . Id . at 1 76 -7 7. Inho ld in g t ha t i t l ack edsubjec t m at te r juri sd ic ti on ov er fo rei gn

14pl ai nt iff

s wh o p ur ch as edon for ei gn ex ch an ge s, the Seco ndCir cu itpl acedpri m ary rel ianc e o n t he factth atall th e ex ecu ti ve s wi th res po ns ib il ity foren su rin g t he
accu racy of in fo rm at io n p ro vi de d t o t he in ve st in g p ub li c o pe rat edou t o f Aus tra li a,
an d a ll of t he act io ns of t ho se ex ecu ti ve s i n v eri fy in g s uc h i nf orm at io n o ccu rredin Aus tra li a. Inad di ti on , th e Sec on d C irc ui t re li edup on th e “ le ng th y ch ai n o f
cau sa ti on be twee n t he Am eri canco ntrib ut io n t o t he m is st at em en ts an d t he ha rm to in ve st or s.” Id . at 1 76 . In o th er wo rd s, “ th os e num be rs ha d t o p as s thr ou gh a nu m be r of ch eckpo in ts m an ne d b y

NAB’ s Au stral ia n p ers on ne l b efo re re ach in g in ve st or s.” Id . at 1 76 -7 7. W e co nc lu de th atth e in st an t ca se is di st in gu is habl e. The C om pl ai ntinth is
cas e al le ge s: Defen da ntHall iwel l was Ch ie f Ope rat in g Off ic er an d aDire ct oran d m em be r of th e Exe cu ti ve Co m

m it te e o f CP Sh ip s dur in g t he Cla ss Peri od . From May 200 4 t hr ou gh th e en d o f th e Cl as s Pe rio d . . . Hall iwel l s erv edas t he Co m pa ny’ s C hi ef Ex ecu ti ve Offic er. . . . He was ba se d i n, an d wo rk edou t o f th e Co m pa ny’ s Tam

paoff ic es th ro ug ho utth e Cl as s Pe rio d. . . . [D] efen da ntHall iwel l m ad e m at eri al ly fals e an d m is le ad in g s ta te m en ts co nt ai ne d i n t he Co m pa ny’ s re le as es an d/ orsi gn edth e Co m pa ny’ s m at eri al ly fals e an d m is le ad in g S EC fil in gs . Co m pl ai ntat ¶23 . The Co m

pl ai ntco nt inue s: Altho ug h C P Sh ip s i s o ffi ci al ly head qu art eredinEng la nd , m os t he ad qu art ers op erat io ns – i nc lu di ng th e rel ev an t o pe rat io ns an d pe rs on ne l wh ic h wer e cen tra l t o t he m is co nduc t i n t hi s ca se 15th ro ug ho utth e Cl as s Pe rio d –were l oc at edinth e Co m pa ny’ s o ffi ces in Tam pa , Flo rid a. The Tam

paoff ic es co nt ai ne d, i nt er al ia , th e Co m pa ny’ s ac co un ti ng de pa rtment . . . an d t he ex ecu ti ve off ic es on th e th irt y -th irdflo or

whi chho us edke y

CP Sh ip s ex ecu ti ve s, i nc lu di ng CEO Hall iwel l. Co m pl ai ntat ¶38 . In p arag rap h 3 9, the Co m pl ai ntall eg es th atth e SAP co nv ers io n pr ojec t o ccurredinTam

pa . This Sta nd ardAcco un ti ng Pla tfo rm was i m pl em en te d in Jan ua ry

20 04 , andwas u se d i n t he May 11, 2 00 4, p res s re le as e to ex cu se or ex pl ai n t he in it ia l re ve la ti on th atth e fi nanc ia l re su lt s fo r 20 03 ha d t o b e rev is ed
. Thi s p res s re le as e is ch al le ng edinth e Co m pl ai ntas b ei ng fal se an d m is le ad in g: it al le ge dl y bu rie d a nddo wnp lay edth e n eed edrev is io n, b ot h u nd ers ta ti ng th e si gn ifi can ce the reo f, an d m is le ad in gl y st at in g tha t i t d idno t af

fectth e Co m

pa ny’ s 20 04 ou tl oo k. Th is May 11, 2 00 4, p res s re le as e, an d the rel at edst at em en ts an d SEC fi li ng s, were is su edaft er Hal li well ha d b eenpro m ot edfro m hi s C hi ef Ope rat in g Off

ic er p os it io n t o C hi ef Ex ecu ti ve Offic er o f th e Co m pa ny, andth us at a ti m e whe n Hal li well , op erat in g o utof Tam pa , bo re the pri m ary res po ns ib il ity no t
on ly for the all eg edm an ip ul at io n o f th e num be rs , bu t al so foren su rin g t he
accu racy of fi na nc ia l i nf

orm at io n p ro vi de d t o i nv es to rs . Ind eed , par ag rap h 4 1 o f th e Co m pl ai ntall eg es th at“ he co nt ro ll edev erythi ng fro m Tam pa .” Thu s, we co nc lu de th atth e in st an t ca se is ve ry di ffer en t fr om

