January 8, 2007

Supreme Court To Address Scienter

After eleven years, the PSLRA's scienter pleading standard finally will be addressed by the U.S. Supreme Court. On Friday, the court granted certiorari in Tellabs, Inc. v. Makor Issues & Rights, Ltd. on appeal from the U.S. Court of Appeals for the Seventh Circuit. (The 10b-5 Daily's summary of the lower court decision can be found here.)

The question presented on appeal is whether, and to what extent, a court must consider or weigh competing inferences in determining whether a complaint has alleged sufficient facts to establish a strong inference of scienter. The Seventh Circuit held that the plaintiff was entitled to more than the most plausible of competing inferences. Instead, a court should "allow the complaint to survive if it alleges facts from which, if true, a reasonable person could infer that the defendant acted with the required intent." In their cert petition (via SCOTUSblog), defendants argued that this is the most lenient of the "four meaningfully different interpretations of the strong inference standard" that have been adopted by federal circuit courts and urged the Supreme Court to resolve the circuit split.

Links to the various cert petition briefs can be found on SCOTUSblog, which also notes that the Supreme Court has ordered expedited briefing in the case and may be planning to hear it during the March 2007 session. Thanks to Greg Harris for the tip.

Posted by Lyle Roberts at January 8, 2007 11:17 PM | TrackBack
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