The Supreme Court has handed defendants in class-action securities lawsuits yet another bulwark to fend off shareholder litigation, raising the bar for how much scienter, or knowing intent to commit wrongdoing, that plaintiffs must prove.
The case, Tellabs v. Makor Issues & Rights, stems from a shareholder lawsuit against Tellabs Corp., accusing the communications equipment company of falsely overestimating its prospects and engaging in alleged channel-stuffing. The Chicago-based Seventh Circuit Court of Appeals set a very low pleading standard for the plaintiffs to meet, saying that a complaint could proceed to trial “if it alleges facts from which, if true, a reasonable person could infer that the defendant acted with the required intent.”
