Commercial Litigation and Arbitration

12(b)(6) Motions — Documents the Court May Consider

The dismissal motion is the first, and often the last, theatre of war in securities class actions. The complaint is the key document, but whether the motion is won or lost often depends on which documents the court can consider outside the complaint without turning the motion into one for summary judgment. Usually, this requires that the documents are not considered for their truth (they are admitted, e.g., to show what was actually stated or publicly disclosed). But sometimes the court may go further. In Malin v XL Capital Ltd., 2007 U.S. Dist. LEXIS 54227 (D.Conn. July 26, 2007), District Judge Peter C. Dorsey ruled that:

1. Transcripts of quarterly conference calls that are not explicitly mentioned in the complaint but are quoted in part may be considered in full to assess whether the complaint’s quotations are misleading.

2. SEC Forms 3, 4 and 5 may be considered for their truth. The court may take judicial notice of their contents pursuant to Fed.R.Evid. 201 because they are filed under oath, are routinely considered on dismissal motions, and their contents are essential to an assessment of scienter on the part of the individual defendants.

3. Charts and graphs that summarize trading and other information may be considered, in accordance with Fed.R.Evid. 1006. To address concerns that they may be misleading, ‛the summaries will not be considered without reference to underlying documents.“

In part, rulings of this sort might be seen as a procedural ramification of Tellabs. Courts need information to make an assessment of the ‛cogency“ of scienter allegations. But these holdings are not limited to the securities field. The same need for information is present in non-securities cases when complaints are put under Bell Atlantic scrutiny for ‛plausibility."

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