           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT   United States Court of Appeals
                                                                                      Fifth Circuit
                                                                                   F I L E D
                                                                                 September 18, 2007
                                        No. 06-11093
                                                                               Charles R. Fulbruge III
                                                                                       Clerk
FLAHERTY & CRUMRINE PREFERRED INCOME FUND
INCORPORATED; FLAHERTY & CRUMRINE PREFERRED INCOME
OPPORTUNITY FUND INCORPORATED;
FLAHERTY & CRUMRINE/CLAYMORE PREFERRED SECURITIES
INCOME FUND INCORPORATED; STAN HAIDUK

                                                    PLAINTIFFS–APPELLANTS
v.

TXU CORP; C JOHN WILDER

                                                    DEFENDANTS–APPELLEES



                    Appeal from the United States District Court
                         for the Northern District of Texas
                                  3:05-CV-01784


Before DeMOSS, DENNIS, and OWEN, CIRCUIT JUDGES.
PER CURIAM:*
       The plaintiffs in this putative securities-fraud class action allege that TXU
Corp. and its CEO, C. John Wilder, violated Sections 10(b)1 and 14(e)2 of the


       *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
       1
        15 U.S.C. § 78j(b) (proscribing manipulative or deceptive practices in connection with
the purchase or sale of securities: “[It shall be unlawful for any person] [t]o use or employ, in
connection with the purchase or sale of any security registered on a national securities
                                        No. 06-11093

Securities Exchange Act and SEC Rule 10b-53 by making material
misrepresentations and omissions of fact in connection with a self-tender offer to
purchase certain convertible securities. The plaintiffs also sued Wilder as a
“controlling person” under Section 20(a) of the Act.4
       The district court granted the defendants’ Rule 12(b)(6)5 motion to dismiss
the plaintiffs’ claims for failing to satisfy the Private Securities Litigation Reform
Act’s (PSLRA) requirement that the plaintiffs plead, with particularity, facts
raising a “strong inference” of scienter.6 While the case was on appeal, the
United States Supreme Court issued an opinion in Tellabs, Inc. v. Makor Issues



exchange or any security not so registered, or any securities-based swap agreement (as defined
in section 206B of the Gramm-Leach-Bliley Act), any manipulative or deceptive device or
contrivance in contravention of such rules and regulations as the Commission may prescribe
as necessary or appropriate in the public interest or for the protection of investors.”).
       2
         Id. § 78n(e) (prohibiting fraud in connection with a tender offer: “It shall be unlawful
for any person to make any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made, in the light of the circumstances under
which they are made, not misleading, or to engage in any fraudulent, deceptive, or
manipulative acts or practices, in connection with any tender offer or request or invitation for
tenders, or any solicitation of security holders in opposition to or in favor of any such offer,
request or invitation.”).
       3
        17 C.F.R. § 240.10b-5 (making it unlawful for any person “[t]o make any untrue
statement of material fact or to omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading”).
       4
        15 U.S.C. § 78t(a) (imposing joint and several liability on a person who exerts control
over a person who violates any provision of the Securities Exchange Act).
       5
           FED. R. CIV. P. 12(b)(6).
       6
          15 U.S.C. § 78u-4(b)(2) (“In any private action arising under this chapter in which the
plaintiff may recover money damages only on proof that the defendant acted with a particular
state of mind, the complaint shall, with respect to each act or omission alleged to violate this
chapter, state with particularity facts giving rise to a strong inference that the defendant acted
with the required state of mind.”).

                                                2
                                    No. 06-11093

& Rights, Ltd.,7 in which the Court clarified the appropriate standard for
determining whether a securities fraud complaint gives rise to a “strong
inference” of scienter, within the meaning of the PSLRA.
      At oral argument, the plaintiffs indicated that remand to the district court
would be appropriate because they did not have the benefit of Tellabs in drafting
their complaint. The district court likewise did not have the opportunity to
consider whether the plaintiffs’ allegations meet the PSLRA’s pleading
requirements in light of the standard articulated in Tellabs. We therefore
VACATE the district court’s judgment and REMAND for reconsideration.




      7
          127 S. Ct. 2499 (2007).

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