Makor Issues & Rights, Ltd. v. Tellabs, Inc.

Tellabs CEO Richard Notebaert made repeated optimistic public statements between December 2000 and June 2001 about strong demand for the company's flagship product and the readiness of its next-generation product, backed by supporting financial data, before the company sharply revised sales projections downward and announced significantly falling flagship-product sales in June 2001, causing a 75% stock price drop. Shareholders (plaintiffs) sued under SEC Rule 10b-5, alleging Notebaert knew his optimistic statements were false, citing over 20 anonymous sources and detailed facts; the trial court dismissed for failure to plead a strong inference of scienter under the PSLRA, the appeals court initially reversed, and the Supreme Court vacated and remanded with a refined standard requiring the scienter inference be at least as compelling as any opposing inference.

Whether a complaint satisfies the PSLRA pleading standard when it alleges facts creating an inference of fraudulent intent that is significantly more likely correct than any opposing inference.