The Shaw Group is on a roll. Following the recent dismissal of the securities class action against the company in the S.D.N.Y., it has obtained an unusual victory in an earlier, unrelated securities class action filed in the D. of La. As noted in The 10b-5 Daily nearly two years ago, the D. of La. court denied Shaw's motion to dismiss in the case, but certified its denial for appeal. The court found that "reasonable minds might disagree on the issue of whether the Plaintiffs have satisfied their pleading burden under the heightened standards for securities claims." Apparently so.
In Indiana Electrical Workers' Pension Trust Fund IBEW v. Shaw Group, Inc., 2008 WL 2894793 (5th Cir. July 29, 2008), the court held that the plaintiffs had failed to allege a strong inference of scienter. Interestingly, the court agreed with the Seventh Circuit that "[f]ollowing Tellabs, courts must discount allegations from confidential sources." In the absence of any financial restatement, the court found that the complaint's circumstantial allegations of scienter (based largely on confidential sources) were insufficient and there were plausible, non-fraudulent explanations for the officer stock sales during the class period.
Holding: Reversed and remanded with instructions to dismiss.Posted by Lyle Roberts at August 13, 2008 11:56 AM | TrackBack