Oral Argument In Tellabs

Download associated file: Supreme Court.pdf 

As discussed in prior blogs, the Supreme Court is currently considering the proper standard for pleading a "strong inference" of scienter under the PSLRA in Tellabs, Inc. v. Makor Issues & Rights LTD., No. 06-484.

The question presented is: "[w]hether, and to what extent, a court must consider or weigh competing inferences in determining whether a complaint asserting a claim of securities fraud has alleged facts sufficient to establish a ‛strong inference“ that the defendant acted with scienter, as required under the Private Securities Litigation Reform Act of 1995."

Interestingly, at oral argument several of the justices appeared troubled by the prospect, raised by the Respondents in point II of their brief (available at http://www.abanet.org/publiced/preview/briefs/pdfs/06-07/06-484_Respondent.pdf), that an interpretation of the PSLRA that applies a standard at the pleading stage that is higher than at the proof stage runs afoul of the Seventh Amendment. At argument, the justices and counsel engaged in an interesting dialogue about possible solutions, which included the prospect of raising the standard at the proof stage in securities cases to avoid Seventh Amendment implications (suggested in footnote 2 of the Petitioners' reply brief, which is available at http://www.abanet.org/publiced/preview/briefs/pdfs/06-07/06-484_PetitionerReply.pdf).

A copy of the argument transcript from the Supreme Court's website is linked below.

Doug Pepe

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