Securities Fraud Class Action Dismissed Under Heightened Pleading Rules

Securities Fraud Class Action Dismissed Under Heightened Pleading Rules

The U.S. Third Circuit Court of Appeals in City of Roseville Employees' Retirement System v. Horizon Lines, Inc., et al., Case No. 10-2788, on August 24, 2011, in a 2-to-1 decision, read opinion here [an enhanced version of this opinion is available to subscribers], affirmed the District Court's granting of defendants' motion to dismiss all claims against corporate defendants and five officers and directors for securities fraud under the heightened pleading rules codified in the Private Securities Litigation Reform Act (the "PSLRA").  The majority substantively agreed with the District Court's resolution of the defendants' motion to dismiss, preferring to not "retrace all of the ground the Court so ably covered...."

This summary was prepared by Kevin F. Brady of Connolly Bove Lodge & Hutz LLP.

The Court of Appeals noted that the PSLRA places "a weighty burden on plaintiffs" to plead sufficient facts, when viewed in their totality, to raise a strong inference of scienter. The District Court applied the Fifth Circuit's approach in Southland Securities Corp. v. INSpire Insurance Solutions, Inc., 365 F.3d 353, 366 (5th Cir. 2004), in which the court recognized that statements of executive officers may be attributed to a corporation when they are "made pursuant to their positions of authority within the company." 

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Read more Delaware business litigation case summaries and commentary on Delaware Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X. Pileggi, of Eckert Seamans.

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