Opinion ID: 2791707
Heading Depth: 4
Heading Rank: 1

Heading: Consistency with Scienter

Text: Mr. Nakkhumpun’s scienter inference is that the defendants “misstated the reason that the Opon negotiations [had] broke[n] down in order to ‘signal[] to potential strategic partners—and, consequently, to mislead shareholders—that the announced $400 million price accurately reflected the value of those assets.’” Appellant’s App., vol. 7, at 1851. The district court concluded that this inference cut against scienter: If the false statement was designed to attract a buyer and maximize shareholder value, the district court thought the intention would have been to help shareholders rather than to deceive them. Id. In our view, this rationale is flawed. Scienter is not limited to situations in which a defendant acted with the primary purpose of misleading shareholders; scienter also exists when a defendant acted 12 with a reckless disregard of a substantial likelihood of misleading investors. In re Level 3 Commc’ns, Inc. Sec. Litig., 667 F.3d 1331, 1343 n.12 (10th Cir. 2012); see Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1233 (10th Cir. 1996) (“This circuit still maintains that recklessness . . . is sufficient scienter for finding civil § 10(b) primary violations.”). If Mr. Taylor mischaracterized the impasse in order to entice prospective buyers, he should have realized the obvious risk that existing and potential shareholders would also be misled and that they might rely on the mischaracterization to their detriment. Therefore, Mr. Nakkhumpun has pleaded facts indicating that Mr. Taylor was at least reckless in disregarding the risk that his statement would mislead existing and potential shareholders.