Opinion ID: 175686
Heading Depth: 4
Heading Rank: 1

Heading: Tellabs v. Pre-Tellabs Standard Analysis

Text: It is well established that we review the district court's dismissal de novo, and we may affirm on any grounds supported by the record, even though they may be different from the grounds relied on by the district court. Ley, 543 F.3d at 805-06 (citation omitted). Nonetheless, plaintiffs argue that the district court applied the incorrect scienter-pleading standard, citing Frank, 547 F.3d at 571, which held that the pleading standard of Helwig had been rejected by Tellabs. Frank does not support plaintiffs' argument. In Frank, the district court incorrectly cited Tellabs as requiring the court to accept plaintiff's inferences of scienter only if those inferences are the most plausible of competing inferences. Id. at 571. The most plausible standard comes from Helwig, which plainly is at odds with the Supreme Court's holding in Tellabs. Id. Accordingly, this court vacated the district court's order and remanded. In this case, in articulating the controlling pleading standard, the district court's parenthetical description of Tellabs stated: plaintiffs must plead facts rendering inference of scienter at least as likely as any plausible opposing inference. This statement correctly describes the Tellabs standard. See Tellabs, 551 U.S. at 324, 127 S.Ct. 2499. However, the district court also repeated this court's pre- Tellabs holding, which enunciated the following standard: [P]laintiffs are only entitled to the most plausible of competing inferences. Helwig, 251 F.3d at 553. The strong inference requirement means that a plaintiff is entitled only to the most plausible of competing potential inferences. Id. at 553. The district court correctly applied the law to the facts using the Tellabs standard, and the Helwig quote was dicta that had no impact on the district court's analysis. See Konkol v. Diebold, Inc., 590 F.3d 390, 397 (6th Cir.2009) (stating that although the district court opinion contained scattered references to the most plausible standard, the court ultimately applied the correct standard). Nonetheless, we review the district court's dismissal de novo, using the correct Tellabs standard.