This morning, lawyers in Tellabs, Inc. v. Makor Issues & Rights, Ltd., No. 06-484 (U.S.) argued about the appropriate standard for pleading a securities fraud case under the Private Securities Litigation Reform Act of 1995. Click here for the transcript.
Update — Blawgletter impressions:
- The case seems to pivot on the question of whether Congress, by requiring that a securities fraud complaint allege facts that raise a "strong inference" of fraudulent intent, toughened the pleading standard beyond the preponderance of the evidence test at trial.
- The idea that a harder test applies at the motion to dismiss stage than at trial troubles some of the justices, particularly Justice Beyer, who as much as said that the dichotomy creates a conflict with the seventh amendment right to trial by jury.
- The Chief Justice and Justice Scalia lean to approving a higher standard for motions to dismiss than for later stages.
- Justices Stevens, Ginsberg, and — to a lesser extent — Beyer lean to letting the district judge read the whole complaint and decide whether, drawing inferences favorable to the plaintiff, it raises a strong inference of scienter.
- Justice Alito questioned whether the "strong inference" test applies to summary judgment as well as to a motion to dismiss.
- Justice Thomas, per usual, said nothing.
- Justices Kennedy and Souter provide the swing votes.