Interestingly, the case could have an impact on securities class actions, according to Scott Musoff of Skadden, Arps, Slate, Meagher & Flom. The Second Circuit has already ruled that Twombly pleading standards apply to cases outside the antitrust area, including securities cases. Musoff said the Supreme Court’s decision cements that principle, which could make it harder on securities class action plaintiffs at the pleading stage by requiring them to plead facts and not just conclusions. “It reinforced the Supreme Court’s message of late that district courts need to be gatekeepers on motions to dismiss to weed out those claims that are supported by facts and those that are not,” he said.
The Supreme Court’s decision could have a particularly strong impact on what defense lawyers like to call “fraud-by-hindsight” cases, in which plaintiffs allege that disclosures must have been false because of later disclosures that corrected them. “This reinforces the notion that they need to come up with facts to show that a statement may have been false and misleading when made,” said Musoff.