The May 2003 issue of Federal Lawyer (not available online) contains a column by James Fazio entitled “The Motive and Opportunity Test for Pleading Scienter under the Federal Securities Laws: Where Is It Now?” Mr. Fazio, an assistant U.S. attorney in the S.D. of Cal., examines whether motive and opportunity allegations are sufficient to establish a strong inference that the defendants acted with fraudulent intent (i.e., scienter), as required by the PSLRA, and concludes that there is a dispute among the circuits on this question.
Quote of note: “In short, the Second and Third Circuits appear to be the only two circuits in which allegations of motive and opportunity may be sufficient in themselves to show scienter. By contrast, the Ninth Circuit is the only circuit to have expressly rejected it. In the vast majority of circuits in between, there appears to be a trend against categorizing facts for purposes of analyzing whether those facts show scienter and in favor of determining whether the complaint in its entirety raises a strong inference of scienter, regardless of whether any alleged facts fall within any formalistic category, such as motive and opportunity.”