The U.S. Supreme Court case Tellabs, Inc., et al. v. Makor Issues & Rights, Ltd., et al., 2006 revolved around the interpretation of the Private Securities Litigation Reform Act (PSLRA). The plaintiffs alleged that Tellabs and its CEO made misleading statements to inflate stock prices, violating securities law. However, under PSLRA a complaint must state with particularity facts giving rise to a "strong inference" that defendant acted with required intent - in this case fraudulent intent or scienter. The issue before the court was how strong an inference of scienter must be for a plaintiff's claim to survive dismissal under PSLRA? The Supreme Court held that it has to be more than merely plausible or reasonable — it must be cogent and at least as compelling as any opposing inference one could draw from the facts alleged. In other words, courts should consider both inferences favoring plaintiffs and defendants when deciding whether complaints meet PSLRA standards for alleging scienter. If equally compelling inferences can be drawn either way then complaint cannot survive motion to dismiss.

In the dissenting opinion for Tellabs, Inc. v. Makor Issues & Rights, Ltd., Justice Scalia argued that the majority's interpretation of the Private Securities Litigation Reform Act (PSLRA) was incorrect and overly complicated. He contended that Congress intended to establish a straightforward standard requiring plaintiffs to plead facts rendering an inference of scienter at least as likely as any opposing inference. Instead, he believed the majority had created a convoluted test by adding unnecessary elements such as considering plausible nonculpable explanations and determining whether intent is more than merely reasonable or conceivable. Furthermore, he criticized their decision for not providing lower courts with clear guidance on how to apply this new standard in future cases.