Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 1 of 17

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1 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 1 of 17 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK IN RE PETROBRAS SECURITIES LITIGATION This Document Applies To: No. 14-cv-9662 (JSR) In re Petrobras Securities Litigation, 14-cv-9662 (JSR) DEFENDANTS SUPPLEMENTAL MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION TO DISMISS THE FOURTH CONSOLIDATED AMENDED COMPLAINT AND IN FURTHER SUPPORT OF THEIR MOTION TO DISMISS THE THIRD CONSOLIDATED AMENDED COMPLAINT

2 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 2 of 17 TABLE OF CONTENTS Page PRELIMINARY STATEMENT... 1 ARGUMENT... 2 CONCLUSION ii

3 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 3 of 17 TABLE OF AUTHORITIES Cases Page(s) Absolute Activist Master Value Fund, Ltd. v. Ficeto, No. 09 Civ (GBD), 2013 WL (S.D.N.Y. Mar. 28, 2013)... 5 Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012)... 3, 6, 9 Allan Applestein TTEE FBO D.C.A. v. Province of Buenos Aires, 415 F.3d 242 (2d Cir. 2005)... 4 Fontana v. Republic of Argentina, 415 F.3d 238 (2d Cir. 2005)... 4 In re Broderbund/Learning Co. Sec. Litig., 294 F.3d 1201 (9th Cir. 2002)... 2 In re Initial Pub. Offering Sec. Litig., 241 F. Supp. 2d 281 (S.D.N.Y. 2003)... 2 In re Vivendi Universal, S.A. Sec. Litig., 284 F.R.D. 144 (S.D.N.Y. 2012) , 6 Loginovskaya v. Batratchenko, 764 F.3d 266 (2d Cir. 2014)... 4, 5, 6 Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010)... 6, 8-9 Perez v. Mortgage Bankers Ass n, 135 S. Ct (2015)... 4 Plumbers Union Local No. 12 Pension Fund v. Swiss Reinsurance Co., 753 F. Supp. 2d 166 (S.D.N.Y. 2010)... 5 Quail Cruises Ship Mgmt. Ltd. v. Agencia de Viagens CVC Tur Limitada, 645 F.3d 1307 (11th Cir. 2011) , 9 S.E.C. v. Benger, No. 09 Civ. 676, 2013 WL (N.D.Ill. Feb. 15, 2013) S.E.C. v. Goldman Sachs & Co., 790 F. Supp. 2d 147 (S.D.N.Y. 2011)... 6 S.E.C. v. Tourre, No. 10 Civ. 3229, 2012 WL (S.D.N.Y. Nov. 19, 2012)... 8 iii

4 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 4 of 17 Sec. Inv r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 513 B.R. 222 (S.D.N.Y. 2014)... 6 Other Authorities Black s Law Dictionary (10th ed. 2014)... 4 U.C.C. Art , 8 iv

5 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 5 of 17 TABLE OF DEFINED TERMS * Cert. Opp n. Ex. Exhibits to the Declaration of Jared Gerber in Support of Defendants Joint Memorandum of Law in Opposition to Plaintiffs Motion for Class Certification, dated Nov. 6, D. Reply Br. Defendants Reply Memorandum of Law in Further Support of Their Motion to Dismiss the Third Consolidated Amended Complaint, filed Nov. 11, 2015, Dkt. No. 299 Defendants DTC FAC The Petrobras Defendants and the Underwriter Defendants The Depository Trust Company Fourth Amended Complaint June 25 Tr. Transcript of Oral Argument dated June 25, 2015, In re Petrobras Sec. Litig., No. 14-cv-9662 (JSR) (S.D.N.Y. 2015) MTD Notes Note Offering or Offering Nov. 25 Tr. Motion to Dismiss The Petrobras Notes at issue in this litigation Public Offering of the 2013 Notes or 2014 Notes Transcript of Oral Argument dated November 25, 2015, In re Petrobras Sec. Litig., No. 14-cv (JSR) (S.D.N.Y. 2015) Offering Documents Documents governing issuance of the 2013 Notes and 2014 Notes, specifically, the Prospectus dated August 29, 2012; Prospectus Supplement dated May 13, 2013; and Prospectus Supplement dated March 10, 2014 TAC Third Amended Complaint * Defendants incorporate by reference terms previously defined in their moving brief. v

