Supreme Court Endorses “Holistic” Approach to Evaluating Securities Fraud in Tellabs


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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Published In: Civil Procedure Updates, General Business Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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