Pension Trust Fund for Operating Engineers v. Kohl’s Corp.

Dist. Ct. did not err in dismissing with prejudice plaintiffs’ securities fraud action under section 10(b) of Securities Exchange Act, alleging that defendants-corporation and corporate officers committed fraud on corporation’s investors by publishing false and misleading information regarding status of leasehold interests held by corporation’s stores, where corporation was forced to adjust its accounting practices in 2005, 2010, and 2011, which resulted in discovery that corporation had understated both its liabilities and assets. Under Private Securities Litigation Reform Act, plaintiffs were required to meet enhanced pleading requirements for defendants’ scienter, such that plaintiffs are required to plead facts demonstrating that defendants’ actions gave rise to strong inference that defendants acted with intent to deceive as demonstrated either by defendants’ knowledge of statements’ falsity or defendants’ reckless disregard of substantial risk that statements were false. Here, plaintiffs’ allegations fell short of demonstrating required scienter, since plaintiffs’ allegations more plausibly demonstrated defendants’ negligence as opposed to any recklessness or actual knowledge of statements’ falsity. Fact that instant errors concerned series of accounting mistakes or that some defendants sold large quantities of stock during relevant period did not require different result.