Pfeffer v. Viacom, Inc., et al.

Scienter Pleading Standard in Fraud Claims

U.S. Chamber's Position: 

NCLC argued in an amicus brief that well-settled Delaware law requires a plaintiff to allege sufficient facts to give rise to a reasonable inference of scienter when pleading a fraud claim. In its brief, NCLC explained that Delaware courts have interpreted Rule 9(b) to require plaintiffs to plead sufficient facts from which it could be reasonably inferred that the defendants had knowledge of the events underlying the fraud claim. NCLC argued that the sharp upward trend of securities class action filings illustrate the need for the Court to uphold the “reasonable inference” test in order to ward against meritless securities class actions that are brought only to coerce costly settlements.

Case Outcome: 

The Delaware Supreme Court agreed with NCLC that plaintiffs must allege more than a mere inference of knowledge on the part of the directors when pleading a fiduciary duty case premised on securities fraud.

Procedural History: 

Amicus brief filed 9/2/08. Decided 1/23/09.