Over the past three years, Brazil’s state-owned oil & gas giant Petrobras has been at the center of a massive corruption scandal. On Friday, the company managed to partially decertify a class action accusing Petrobras of fraud.
The New York Petrobras class action is one of the aftershocks caused by Operation Car Wash.
Investors across the world have accused Petrobras of deliberately lying to them and doctoring balances. For them, the company is liable for the corruption scheme that drained resources, causing the company to have a current value ten times smaller than it had in 2009. The two last CEOs – Maria das Graças Foster and Sérgio Gabrielli – are part of the lawsuit.
Universities Superannuation Scheme (USS), a Liverpool-based pension fund at the head of the case, won class certification last year. However, New York’s Second Circuit directed the lower court Friday to reconsider such status in light of Supreme Court precedent.
“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,” the 66-page opinion states, citing the 2010 ruling in Morrison v. National Australia Bank.
“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,’” U.S. District Judge Nicholas Garaufis wrote for the court, sitting on a three-judge panel by designation from Brooklyn.