This Note takes the position that emerging collective scienter theory may bar courts from attributing liability for securities fraud under SEC Rule 10b-5 directly to a corporation. Recent developments under the Private Securities Litigation Reform Act (PSLRA) seek to strengthen pleading standards in securities litigation by requiring that a plaintiff plead a strong inference of scienter on the part of a corporate defendant to survive a motion for dismissal. Federal district and appellate court decisions demonstrate the recent increasing support for collective scienter, a theory which allows a plaintiff to plead that one employee made a material misstatement while another had the requisite scienter. This Note examines representative cases applying the weak and strong forms of collective scienter and finds that each case misinterpreted the case law upon which it relied. Where case law fails to demonstrate the theory’s viability, comparative analogies to established legal concepts further call into question the feasibility of collective scienter. This Note contends, by analogy to the group pleading doctrine, that the strong version of collective scienter fails to comport with the PSLRA’s strong inference standard. Further, this Note finds that weak collective scienter’s expansion of standard corporate liability—normally attributed by common law agency principles—is unwarranted and unfeasible as a policy matter. Finally, this Note recommends a return to the application of respondeat superior in determining corporate liability.
Case Comment: Bhogaita v. Altamonte
EVERY DOG CAN HAVE HIS DAY IN COURT: THE USE OF ANIMALS AS DEMONSTRATIVE EXHIBITS Kyle R. Kroll, Volume 100, Online Managing Editor In Bhogaita v. Altamonte, the Eleventh Circuit recently decided whether to allow a dog in the courtroom as a demonstrative exhibit. Although the case presented many serious [...]
Revisiting Water Bankruptcy
REVISITING WATER BANKRUPTCY IN CALIFORNIA’S FOURTH YEAR OF DROUGHT Olivia Moe, Volume 100, Managing Editor This spring, as “extreme” to “exceptional” drought stretched across most of California—indicating that a four-year streak of drought was not about to resolve itself—Governor Jerry Brown issued an unprecedented order to reduce potable urban water [...]
Defying Auer Deference
DEFYING AUER DEFERENCE: SKIDMORE AS A SOLUTION TO CONSERVATIVE CONCERNS IN PEREZ v. MORTGAGE BANKERS ASSOCIATION Nicholas R. Bednar, Volume 100, Lead Articles Editor* On March 9, 2015, the Supreme Court of the United States handed down its decision in Perez v. Mortgage Bankers Association. The Court overturned the D.C. [...]