Vol. LVII No. 2

Where to Point the Finger: Omnicare’s Attempt to Rectify the Collective Scienter Debate

Abstract: The crucial element in pleading a securities fraud case under the 1934 Exchange Act is proving that the defendant had the requisite intent, or scienter. Circuit courts are divided over the issue of pleading scienter against a corporation for section 10(b) and Rule 10b-5 securities fraud cases. Since a corporation can only act through its agents, courts have struggled to determine which agents’ mental states can be imputed against a corporation. In 2014, in In re Omnicare, Inc. Securities Litigation, the U.S. Court of Appeals for the Sixth Circuit created a new rule to address pleading scienter against a corporation in securities fraud cases. This rule incorporates positions from both sides of the scienter debate, and is likely an appealing approach for those circuits that have not fully ruled against either side of the split. This Note discusses the corporate scienter debate, and argues that the Sixth Circuit’s Omnicare ruling must be further refined in order to establish a conclusive and widely applicable pleading standard.

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