Post a JobTo the category of unintended consequences, you might add a Supreme Court ruling released Monday that could help securities class action defense lawyers and their clients. In Ashcroft et al. v. Iqbal et al., the Court voted 5 to 4, to throw out a claim that former attorney general John Ashcroft and current FBI director Robert Mueller violated the Constitutional rights of a detainee caught up in the Bush administration's post-9/11 roundup. Javaid Iqbal, a Pakistani Muslim, claimed that he had been singled out because of his race, country of origin, and religion as part of a policy adopted and executed by Ashcroft and Mueller. The court ruled that Iqbal had not met the pleading requirements set forth in the antitrust case Bell Atlantic Corp. v. Twombly.
Interestingly, the case could have an impact on securities class actions, according to Scott Musoff of Skadden, Arps, Slate, Meagher & Flom. The 2nd Circuit has already ruled that Twombly pleading standards apply to cases outside the antitrust area, including securities cases. Musoff said the Supreme Court's decision cements that principle, which could make it harder on securities class action plaintiffs at the pleading stage by requiring them to plead facts and not just conclusions. "It reinforced the Supreme Court's message of late that district courts need to be gatekeepers on motions to dismiss to weed out those claims that are supported by facts and those that are not," he said.
The Supreme Court's decision could have a particularly strong impact on what defense lawyers like to call "fraud-by-hindsight" cases, in which plaintiffs allege that disclosures must have been false because of later disclosures that corrected them. "This reinforces the notion that they need to come up with facts to show that a statement may have been false and misleading when made," said Musoff.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.
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