Blawgletter said last June that the decision in Tellabs, Inc. v. Makor Issues & Rights Ltd., 127 S. Ct. 2499 (2007):
turns on what Congress meant 12 years ago by "strong inference" of scienter in the Private Securities Litigation Reform Act. The Court holds that the complaint as a whole must give "cogent" reasons for believing that the defendants meant to practice a fraud. The nub of the decision: From now on, lower courts have to infer whatever the complaint plausibly implies — including innocent intentions.
Today, the Seventh Circuit revisited the very same Tellabs complaint and reached the very same conclusion it did before — that the complaint states a viable claim for securities fraud. As Judge Posner, after summarizing the allegations, concluded:
Because the alternative hypotheses–either a cascade of innocent mistakes or acts of subordinate employees, either or both resulting in a series of false statements–are far less likely than the hypothesis at the corporate level at which the statements were approved, the latter hypothesis must be considered cogent.
Makor Issues & Rights, Ltd. v. Tellabs Inc., No. 04-1687 (7th Cir. Jan. 17, 2008). There you have it.