Mo rri so n. Altho ug h t he pro bl em at ic nu m be rs inMo rri so n m ay

ha ve ori gi na te d i n t he Uni te d
16St at es , all of t he ex ecu ti ve s b eari ng res po ns ib il ity to pre se ntaccu rat e in fo rm at io n to th e in ve st in g p ub li c, an d a ll of the ir a ct io ns insupe rv is in g a ndve rif y in g s uc h in fo rm at io n, o ccurredinAus tra li a. By co ntras t, i n t he in st an t ca se , no t o nl y di d t he
m an ip ul at io n a ndfal si fic at io n o f th e num be rs oc cu r in Flo rid a, th e ex ecu ti ve s wi th
res po ns ib il ity

foren su rin g t he accu racy of th e acc ou nt in g d at a o pe rat edfro m Fl or id a. The a cco un ti ng de pa rtment f orth e Co m

pa ny was lo cat edinTam pa , and op erat edun de r th e m ic ro m an ag em en t o f Hal li well (fi rs t i n h is po si ti onas C hi ef Ope rat in g Off

ic er an d l at er as Ch ie f Exe cu ti ve Offic er). Alt ho ug h o th er d iv is io ns of th e Co m pa ny’ s h ead qu art ers were l oc at edinit s o ffi ci al he ad qu art ers inEng land , th e h ead qu art ers op erat io ns “ whi chwere ce nt ral to th e m is co nduc t i n t hi s ca se . . . were l oc at edinth e Co m

pa ny’ s o ffi ces inTam

pa .” A nu m

be r of th e st at em en ts ch al le ng edinth is Co m

pl ai ntwere ac tu al ly m ad e o r si gn edby H al li well , who was ba se d i n a ndop erat edou t o f Tam pa . Alth ou gh itis tru e th atot he r ch al le ng ed st at em en ts were m ad e b y Defen da ntMi le s o r Defen da ntW eb be r (wh o o pe rat edou t of Eng land ) th ere i s n o i nd ic at io n i n t he Co m pl ai ntth atth ey

pe rfo rm edan y ve rif ic at io n a ct iv it ie s wi th res pe ctto en su rin g t he accuracy of th e in fo rm at io n ge ne rat edinTam

pa . In an y

ev en t, the m os t tha t co ul d b e sa idis th atth ey als o b or e so m e res po ns ib il ity

inth atreg ard , inad di ti on to th e p rimary res po ns ib il ity

bo rn e by Halli well inTam

pa . Furt he rm or e, in th e in st an t ca se , andun li ke Mo rri so n, the

17Co m

pl ai ntin di cat es no len gt hy chai n o f cau sa ti onbe twee n t he Am eri can co nt rib ut io n t o t he m is st at em en ts an d t he ha rm to in ve st or s. Ra th er, the cau sa ti on he re was di rectan d i m

m ed ia te . 1 0 Acco rd in gl y , we con cl ud e th atMo rri so n i s d is ti ng ui sh ab le , andth atth e al le ge d a ct iv ity

inTam parep res en ts subs ta nt ia l ac ts infurth eran ce o f th e fraud whi chdi rect ly caus edth e cl ai m edlo ss es . W e co nc lu de th atth e d is tri ctco urt 1 1 pr op erl y ex erci se d s ub

ject m at te r juri sd ic ti on ov er the cla im s o f fo rei gn We note that, in case s decide d befor e Morrison, the Second Circuit had e x pressly 1 0 reje cted the a

rgument that, although the ac tual manipulation and fa lsification of the number s occur red in the United States, “the inac curate monthly acc ount statements [were] prepa red a nd mailed to investors by

the Fund a dministrator in B ermuda , [and they] constitute[d] the hea rt of the fra ud.” B erg er, 322 F .3d at 193; see a lso id. at 193-95. Acc ord Itoba Ltd. v. L EP Group PL C, 54 F.3d 118, 124 (2d Cir. 1995) ( “[W ]e hold that the situs of preparations for SEC filings should not be determinative of jurisdictional questions. Otherwise, the pr otection af forde d by the Securities Exchang e Ac t could be cir cumvented simply by prepa ringSEC fili ng s outside the United States.”).

