Atlanta attorneys on post-TELLABS witness treatment
Atlanta partner Tim Mast and Atlanta associate Alex Reyes’ article “PSLRA Confidential: Post-TELLABS Treatment of Confidential Witnesses” was published June 10 in The Business Suit, a newsletter issued by the Defense Research Institute, which is an international organization of attorneys defending the interests of businesses and individuals in civil litigation.
According to Mast and Reyes’ article “it is well-settled that securities fraud actions are subject to heightened pleading requirements and that plaintiffs often rely on statements from purported confidential witnesses in an attempt to bolster their allegations and clear the Rule 9(b) and PSLRA pleading hurdles. However in the post-Tellabs era, Circuit courts have split as to how confidential witnesses may be used to meet these heightened requirements.” The article goes on to give examples of certain court views on the issue.
“In sum, these decisions generally indicate that courts are more willing to give weight to confidential witness statements where both the information about the witness’s background and the information provided by the witness are sufficiently detailed, and where the statements are corroborated by multiple sources or other indicia of reliability,” Mast and Reyes’ conclude. “Where the statements do not contain this level of detail or support, courts are much more inclined to discount the statements and find that they do not ‘qualify as a “strong”…inference of scienter [that is] cogent and at least as compelling as any opposing inference one could draw from the facts alleged.”