Scienter

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Scienter is a legal term that refers to intent or knowledge of wrongdoing. This means that an offending party has knowledge of the "wrongness" of an act or event prior to committing it. For example, if a man sells a car with brakes that do not work to his friend, but the seller does not know about the brake problem, then the seller has no scienter. If he sells the car and knew of the problem before he sold the car, he has scienter. The word has the same root as science, the Latin scienter (knowingly), from scire (to know; to separate one thing from another).

The scienter action (tort law)[edit]

The scienter action is a category within tort law in some common law jurisdictions which deals with the damage done by an animal directly to a human. It has a long history in English law. An action in those jurisdictions, where it has not been extinguished by statute, is in addition to the torts of negligence and nuisance. Where an animal is known to behave in a certain way, and that is expressed on a person causing injury, an action can be taken in this tort. This tort is not available in New South Wales, The Australian Capital Territory, South Australia or New Zealand. In these jurisdictions the actions involving animals need to be in nuisance or negligence. To be successful the plaintiff needs to take action against the person in control of the animal, and it is strict liability, requiring no more than proof of injury, that the animal had a problematic trait, and the person in control knew about the trait in the animal. Being strict liability, there is no need to argue fault in the form of wilful intent or negligence on the part of the animal or its controller. The only defence is if it can be proved the plaintiff voluntarily assumed the risk of injury by their actions, or if the plaintiff was the cause of the injury. It is common to distinguish between harmless animals and wild animals. No scienter is needed for wild animals. Animals are classed as wild or harmless on the basis of species or kind, not on the basis of being a tame individual. An elephant is considered wild irrespective of its use. The scienter action is referred to in Rylands v. Fletcher in that one who keeps a wild thing “must keep it at his peril” to make reference to part of Justice Colin Blackburn’s comment.

General use[edit]

It is generally used as an element to certain causes of action and is sometimes used as a standard for liability or guilt in some jurisdictions. For instance, section 1960 of title 18 of the United States Code, which prohibits unlicensed money transmitting businesses, has a scienter requirement, in that it only applies to anyone "[who] knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business". [1]

In contract law[edit]

Scienter is also an element of the contract law breach of contract cause of action, wherein the aggrieved party alleges some destruction of the meeting of the minds, also known as mutual assent, due to fraud, misrepresentation or duress per minas. It can also be used as a defense to a breach of contract lawsuit.

Scienter as element of securities fraud claim[edit]

In the United States, in order to prevail in a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934, a plaintiff must allege and prove that the defendant acted with scienter. The Private Securities Litigation Reform Act of 1995 added the requirement that a plaintiff must plead facts giving rise to a "strong inference" of scienter. The meaning of scienter under this law has been highly controversial since the enactment of the PSLRA. In 2007, the United States Supreme Court issued a decision in which it clarified what was to be understood as a "strong inference". In Tellabs, Inc. v. Makor Issues & Rights, LTD (21 June 2007), by an 8-1 ruling, the Court defined the standard that the plaintiff should meet in order to proceed with a securities fraud litigation : a complaint must show "cogent and compelling evidence" of scienter.

See also[edit]

References[edit]

  1. ^ 18 U.S.C. § 1960

External links[edit]