Jenner & Block

"Motive and Opportunity Are Not Enough," Securities Litigation Journal, American Bar Association

In this article, Partner Stephen L. Ascher and Associate Daniel B. Tehrani discuss the Supreme Court’s decision last year in Tellabs, Inc. v. Makor Issues & Rights, Ltd., which should finally discard the “motive and opportunity” test that the Second and Third Circuits have long used to determine whether a securities fraud plaintiff has adequately alleged fraudulent intent. According to the authors, “almost all businesses and businesspeople have motives and opportunities to commit securities fraud,” making mere motive and opportunity insufficient justification for putting a defendant to the burden of defending a securities fraud claim. Mr. Ascher and Mr. Tehrani argue that eliminating the “motive and opportunity” test will advance the gatekeeping function that Congress intended in passing the Private Securities Litigation Reform Act of 1995 and should lead to much more principled and consistent decisions with respect to claims against individual and corporate defendants.