A substantial body of law addresses the extent to which a securities fraud complaint may rest on allegations based on the plaintiffs’ confidential informants (see our post of July 29, 2007, discussing Higgingotham v. Baxter Int’l, Inc., 2007 U.S. App. LEXIS 17918 (7th Cir. July 27, 2007)). What if the confidential informants are not those of the plaintiffs but, rather, are those of newspaper reporters? Under the decision of District Judge David H. Coar in In re JPMorgan Chase & Co. Secs. Litig., 2007 U.S. Dist. LEXIS 93877 (N.D. Ill. Dec. 18, 2007):

[A]t a minimum, newspaper articles satisfy the heightened PSLRA pleading requirements if (1) they are based on an independent investigative effort, (2) they are sufficiently particular and detailed to indicate their reliability, and (3) Plaintiffs' counsel conducted its own independent investigation which corroborates the information in the article.

The Court took care to distinguish confidential informants of plaintiffs’ counsel and those of newspaper reporters. “A reputable newspaper, where an independent investigation was conducted, provides an additional layer of reliability in reporting. Further, the confidential nature of a journalist's source is used to encourage reporting and accuracy. In the present case, the confidential source is the informant to a newspaper, not to the Plaintiffs' counsel directly.”