Supreme Court Endorses “Holistic” Approach to Evaluating Securities Fraud in Tellabs
The Supreme Court has issued its much-anticipated decision in Tellabs v. Makor Issues & Rights, No. 06-484,
551 U.S. ___ (June 21, 2007). Tellabs holds that a court must consider competing inferences in determining
whether the allegations in a securities fraud complaint give rise to a “strong inference” of scienter, as required
by the heightened pleading standard set forth in the Private Securities Litigation Reform Act of 1995 (the
“Reform Act”). Congress imposed the heightened pleading requirement as a check against abusive litigation in
private securities fraud actions. While Tellabs provides guidance about what constitutes a “strong inference” of scienter, it rejects any brightline rules.
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