Corporate Counsel: Don't Relax Just Yet

Well, it's shaping up to be not such a horrible week for class-action lawyers after all.

Sure, it began badly, when the Supreme Court gave big business a big gift by closing the door on "scheme" liability in securities class actions in Stoneridge Investment Partners v. Scientific-Atlantic.

But it seems that plaintiffs' lawyers were right when they said a supposed win for big business from the court's last term—the case of Makor Issues & Rights v. Tellabs, an 8-1 ruling handed down last June—would hardly endanger securities class actions.

In Tellabs, the court interpreted tougher pleadings standards for complaints in these cases imposed by a 1995 law called the Private Securities Litigation Reform Act, and sent the case back to the federal appeals court in Chicago for further review.

Circuit Judge Richard A. Posner issued a decision in the case today, and it is a big win for the plaintiffs' lawyers from Milberg Weiss.

The 1995 law requires a "strong inference" of scienter, and Posner has found the Milberg Weiss complaint meets that burden, even though it does not name the persons in management responsible for the alleged fraud. "The absence of proper names does not invalidate the drawing of a strong inference from the informants' assertions," Posner concludes.

by Karen Donovan