Federal Rule of Civil Procedure 9(b) is clear on its face: “Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Nonetheless, almost 40 years after the rule’s adoption, the U.S. Court of Appeals for the Second Circuit began requiring plaintiffs to plead facts giving rise to a “strong inference” of scienter. The Second Circuit has never reconciled the “strong inference” standard with the plain language of Rule 9(b), and its approach contradicts how the rule is applied in every other circuit. As a consequence, the Second Circuit is increasingly viewed as anti-plaintiff, particularly in securities cases, and Rule 9(b) has become a frequent weapon for district judges to dismiss fraud claims.

The “strong inference” language has always been in significant tension with Rule 9(b). But the problem was exacerbated by Tellabs v. Makor Issues & Rights, 551 U.S. 308 (2007), where the Supreme Court interpreted the Private Securities Litigation Reform Act’s (PSLRA) “strong inference” standard for federal securities claims (15 U.S.C. §78u-4(b)(2)) as being even more strict than the Second Circuit’s common-law approach. Having two different standards going by the name “strong inference” has already resulted in confusion, and threatens to bring the Second Circuit even more out of step with the other circuits.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]