Tellabs, Incorporated, et al. v. Makor Issues & Rights, Ltd., et al.

Case Details

Status: Victory
Docket No: 06-484
U.S. Chamber Litigation Center Involvement: Petitioner
Solicitor General Involvement: Petitioner
Sub-Issue: Scienter
Industry: Technology
Sub-Industry: Telecommunications
Term: 2006 Term
Oral Argument Date: March 28, 2007
Vote: 8-1
Opinion: Ginsburg
Lower Court: U.S. Court of Appeals for the Seventh Circuit

Question(s) Presented

Whether, and to what extent, a court must consider or weigh competing inferences in determining whether a complaint asserting a claim of securities fraud has alleged facts sufficient to establish a “strong inference” that the defendant acted with scienter, as required under the Private Securities Litigation Reform Act of 1995.

U.S. Chamber's Position

NCLC filed twice in this case: once supporting cert. and once on the merits.

Urging the U.S. Supreme Court to adopt a strict pleading test as to the sufficiency of scienter allegations in securities fraud cases, NCLC reminded the high court that Congress enacted the Private Securities Litigation Reform Act (PSLRA) to curb vexatious litigation. In particular, NCLC described the significant risk of blackmail settlements and highlighted the potential of a stricter pleading standard for avoiding that risk. The courts of appeals have arrived at three different approaches in determining whether the defendant had the proper state of mind to be held culpable, and the Seventh Circuit, in its decision below, developed a particularly weak variant.

Case Outcome

As urged by NCLC, the Supreme Court adopted a stricter test for pleading scienter in securities fraud cases than did the Seventh Circuit below, holding that the inference of wrongful mind must be as cogent and compelling as competing inferences.

Justices in Majority
Alito
Breyer
Ginsburg
Kennedy
Roberts
Scalia
Souter
Thomas
Justices in Minority
Stevens
Procedural History

Amicus brief supporting cert. 12/6/06. Cert. granted 1/5/07. Amicus brief on the merits filed 2/9/07. Oral argument held 3/28/07. Decided 6/21/07.

Case Documents