Schoenbaum v. Firstbrook

Banff Oil, a Canadian corporation whose operations were entirely in Canada, traded its stock on the American Stock Exchange. Banff's directors arranged to transfer Banff stock to Aquitaine, a subsidiary of a French corporation, for $1.35 per share; roughly ten months later, Paribas, a Delaware subsidiary of a French bank, purchased Banff shares for $7.30 per share, with both transactions paid for and completed in Canada. An American shareholder brought a derivative suit under Section 10(b) and Rule 10b-5, alleging the defendants conspired to defraud Banff by selling its stock to Aquitaine and Paribas below fair market value. The defendants moved to dismiss for lack of subject matter jurisdiction, arguing the Act does not apply extraterritorially, and the district court agreed and dismissed the complaint.