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Schoenbaum v. Firstbrook

United States Court of Appeals for the Second Circuit
405 F.2d 200 (2d Cir. 1968)


Banff Oil Ltd. (Banff) is a Canadian corporation that is traded on the American Stock Exchange. All of its operations are conducted in Canada. Aquitaine of Canada, Ltd. (Aquitaine) (defendant) is a subsidiary of a French corporation. On March 16, 1965, Banff’s directors (defendants) arranged for the transfer of Banff’s stock to Aquitaine for $1.35 per share. Paribas Corporation (Paribas) (defendant) is a Delaware corporation and a subsidiary of a French banking institution. On January 24, 1966, Paribas purchased Banff’s shares for $7.30 per share. These stocks were paid for and delivered in Canada. An American shareholder of Banff brought this derivative suit pursuant to Section 10(b) of the Securities and Exchange Act (Act) and Rule 10b-5. The suit alleged that the defendants conspired to defraud Banff by arranging for the sale of Banff’s stocks to Aquitaine and Paribas below fair market value. The defendants moved to dismiss the complaint for lack of subject matter jurisdiction, arguing that the Act does not have extraterritorial application. The district court agreed and dismissed the complaint.

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