6 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 6 of 17 Tejedor Aff. Underwriter Defendants Affidavit of Juan Antonio Perez Tejedor, In re Petrobras Sec. Litig., No. 14-cv-9662 (JSR) (S.D.N.Y. Dec. 7, 2015), ECF No BB Securities Ltd., Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Itau BBA USA Securities, Inc., Morgan Stanley & Co. LLC, HSBC Securities (USA) Inc., Mitsubishi UFJ Securities (USA), Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Standard Chartered Bank, Bank of China (Hong Kong) Limited, Banco Bradesco BBI S.A., Banca IMI S.p.A. and Scotia Capital (USA) Inc. The Underwriter Defendants (which are named as defendants in Count III of the TAC and FAC only) have been named in this action solely based upon their having allegedly served as underwriters for one or more of the Note Offerings. Banco Votorantim Nassau Branch and Santander Investments Securities Inc. are not named as defendants in the TAC or FAC. vi

7 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 7 of 17 Defendants respectfully submit this supplemental memorandum of law in support of their motion to dismiss the FAC and in further support of their motion to dismiss the TAC. PRELIMINARY STATEMENT Defendants moved to dismiss the TAC under Morrison because Plaintiffs repeatedly failed to plead specific facts demonstrating that they purchased Notes in domestic transactions after representing to the Court that they made purchases through a United States broker, and through a United States counterparty. June 25 Tr. at 17:3-4. After hearing argument on November 25, the Court gave Plaintiffs one last chance to allege whether beneficial ownership of the Notes purchased by the four Named Plaintiffs was transferred in the United States and, if so, to brief whether such transfer satisfies Morrison s domestic transaction test. For the two domestic Named Plaintiffs, North Carolina and Hawaii, the FAC pleads that beneficial ownership in the Notes transferred when the trades were settled by DTC in New York. FAC 544, The assertion that beneficial ownership was transferred to the Named Plaintiffs when the trades settled at DTC is mistaken, as there is no allegation that any Named Plaintiff is a DTC participant. Moreover, even assuming, counterfactually, that Plaintiffs beneficial ownership interest had transferred at DTC, such a transfer is not sufficient to satisfy Morrison. Therefore, the Securities Act claims asserted by North Carolina and Hawaii must be dismissed. For the two foreign Named Plaintiffs, Union and USS, the FAC makes no allegation of beneficial ownership being transferred, much less where that transfer occurred. Id The FAC also asserts, for the first time, that irrevocable liability for the Notes bought by North Carolina and Hawaii occurred in the United States. Id. Defendants disagree, but the Court was quite clear that the sole ground upon which Plaintiffs could amend again was on the particular issue of whether transfer of beneficial ownership suffices to establish a transfer of legal title. Nov. 25 Tr. at 24:3. No amendment was permitted with respect to irrevocable liability. See id. at 23:13-17, 24:2-3 ( [T]he only thing I m giving them leave to do is amend to address this particular issue [of beneficial ownership]. ). Accordingly, the new allegations should be stricken. 1

