Paul Weiss Discusses Increased Burden of Pleading Corporate Scienter

On May 27, the Second Circuit issued a ruling that significantly heightens the already heavy burden plaintiffs face in pleading corporate scienter.  The Second Circuit affirmed dismissal of a putative securities class action against Kimberly-Clark Corporation and Avanos Medical, Inc. based on alleged misrepresentations by those companies’ senior executives. The decision upheld the district court’s ruling that plaintiff’s proposed amended complaint failed to raise a strong inference of corporate scienter. The Second Circuit ruled that a plaintiff cannot establish corporate scienter merely by relying on the statements of employees who never communicated their knowledge to specific senior executives who (i) … Read more