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News & Events

7.2.2007

U.S. Supreme Court Construes “Strong Inference” of Scienter Requirement Under PSLRA in Favor of Defendants

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The Private Securities Litigation Reform Act (“PSLRA”) was enacted in 1995 as a check against abusive private federal securities fraud lawsuits, and requires plaintiffs bringing such suits to meet exacting pleading requirements. On June 21, 2007, the United States Supreme Court decided Tellabs, Inc. v. Makor Issues & Rights Ltd., ___ S.Ct. ___, 2007 WL 1773208, a class action alleging that defendants engaged in securities fraud in violation of Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5. In Tellabs, the Court resolved a disagreement among the federal Courts of Appeals whether, and to what extent, a court must consider competing inferences in determining whether a plaintiff’s securities fraud complaint gives rise to a “strong inference” that the defendants acted with “scienter,” meaning that they intended to “deceive, manipulate or defraud,” as required under the PLSRA’s heightened pleading requirements, 15 U.S.C. § 78u-4(b)(2). View full article (PDF).