By James Hamilton, J.D., LL.M.
The requirement that investors in a private securities fraud action state facts that the defendants acted with a strong inference of scienter has been interpreted by the Supreme Court to mean that the fraud claim will survive only if a reasonable person would deem the inference of scienter cogent and at least as compelling as any opposing inference. This was the Court’s ruling on a provision of the Private Securities Litigation Reform Act (PSLRA) providing that plaintiffs must state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind. Tellabs, Inc. v.Makor Issues & Rights, Ltd. (US S. Ct. 2007), Dkt. No. 06-484, FED. SEC. L. REP.¶94,335
My white paper on the opinion is available here