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Louisiana Sch. Employees' Ret. Sys. v. Ernst & Young, LLP, 08-6194, concerned a challenge to the district court's dismissal on the pleadings pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) and the pleading requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA), in a securities fraud class action lawsuit against a public accounting firm Ernst & Young in connection with purchase of publicly traded securities of a pharmaceutical distribution company.
In affirming the dismissal, the court held that plaintiffs have failed to adequately allege all of the elements of their section 10(b) and Rule 10b-5 claim as their allegations do not raise a strong inference that defendant acted with scienter in affirming the company's allegedly fraudulently accounting, and conclusory allegations about what defendant must or should have known while auditing the company do not amount to specific allegations that show material misstatements. Further, in light of plaintiffs' procedural shortcomings and in the context of the PSLRA, the district court did not abuse its discretion be denying plaintiffs an opportunity to amend their complaint.