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Second Circuit Vacates Decision Denying a Motion To Dismiss Securities Fraud Claims Against Corporate Defendants
July 7, 2008 Full PDF
The Second Circuit's recent decision in Teamsters Local 445 Freight Division Pension Fund v. Dynex Capital Inc. & Merit Securities Corp., 2008 U.S. App. LEXIS 13449 (2d Cir. June 26, 2008), represents an important clarification of the requirements for pleading "corporate scienter" in connection with claims for securities fraud under the PSLRA. The Second Circuit held that, in order to plead scienter adequately, a plaintiff must allege that at least one corporate agent had the requisite scienter, but that a plaintiff may under some circumstances survive a motion to dismiss even if he does not identify the particular person having the necessary state of mind. While the Second Circuit declined to hold categorically that a plaintiff's failure adequately to plead scienter on the part of a specific agent of the corporation precludes a finding that plaintiff has adequately pleaded scienter on the part of the corporate defendants, the decision nevertheless is one that should prove helpful to corporate defendants seeking to dismiss claims of securities fraud for failure to plead scienter adequately.