|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Emerging Issues In Securities Litigation: Pleading Scienter In 10b-5 Actions After Tellabs
Staff Writer
Mondaq. May 8, 2008
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EXCERPT: The Supreme Courts Tellabs decision has been widely seen as making it more difficult for private securities fraud plaintiffs to satisfy the Private Securities Litigation Reform Acts (PSLRA) requirement of pleading a "strong inference" of scienter, by holding that such plaintiffs "must plead facts rendering an inference of scienter at least as likely as any plausible opposing inference." In Tellabs, the Supreme Court rejected the approach of some of the federal circuits most notably the Second and the Seventh that had declined to consider competing inferences in applying the "strong inference" standard. Now, almost a year after the June 2007 decision, what impact is Tellabs really having? Has the case benefited defendants as much as first predicted? On remand from Tellabs, the Seventh Circuit "adhered" to its earlier judgment that the complaint did adequately plead scienter, even under the new "competing inferences" approach. And on April 16, the First Circuit reversed a district courts pre-Tellabs dismissal of a securities fraud class action, noting that "[t]he district court did not have the benefit of the Tellabs opinion, which reversed a higher standard for scienter imposed by the prior law of this circuit." Mississippi Public Employees Retirement System v. Boston Scientific Corp., 2008 WL 1735390, at *12 (1st Cir. April 16, 2008) ("Boston Scientific"). While the conventional wisdom has been that plaintiffs now have a tougher pleading hurdle, the Supreme Courts formulation of the scienter test--requiring the plaintiffs inference to be "at least as likely" as the defendants effectively ended the practice in some jurisdictions of deciding a "tie" in favor of the defendant. |
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