Opinion ID: 2791707
Heading Depth: 1
Heading Rank: 2

Heading: Heightened Pleading Requirements

Text: To plead securities fraud under § 10(b) of the Securities Exchange Act and Rule 10b-5 of the Securities and Exchange Commission, a plaintiff must plausibly allege that a defendant made statements that 1. contained false or misleading statements of material fact, 4 2. related to the purchase or sale of a security, 3. were made with intent to defraud investors or conscious disregard of a risk that shareholders would be misled (scienter), 4. led to reliance by the plaintiff, and 5. caused the plaintiff’s loss (loss causation). Adams v. Kinder-Morgan, Inc., 340 F.3d 1083, 1095 (10th Cir. 2003); see City of Philadelphia v. Fleming Cos., 264 F.3d 1245, 1260 (10th Cir. 2001) (defining recklessness). On the first element (falsity), a plaintiff must plead the fraud with particularity. Fed. R. Civ. P. 9(b). To satisfy this requirement, Mr. Nakkhumpun had to specify each fraudulent statement, explain why the statement was misleading, and allege with particularity his basis for believing that the statement was false. 15 U.S.C. § 78u- 4(b)(1). On the third element (scienter), a plaintiff must allege facts that create a strong inference that the defendants acted with the intent to deceive shareholders or in reckless disregard of a risk that shareholders would be misled. Adams, 340 F.3d at 1096. These alleged facts must be susceptible to an inference of scienter that is “at least as compelling as” any competing inference. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007). 5