Ninth Circuit Reaffirms Existing Precedent On Materiality And "Motive And Opportunity" Scienter Allegations


In Siracusano v. Matrixx Initiatives, Inc., 2009 WL 3448282 (9th Cir. Oct. 28, 2009), the United States Court of Appeals for the Ninth Circuit reversed and remanded a decision by the United States District Court for the District of Arizona granting defendant Matrixx Initiatives, Inc.’s (“Matrix”) motion to dismiss a putative securities fraud class action brought under Section 10(b) of Securities Exchange Act of 1934. In its decision, the Ninth Circuit rejected older precedent from the Second Circuit and held that the materiality or immateriality of an allegedly false statement generally is not to be determined at the pleading stage, but an issue of fact properly reserved for later stages of the proceeding. Additionally, the Ninth Circuit reiterated the Supreme Court’s recent admonition in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) [see blog article on Tellabs], that a plaintiffs’ failure to plead motive and opportunity is an insufficient basis on which to dismiss a complaint that otherwise alleges scienter with the particularity required by the Private Securities Litigation Reform Act of 1995. This decision in Siracusano largely echoes existing Ninth Circuit authority on the issues of materiality and scienter, as well as the interpretation and application of Tellabs.

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