8 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 8 of (Union); (USS). 2 Based upon the prior proceedings, the claims based upon the Notes allegedly purchased by USS and Union should therefore be dismissed under Morrison. Further, since the only FAC amendments were to the Securities Act claims, which are not incorporated in the Exchange Act claims, all Exchange Act Note claims should also be dismissed. ARGUMENT Unable to allege that they purchased a security traded on a domestic exchange, and having consistently failed to allege that irrevocable liability was incurred in the US (i.e., through a meeting of the minds), Plaintiffs now argue that they satisfy the third prong of Absolute 2 All of the Named Plaintiffs submit as exhibits to the FAC the same exhibits they submitted in their opposition to this MTD. Union submitted two documents. The first, FAC Ex. Q, purports to reflect a purchase by Union De-DU8808 Fund (account name). Union itself purchased no Petrobras securities; it contends that it is able to bring claims in this proceeding through assignments. The three assignment documents, ECF No. 19, Ex. E, list many funds as assignees, but not the fund that appears in FAC Ex. Q. The second Union FAC exhibit, FAC Ex. R, reflects a transaction between Union and a German bank. There is no connection to the US. The only US reference is that the securities are kept for safekeeping in the US, but because the Notes were issued as one or more fully registered global notes, FAC 529, all of which were held at DTC, that statement is true for every Note no matter where in the world it was purchased or sold. See infra p.3. Furthermore, Union experienced a gain across the Notes at issue, see Cert. Opp n. Ex. 14 at 164:10-165:11, and thus it lacks standing as to its Notes claims. See, e.g., In re Broderbund/Learning Co. Sec. Litig., 294 F.3d 1201, 1203 (9th Cir. 2002) (affirming dismissal of Securities Act claims by investor who had gains because he could not show damages... and, therefore, could not spell out a claim ); In re Initial Pub. Offering Sec. Litig., 241 F. Supp. 2d 281, 351 (S.D.N.Y. 2003) ( [A] plaintiff who sells a security above its offering price has no cognizable damages under Section 11 of the Securities Act, notwithstanding the fact that such plaintiff may have actually suffered a loss. ). The sole document submitted by USS, FAC Ex. S, reflects not a purchase or sale, but a transfer of securities from USS s London investment advisor, LGIM, to LGIM s US subsidiary, as the affidavit USS submitted in opposition to the MTD the TAC attests. See Tejedor Aff., 2. This internal transfer between USS s British advisor and its affiliate has no bearing on whether any Note purchase by USS was a domestic transaction. Moreover, on a net basis, USS also experienced a gain on the Notes, and the FAC does not allege that it was damaged as a result of purchasing the Notes. See Cert. Opp n. Ex. 10 at Finally, Hawaii s Note purchases are insufficient not only for the reasons set forth herein, but also because it suffered no loss with respect to them. FAC Exhibits G and H show that Hawaii either had gains, or suffered no losses, on the Notes. As with USS, the FAC does not even allege that Hawaii incurred any damages as a result of purchasing the Notes. FAC

9 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 9 of 17 Activist on the theory that title transferred in the US. The argument is mistaken factually and legally, and Plaintiffs claims should be dismissed. It is undisputed that when the Notes were issued, title was transferred to DTC s nominee, Cede & Co., and has remained there ever since. The relevant prospectus supplements for the Notes stated, [e]xcept under the limited circumstances described... all notes will be book-entry notes. Each global note will be deposited directly with the Depository Trust Company, a securities depositary, and will be registered in the name of DTC s nominee. FAC 529; see also id. at 532 ( DTC will be the only registered holder of the notes and will be considered the sole representative of the beneficial owners of the notes for purposes of the indenture. ). Those limited circumstances which would have permitted title transfer have not occurred. As a matter of law, Plaintiffs argument that transfer of a beneficial interest in the US should satisfy Morrison is wrong for a number of reasons. First, Absolute Activist made crystal clear that there are only three ways to plead a domestic transaction that satisfies Morrison, and that when a security is not traded on a US exchange, if the plaintiff did not make a contract to purchase in the US, it must plead that title was transferred within the United States. Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 62 (2d Cir. 2012) (emphasis added). Of course, for the vast numbers of securities that trade on US stock exchanges, there is no need to determine where irrevocable liability is incurred or where title transfers. Plaintiffs argument is inconsistent not only with the language of Absolute Activist but also with its reasoning and logic. The Circuit s test was grounded in text: the Exchange Act s definition of a sale as including a contract for sale, and the dictionary definition of a sale as [t]he transfer of property or title for a price. Id. at 68 (quoting 15 U.S.C. 78j(b) and Black s Law Dictionary 1454 (9th ed. 2009)); see also Quail Cruises Ship Mgmt. Ltd. v. Agencia de 3

