Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

The following is not meant to be legal advice.

On March 28, 2007, the United States Supreme Court heard oral argument in Tellabs, Inc., et al. v. Makor Issues & Rights, Ltd., et al.  A decision is expected by the end of June 2007.

The case involves the interpretation of the requirement that plaintiffs in securities fraud actions plead a strong inference of scienter.  The issue relates to the extent to which a court must weigh competing factual inferences in determining whether a strong inference of scienter has been alleged. The Private Securities Litigation Reform Act (PSLRA) requires that a complaint state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind.

The plaintiffs rely on confidential sources to bolster their allegations.  The United States Supreme Court may address whether plaintiffs must identify confidential sources, whether the PSLRA raised the substantive scienter standard for securities fraud cases, and whether the PSLRA requires a strong inference of scienter to be alleged separately for each person named as a defendant.