As noted above , see supr a note 8, this ca se has be en litiga ted by agree ment of the 1 1 parties pur suant to the Second Circuit’s a rticulation of the c onduct test. Be cause we c onclude that the Second Circuit’s a rticulation of the test ha s been me t in this case , we ne ed not dec ide if the less string ent formulation of the test (as utiliz ed in the Third, Eighth and Ninth Circuits) would also suffice to establish subject matter jurisdiction. Moreove r, the re cent Morrison case in the Second Circuit may

repr esent a

somewhat more stringe nt application of the c onduct test than was indicated in previous Second Circ uit cases. Ag ain, bec ause w e conc lude that the fa cts in the instant case a lso satisfy

the Morrison application of the Second Circuit test, we ne ed not (a nd do not) dec ide whethe r we should adopt the Morrison application of the test. In other wor ds, we need not de cide whe ther to adopt the Mor rison decision’s e mphasis on the location of the activities perf

ormed in ensuring the acc urac y of financ ial information to be provide d to the public, and that dec ision’s consequent discountingof the significanc e of the location of the a ctual falsification of the rele vant numbers. B eca use the fa cts alleg ed in the instant ca se satisfy even the ver y stringe nt application of the c onduct test articulated in Morrison, we ne ed not dec ide whether the Morrison opinion itself corr ectly denied subjec t matter jurisdiction notwithstanding the fa ct that the fa lse numbers at issue there w ereactua lly cre ated in F lorida. 18pu rch as ers . 1 2

B. The M eri ts : Germ ai n’s Ob jecti on s Hav in g e st ab li sh edth atth e d is tri ctco urt p ro pe rly exer ci se d s ub ject m at te r juri sd ic ti on , we tu rnto th e m eri ts . Firs t, we wi ll ad dr es s the ad equa cy of n ot ic e to 1 3 th e cl as s. Th en , we wil l turn t o t he ad equa cy of t he set tl em en t i ts el f. 1. No ti ce Fed eral Ru le of C iv il Pro cedur e 2 3( e)(1 )(B) requi res th e co urt t o p ro vi de

“ di rectno ti ce i n areas on ab le m an ne r to all cla ss m em be rs who wou ldbe bo un d b y th e [p ro po se d s et tl em en t].” Not ic e m us t b e “ reas on ab ly calcu la te d, u nd er al l the ci rcu m st an ces , to ap pr is e in te res te d p art ie s o f th e p en de nc y of the act io n a ndaffo rd
With respe ct to Ger

main himself, the district court’s e x erc ise of subjec t matter 1 2 jurisdiction is bol stered by the fa ct that he pur chase d his securities on the NY SE. Although Ger main may not have standingto object on beha lf of for eigners who pur chase d on the TSX, we never theless addr ess that issue bec ause of our oblig ation to examine our jurisdiction sua sponte. We note howeve r that the re cord sug g ests that there are not many of such f oreigners. Ger main also argues that we should abstain from exerc ising jurisdiction as a 1 3 matter of c omity . We reviewa district cour t’s decision to deny

abstention based on inter national comity for a buse of discr etion. Be liz e Te lecom, Ltd. v. Gov’t of B elize, 528 F.3d 1298, 1303 (11th Cir. 2008). This Court weighs three f actor s in determiningwhether to abstain: “(1) international c omity ; (2) fa irness to litigants; and ( 3) ef ficient use of

scar ce judicia l resourc es.” Be liz e, 528 F .3d at 1305. First, with re spect to principles of comity , we note that “cour ts regularly

permit parallel proce eding s in an Americ an cour t and a f oreign court.” Turner