10 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 10 of 17 Viagens CVC Tur Limitada, 645 F.3d 1307, 1310 (11th Cir. 2011) ( By definition, [a] transfer of title constitute[s] a sale. ). The very same source relied on by the Circuit for the definition of sale makes clear that the transfer of a beneficial interest is a concept legally distinct from title, and has been for centuries. See Beneficial Interest, Black s Law Dictionary (10th ed. 2014) ( A right or expectancy in something..., as opposed to legal title to that thing. ); id., Beneficial ( Consisting in a right that derives from something other than legal title. ) (emphases added); cf. Perez v. Mortgage Bankers Ass n, 135 S. Ct. 1199, 1207 (2015) (determining meaning of a term in both ordinary parlance and legal usage by examining competing definitions in Black s Law Dictionary). 3 Second, since Absolute Activist, the courts have made clear that transfer of beneficial interest in the US, or the recording of book entries in the US, is not sufficient to plead a domestic transaction. In Loginovskaya v. Batratchenko, the Second Circuit explicitly declined to extend the holdings of Absolute Activist and Morrison to cover transactions involving the transfer of a legal interest other than title. 764 F.3d 266, 274 (2d Cir. 2014). The Circuit reaffirmed that, to plead a domestic transaction, a plaintiff must demonstrate that the transfer of title or the point of irrevocable liability for such an interest occurred in the United States. Id. Because the plaintiff there obtained only an interest in the investment (held for her benefit by others) and title was not in the individual investor, id., she failed to plead a claim under US law. Likewise, in In re 3 Moreover, at the time that Absolute Activist was decided, DTC was an established Wall Street institution, and its function holding title to immobilize securities and enabling efficient trading by recording transfer of beneficial interests via book entry was well understood by the Second Circuit. See Fontana v. Republic of Argentina, 415 F.3d 238 (2d Cir. 2005) (addressing the argument that plaintiffs, because they are beneficial owners rather than the registered holders of the bonds at issue, lack standing to sue ); Allan Applestein TTEE FBO D.C.A. v. Province of Buenos Aires, 415 F.3d 242, 243 (2d Cir. 2005) (also addressing standing in light of various attenuated ownership interests in the notes at issue). If the Second Circuit in Absolute Activist intended to sweep trades where beneficial interest transfers through DTC into its definition of a domestic transaction, it would have said so. It did not. 4

11 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 11 of 17 Vivendi Universal, S.A. Sec. Litig., where title to the securities at issue was immobilized at a central depository in France and all the plaintiff could obtain were book entries instead of share certificates, the court held that no domestic transaction was pleaded. 284 F.R.D. 144, 150 (S.D.N.Y. 2012). It was not enough that confirmations were sent to US investors; those documents (though representing ownership interests) were not documents of title. Id. at Indeed, courts have consistently refused to give controlling weight to domestic activities that are needed to carry out the transactions, [but are] not the transactions themselves. Loginovskaya, 764 F.3d at 275. Thus, just as entry of an order from a customer in the US to a broker in the US to purchase a security is not necessarily enough to establish a domestic transaction because it does not establish rights between seller and buyer, see Plumbers Union Local No. 12 Pension Fund v. Swiss Reins. Co., 753 F. Supp. 2d 166, 178 (S.D.N.Y. 2010), so too the transfer of beneficial interest which establishes rights only between the buyer and his immediate securities intermediary, see U.C.C cmt. 2 (1994); U.C.C. Art. 8, Prefatory Note, III.C.1, and not between a seller and a defrauded buyer cannot be enough to establish a domestic transaction. See S.E.C. v. Benger, No. 09 Civ. 676, 2013 WL , at *10 (N.D. Ill. Feb. 15, 2013) (rejecting the SEC s theory under Morrison where the only domestic activity that had anything to do with the transaction was the shuttling of documents back and forth by the 4 Plaintiffs admit that they are not aware of any precedent that supports their position, see Nov. 25 Tr. 12:23-13:16, and they rely only on dicta from Absolute Activist on remand. Judge Daniels observed in that case that [t]ransfer of title... occurred within the U.S. in part because many of the relevant trades were settled through the [DTC], Absolute Activist Master Value Fund, Ltd. v. Ficeto, No. 09 Civ (GBD), 2013 WL , at *18 (S.D.N.Y. Mar. 28, 2013). However, this one sentence throwaway, Nov. 25 Tr. 13:17-20, 15:7-8, was not necessary to the decision and is belied by the actual operation of DTC. See D. Reply Br. at 4-5. Even Plaintiffs concede (as they must) that there is no transfer of title at DTC. Nov. 25 Tr. at 17. Moreover, the argument that a change in beneficial ownership is the functional equivalent of transfer of title was not presented to the district court in Absolute Activist, and thus Plaintiffs reliance upon that case is not persuasive. 5

