March 6, 2009

Where Are They Now?

A visit to the U.S. Supreme Court does not necessarily mean the end of a securities class action, even if the defendants win their legal argument. The defendants in the Tellabs case successfully overturned the Seventh Circuit's interpretation of the "strong inference" pleading standard for scienter (i.e., fraudulent intent). On remand, however, the Seventh Circuit found that the plaintiffs had adequately plead scienter even under the Supreme Court's more rigorous interpretation and sent the case back to the district court for further proceedings.

A mere eight years after the case was filed, the issue of class certification has been decided. In Makor Issues & Rights, Ltd. v. Tellabs, Inc., 2009 WL 448895 (N.D. Ill. Feb. 23, 2009), the court rejected the defendants' attempts to limit the class period and class members. Among other rulings, the court found that in-and-out traders, members of the class in a related ERISA class action, and Tellabs employees should not be excluded from the class. However, the court did exclude one of the proposed representative plaintiffs because, under a last-in, first-out ("LIFO") analysis of his stock trading, his gains during the class period outweighed any losses.

Holding: Class certification granted.

Posted by Lyle Roberts at March 6, 2009 3:26 PM | TrackBack
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