In re Advanta Corp. Securities Litigation
United States Court of Appeals for the Third Circuit
180 F.3d 525 (1999)
After accurately reporting recent earnings and projecting continued growth based on charging high permanent interest rates, Advanta (codefendant) instead lowered its permanent rates to attract more customers, resulting in a $20 million first-quarter loss; before that loss was publicly recorded, two Advanta officers (codefendants) sold shares at a profit. Shareholders (plaintiffs) sued, alleging Advanta fraudulently withheld or misstated its plans to lower rates and recklessly disregarded the risks of that strategy, but the district court dismissed for failing to plead scienter as the Reform Act requires.
Whether pleading scienter in a securities-fraud case requires the plaintiff's allegations to establish, with particularity, either a strong inference of motive and opportunity to commit fraud, or circumstantial evidence of reckless or conscious misconduct.