12 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 12 of 17 Escrow Agents ); cf. In re Vivendi, 284 F.R.D. at 152 (focusing on when (and where) there is a binding contract for the purchase or sale of a security rather than when the shares are actually transferred ); S.E.C. v. Goldman Sachs & Co., 790 F. Supp. 2d 147, 158 (S.D.N.Y. 2011) (rejecting SEC s argument that the location of a transaction [should] be determined by looking at the entire selling process, rather than where the purchase and sale occurred, and holding that closing, by itself, is not sufficient to make... note purchases domestic transactions ); Sec. Inv r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 513 B.R. 222, 228 (S.D.N.Y. 2014) (rejecting argument that an otherwise foreign transfer was rendered domestic because it formed a chain that originated with a transfer from a US brokerage firm). Third, the Supreme Court intended to create a clear test to supplant what it viewed as the Second Circuit s vague, unpredictable, and inconsistent test that was vulnerable to forum shopping. Morrison v. National Australia Bank Ltd., 561 U.S. 247, , (2010); Loginovskaya, 764 F.3d at 274 n.9 (rejecting any argument that would expand Morrison s transaction test beyond the scope of the conduct and effects test with which Morrison dispensed ); Absolute Activist, 677 F.3d at (noting that a test that swept in all securities registered with the SEC would sweep too broadly and conflict with Morrison). The Second Circuit s irrevocable liability and transfer of title tests satisfy Morrison s criteria. Each of them establishes, as the site of the transaction that is of congressional concern, a single location that although subject to proof can be easily determined based on recognized and readily understood standards. Plaintiffs transfer of beneficial interest test, by contrast, would result in a single transaction having numerous locations depending entirely on chance or on the vantage from which it is viewed. When a party agrees to purchase a security for which title is held at DTC, 6

13 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 13 of 17 that acquisition is reflected in a cascading series of book entries that may be recorded in any number of locations, in the US or abroad. For example, two foreign entities might enter into an agreement in a foreign country to purchase and sell notes; that transaction would be reflected in multiple book entries. The purchaser s acquisition of a beneficial interest in the notes would be reflected on the books of its broker. The broker s acquisition of a beneficial interest on behalf of its customer then would be reflected in the records of another securities intermediary who would sit between the broker and the DTC (as the ultimate acquirer is often not the customer of the DTC participant but rather a customer of a customer). That securities intermediary s acquisition of a beneficial interest frequently would be reflected in the records of a DTC participant (if the securities intermediary needed the securities to balance its books). And, ultimately, depending on the intermediary s inventory, the DTC participant s acquisition of an interest from another DTC participant would be reflected in the records of the DTC. That appears to be exactly what happened here. No Plaintiff claims to be a DTC participant. They either had accounts with DTC participants (or their affiliates) or with other institutions that, directly or indirectly, had accounts with DTC participants. The transaction that transferred beneficial interest to them thus occurred not at DTC but at some other location. 5 Plaintiffs test (unlike the Second Circuit s) offers the Court no basis to choose: Is it the first location, the second, the third, or any of the three? And, indeed, there is the possibility that no transfer of beneficial interest occurs at DTC (even to a DTC participant trading for its own account) because it (or the customer s broker or bank) may have sufficient securities in its account to balance its purchases and sales for the day such that the total of its purchases equal the total of its sales (or where its inventory is sufficient to complete the transaction) without the need 5 Although two Named Plaintiffs (North Carolina and Hawaii) point to trade tickets that say settlement loc: DTC, that merely reflects that title resided at DTC. 7

14 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 14 of 17 for a transfer at DTC. And to take it one step further, it is impossible to ascribe a transfer at DTC to any particular ultimate acquirer (so that no investor could tell whether it is in the class or not) because the DTC participant will act on behalf of a securities intermediary who will act for others. All of this is complicated further by the fact that orders may be aggregated at every one of those levels, muddling together multiple transactions. See U.C.C cmt. 2. Fourth, Plaintiffs argument runs contrary to Morrison itself. The Court there decried the Second Circuit s prior conduct and effects test as complex in formulation and unpredictable in application and lacking in a textual or even extratextual basis. Morrison, 561 U.S. at The Supreme Court stressed that the proper reach of the securities laws turns on the focus of congressional concern, which, in this case, is the regulation of fraud in connection with domestic purchase-and-sale transactions. Id. at Applying that test, the Court ruled that only the purchase-and-sale transactions were the focus of congressional concern, because it was fraud between buyer and seller in the contract for a purchase or sale, or fraud on a domestic exchange, that Congress sought to regulate. Id. at 267. Plaintiffs argument, by contrast, not only ignores Absolute Activist s textual analysis, but would make as the objects of the statute s solicitude an event far from the focus of congressional concern. Id.; cf. S.E.C. v. Tourre, No. 10 Civ. 3229, 2012 WL (S.D.N.Y. Nov. 19, 2012) (holding Morrison was not satisfied where the only domestic transactions alleged were not the allegedly fraudulent transaction itself but merely connected to it in some other way ). There is no evidence in the Supreme Court s decision in Morrison, in the decisions of the courts applying the federal securities laws over the decades, or in the securities laws legislative history, that would suggest that Congress intended to regulate every transaction, including those entered into abroad between foreign entities, that involves DTC eligible securities. Morrison 8

