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Texas District Court Rejects Heightened Pleading Standard in SOX Case

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In Ellis v. CommScope, Inc. of North Carolina, a Texas district court judge rejected an employer’s attempt to impose a heightened pleading standard on SOX plaintiffs.  CommScope moved to dismiss on the grounds that Ellis did not plead scienter in alleging that he disclosed shareholder fraud.  The district court rejected CommScope’s “flawed” reasoning, holding that at the pleading stage, “Ellis is not required to show that CommScope acted with scienter” and instead “merely needs to plead facts showing he had a reasonable belief that CommScope acted with scienter.”

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