Opinion ID: 2791707
Heading Depth: 3
Heading Rank: 2

Heading: At Least as Strong as a Competing Inference

Text: The inference of recklessness is at least as strong as a competing inference. The defendants contend that “the most plausible inference to be drawn from Delta’s explanation of why the negotiations ended was that [Delta] was trying to maximize shareholder value.” Appellees’ Resp. Br. at 23. But, this inference is consistent with scienter. The defendants urge that  they were under a fiduciary duty to obtain the highest price for the Vega Area assets, and  Mr. Taylor was carrying out his fiduciary duty when he explained the impasse in July 2010. According to the defendants, “[a]ny inaccuracy in the [July 2010] statement ‘was only a side-effect of Defendants’ efforts to obtain the best outcome for . . . shareholders.’” Id. 20 This argument implies that the defendants intended to mislead strategic partners rather than shareholders. But, scienter does not require the defendants to act with the primary purpose of deceiving shareholders. Scienter would also exist if Mr. Taylor recklessly disregarded a likelihood of misleading shareholders even if he did so out of an effort to fulfill his fiduciary duties. See pp. 12-13, above. Thus, even if Mr. Taylor was trying to maximize shareholder value, he would have been acting recklessly in disregarding the risk of misleading actual and prospective shareholders. The defendants’ explanation does not preclude a reasonable inference of recklessness. According to the defendants, they were attempting to entice potential strategic partners to consider a partnership with Delta. Because the defendants knew that strategic partners would conduct their own due diligence and would not ultimately rely on a $400 million valuation, the defendants imply that they did not intend to mislead anyone. But, the press release was directed to the public, not just to strategic partners. And, shareholders might not have the benefit of due diligence to assess Opon’s $400 million valuation. Therefore, Mr. Taylor’s statement created a risk of misleading shareholders to believe that at least one potential buyer had valued the 37.5% interest in the Vega assets at $400 million. This risk was readily apparent, 21 creating an inference of scienter that was at least as strong as an inference of innocence.