15 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 15 of 17 held that transactions on domestic exchanges enjoy primacy of congressional concern. 561 U.S. at 249. That category encompasses the overwhelming majority of securities transactions for example, more than 33 million trades were executed on US exchanges on the first day of this month. See Ex. 1 (BATS Historical Market Volume Data). The Court made clear a contract for sale when executed in the US also was a focus of congressional concern. That category can apply when an individual buyer purchasing over the counter from an individual seller decides to make that agreement in the US. But, if Plaintiffs argument were accepted, Absolute Activist s first and second categories would be swallowed by the third, and its carefully drawn distinctions would become illusory. It would be a rare trade indeed that took place on a domestic exchange but where DTC had no connection to the transaction. 6 This would turn the Morrison framework on its head. Moreover, Plaintiffs broad-ranging transfer of beneficial interests test would implicate the Supreme Court s concerns about the probability of incompatibility with the applicable laws of other countries if the Exchange Act were read to reach transactions abroad. Morrison, 561 U.S. at 269. That danger is averted by the Second Circuit s irrevocable liability and transfer of title tests. Both refer to well-recognized events that have universal legal significance. It is universally recognized that a contract is created when a meeting of minds occurs, just as it is also universally recognized that a sales transaction is consummated when title transfers. See Quail Cruises, 645 F.3d at By contrast, as the Offering Documents for the Notes themselves explained, transfer of beneficial interest, which does not have uniform legal meaning, is not universally considered enough to transfer ownership. See FAC 529 ( The laws of some 6 DTC holds title to a staggering number of securities. See Ex. 2 at 3, 4 (DTCC Capabilities) ( DTCC s global trade repositories record more than U.S. $500 trillion in gross notional value of transactions made worldwide.... Today, DTCC safely and securely clears more than U.S. $1.6 quadrillion in transactions every year. ). 9

16 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 16 of 17 jurisdictions... may require some purchasers to take physical delivery of their notes.... ). Thus, under Plaintiffs proposed test, two jurisdictions intending to regulate precisely the same conduct the transfer of an interest in a security could consider that conduct to occur in its own territory and regulate it as a domestic transaction (the first because title transferred in its location, and the second because beneficial interest transferred). It is inconceivable that Congress or the Supreme Court intended that result, and such a result would violate principles of comity expressed in Morrison. Finally, when applied literally, Absolute Activist means that acquirers of Petrobras Notes who chose to contract abroad will likely not have a US claim, but that is not grounds to ignore or bend its holding. Importantly, the federal securities laws apply both to securities that are widely and publicly traded and to securities that are conveyed through private transactions. In the case of widely or publicly traded securities, Morrison will frequently be satisfied by (and frequently requires) a trade on a domestic exchange. And for securities that are privately exchanged, Morrison can also be satisfied by a meeting of the minds in the US (i.e., irrevocable liability) or transfer of legal title in the US. That is as it should be. A seller who lies to a buyer when passing title to a security in the US is properly subject to liability under the US securities laws. Here, however, Plaintiffs cannot establish a domestic transaction because (as they concede) they did not purchase the Notes in the US or on a US exchange and they did not acquire title to the Notes in the US. CONCLUSION For the foregoing reasons and for the reasons stated in Defendants opening and reply briefs, the referenced claims should be dismissed with prejudice. 10

17 Case 1:14-cv JSR Document 351 Filed 12/07/15 Page 17 of 17 Dated: New York, New York December 7, 2015 Respectfully submitted, CLEARY GOTTLIEB STEEN & HAMILTON LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP By: s/ Mitchell A. Lowenthal Mitchell A. Lowenthal Lewis J. Liman Roger A. Cooper Elizabeth Vicens Jared Gerber By: s/ Jay B. Kasner Jay B. Kasner Scott D. Musoff Jeremy A. Berman One Liberty Plaza New York, New York (212) Four Times Square New York, New York (212) Attorneys for the Petrobras Defendants Attorneys for the Underwriter Defendants 11