Supreme Court Requires Plaintiff to Meet Stringent Pleading Standard: Under PSLRA’s “Strong Inference” Requirement, Courts Must Consider Plausible Inferences Favoring Defendants

On June 21, 2007, in a much anticipated ruling affecting the ability of federal securities fraud complaints to withstand a motion to dismiss, the United States Supreme Court resolved a dispute between the federal circuit courts regarding what securities fraud plaintiffs must plead concerning the state of mind of the defendants in order for a complaint to withstand dismissal.  Tellabs, Inc. v. Makor Issues & Rights, Ltd., 2007 WL 1773208 (June 21, 2007).  The Court squarely reinforced the importance of the heightened pleading standard contained in the Private Securities Litigation Reform Act (“PSLRA”) and settled a dispute between the federal circuit courts over the application of the PSLRA standard in favor securities fraud defendants.  To view a Client Advisory concerning this issue by Edwards Angell Palmer & Dodge’s Securities and Government Enforcement Group, please click here.