Entm’t v. Deg eto Film, 25 F.3d 1512, 1521 (11th Cir. 1994). Second, a s discussed below, the se ttlement is fair, re asonable and adequate. Fina lly , the American c ourts have inve sted substantial judicial resourc es in this lawsuit, and the re source s invested by the Canadia

n courts will be unaf

fec ted with respe ct to optouts and Canadian c itiz ens who purc hased on the TSX. Acc ording ly , we c onclude that the district court did not abuse its discre tion. 19th em

anop po rtu ni ty to p res en t the ir o bjec ti on s.” M ul la ne v. Ce nt . Hano ve r Ban k & Tru stCo ., 33 9 U.S. 3 06 , 31 4, 7 0 S . Ct. 6 52 , 65 7 (1 95 0) . Germ ai n a rg ue s, i n es se nc e, th atno ti ce d idno t re as on ab ly app ris e cl as s m em be rs of t he ir r ig ht s wi th
res pe ctto th e Can ad ian Act io ns . This arg um en t i s wi th ou t m eri t. The Supp le m en ta l No ti ce ex pr es sl y in fo rm s cl as s m em

be rs of t he Can ad ia n Act io ns , pr ov id es co nt actin fo rm at io n fo r fu rth er i nqui rie s, an d s ta te s tha t fa il ur e to op t o ut of th e p res en t s ettl em en t m ig htpre cl ud e p art ic ip at io n i n t he Can ad ia n Act io ns . 2. Th e Set tl em en t The di stric t co urt re vi ews a cl as s ac ti on set tl em en t t o d et erm in e whe th er i t i s fai r, reas on ab le an d a de qu at e. See B en ne ttv. Be hr in g C or p., 7 37 F.2d98 2, 9 86 (1 1t h C ir. 1 98 4) . The co urt co ns id ers th es e rel ev an t fa ct or s: (1 ) th e li ke li ho odof s uc ces s attri al ; (2 ) th e ran ge of p os si bl e rec ov ery; (3 ) th e p oi ntonor b el ow the ran ge of p os si bl e rec ov ery atwhi cha se tt le m en t i s fa ir, a de qu at e an d re as on ab le ; (4 ) th e co m pl ex ity , ex pe ns e an d dur at io n o f li ti ga ti on ; (5 ) th e subs ta nc e an d a m ou ntof op po si ti on to th e se tt le m en t; an d (6 ) th e st ag e o f pr oc eed in gs at wh ic h th e se tt le m en t was ach ie ve d Id . at 9 86 . Germ ai n a ll eg es ess en ti al ly tha t the di st ric t co urt erredinap pr ov in g t he
se tt le m en t b ecau se for ei gn cla ss m em be rs ha ve po te nt ia l fo r a g reat er re co ve ry in th e Can ad ian Act io ns . Germ ai n m ak es no att em ptto arg ue th atth e se tt le m en t i s un fai r fo r rea so ns ou ts id e th e ex is te nc e o f th e Can ad ia n Act io ns . Thu s, o ur

20co ns id erat io n i s l im it edto th is si ng le fact or . W e o bs erv e th atno ti ce ad equa te ly

in fo rm edcla ss m em

be rs of t he pe nd in g C an ad ian Act io ns . They were p ro vi de d with t he ne ces sa ry

in fo rm at io n t o p ur su e fu rth er i nqui rie s. An y cla ss m em

be r wis hi ng to pu rs ue th e Can ad ian Act io ns co ul d o ptou t o f th e in st an t s et tl em en t. Rec ov ery in th e Can ad ian a ct io n re m ai ns sp ecu lati ve , and , fin al ly, th ere i s n o al le ga ti on th atth e in st an t re co ve ry is ot he rwis e unf

ai r. Acco rd in gl y , we di sc ernno ab us e o f di sc ret io n i n t he di st ric t co urt’s ap pr ov al of t he set tl em en t. Cf. Inre Co rru ga te d C on ta in er An ti tru stLit ig ., 64 3 F .2d19 5, 2 22 (11 th Cir . 19 81 ) (“ W e ag ree wi th th e d is tri ctco urt tha t re le as es fro m st at e cl ai m s ar e g en eral ly reaso nabl e
an d t he ob

jecto rs ha ve no t p oi nt edto an y ex tra or di na ry

fact or s d ic tati ng di ffer en t tre atm en t o f th e st at e-cl ai m rel eas es he re.”)
. CONCLUSION Fo r th e fo reg oi ng reas on s, we co nc lu de th atth e d is tri ctco urt p ro pe rly
ex erci se d s ub

ject m at te r juri sd ic ti on ov er the cla im s o f fo rei gn pu rch as ers . On th e
m eri ts , Germ ai n’s o bjec ti on s ar e eas il y di sm is se d. Acco rd in gl y , th e d eci si on of

1 4 th e d is tri ctco urt i s AFFIRMED.
All arguments not ex plicitly addre ssed ar e re

jected w ithout need for f

urther 1 4 discussion. 21