The opinion, by Justice Ruth Bader Ginsburg, will make it harder to file lawsuits on behalf of investors alleging they lost money due to securities fraud. The holding requires plaintiffs' attorneys, when filing a lawsuit, to show that companies or corporate officers had a "cogent" intent to commit securities fraud, the paper reported.
The Tellabs decision seeks to better define "scienter," a legal term in securities law that defines the standard for what is required to show a corporate defendant knew about or intended to commit securities fraud, according to the paper. "To qualify as strong....we hold an inference of scienter must be more than merely plausible or reasonable," Ginsburg wrote. "It must be cogent and at least as compelling as any opposing inference of nonfraudulent intent."
Ginsburg said the pleading standard the court was announcing Thursday wasn't higher than what must be proven during the trial phase of a case, the paper reported. In explaining this, she said a new case must show it was "at least as likely" that a defendant meant to commit fraud while at trial the standard to prove guilt requires proof that "it is more likely than not."
The Supreme Court ruling in Tellabs Inc. v. Makor Issues & Rights Ltd. overturns a 7th U.S. Circuit Court of Appeals holding that set a lower pleading standard, the paper reported. Justice John Paul Stevens dissented. Two justices -- Justice Antonin Scalia and Samuel Alito -- filed concurring opinions that offered different legal reasoning but supported the outcome of the majority opinion, the paper reported.-New York State Society of Certified Public Accountants
