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Supreme Court Upholds Strict Pleading Requirement in Securities Fraud Litigation
June 21, 2007 Full PDF
In Tellabs, Inc. v. Makor Issues & Rights, Ltd. the Supreme Court held that, in considering a motion to dismiss a securities fraud claim on scienter grounds, courts must do the sort of weighing of facts traditionally reserved for post-discovery proceedings. Plaintiffs' allegations in support of a conclusion that defendants acted with the requisite intent must be balanced - at the motion to dismiss phase - against the facts tending to show an absence of intent. The claim may proceed only if the inference of intent is at least as strong as the inference against it. The attached memo discusses the Court's approach, which offers defendants a significant opportunity to dispose of weak securities fraud claims before discovery begins.