1. After reading this case, do you think that application of the PSLRA is consistent with balancing the rights of shareholders with curbing frivolous litigation?
2. Would you qualify Notebaert’s statements as intentionally misleading or just overly optimistic? What’s the difference?

Shareholders of Tellabs filed a lawsuit alleging that Tellabs CEO Notebaert engaged in securities fraud in violation of §10(b) of the ’34 Act by knowingly misleading the public by making optimistic statements regarding the demand for their flagship product and overstated revenue projections. The shareholders alleged that Notebaert’s optimistic assessments promoted Tellab’s stock and not long after the statements, Tellabs disclosed that the demand for the product had significantly dropped and the revenue projections were substantially lowered. As a result, the stock price plunged from a high of $67, to a low of $15.87 overnight. The trial court dismissed the complaint after finding that the shareholders had not provided specific instances of Notebaert’s conduct that inferred scienter; however, the appellate court reversed, concluding that the shareholders had sufficiently alleged that Notebaert acted with the requisite state of mind.

  • CreatedNovember 06, 2014
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