View source for Scienter

{{Short description|Intent or knowledge of wrongdoing}}
{{italic title}}
{{use British English|date=January 2025}}
{{Use dmy dates|date=January 2025}}
[[File:David Lamar.jpg|thumb|right|upright=0.8|[[Scam|Confidence tricks]], such as those done by [[David Lamar]], are a form of [[fraud]]. An element of fraud is scienter.]]
In law, '''{{lang|la|scienter}}''' ({{IPA|/sʌɪˈɛntə/|lang=en-GB}} in British English, {{IPA|/saɪˈɛn(t)ər/|lang=en-US}} in American English,<ref>{{Cite web |title=scienter, n. & adv. meanings, etymology and more |url=https://www.oed.com/dictionary/scienter_n |access-date=9 May 2025 |website=Oxford English Dictionary}}</ref> [[Law Latin]] for "'''knowingly'''", {{IPA|/skiˈen.ter/, [s̠kiˈɛn̪t̪ɛr]|lang=la}}, {{ety|la|scire|to know, to separate one thing from another}}) is a legal term for [[intent (law)|intent]] or [[knowledge]] of [[wrongdoing]], or reckless disregard for the truth.<ref name="Bolger">{{Cite journal |last=Bolger |first=Jeanne |date=1981 |title=Recklessness and the Rule 10b-5 Scienter Standard after Hochfelder |url=https://ir.lawnet.fordham.edu/flr/vol49/iss5/7/ |journal=Fordham Law Review |volume=49 |issue=5 |pages=817-837}}</ref><ref>{{Cite journal |last=Wilkinson |first=Thomas |date=1980 |title=Securities Law&nbsp;— Rule 10b-5 - Recklessness Formulation of Scienter Requirement under Rule 10b-5 |url=https://digitalcommons.law.villanova.edu/vlr/vol25/iss6/14/ |journal=Villanova Law Review |volume=25 |issue=6 |pages=1082 |issn=0042-6229 |via=Villanova University Charles Widger School of Law Digital Repository}}</ref><ref>{{Cite web |title=scienter |url=https://www.law.cornell.edu/wex/scienter |access-date=23 February 2025 |website=LII / Legal Information Institute}}</ref> An offending party then has knowledge of the "wrongness" of an act or event prior to committing it.<ref>{{Cite journal |last=Crumbley |first=D. Larry |last2=Grossman |first2=Amanda M. |last3=Grossman |first3=Steven D. |year=2024 |title=Improving the Efficacy of the Securities Fraud Lawsuit Against Catalent, Inc.  |url=http://web.nacva.com/JFIA/Issues/JFIA-2024-No1-6.pdf |journal=Journal of Forensic and Investigative Accounting |volume=16 |issue=1 |pages=87-95}}</ref>

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, the seller then has no {{lang|la|scienter}}. If he sells the car and knew of the problem before he sold the car, he has {{lang|la|scienter}}.

==Scienter action in tort law==
The scienter action is a category within [[tort]] law in some [[common law]] jurisdictions that deals with the damage done by an animal directly to a human. Tort law is designed to offer retribution for civil wrongs.<ref name="Parker">{{Cite journal |last=Parker |first=Reginald |date=1951 |title=The General Tort Law of Personal Injuries |url=https://heinonline.org/HOL/LandingPage?handle=hein.journals/jatla8&div=10&id=&page= |journal=NACCA Law Journal |volume=8 |pages=156-173 |via=HeinOnline}}</ref> Scienter within tort law had a long history in [[English law]] until it was abolished by the [[Animals Act 1971]].<ref>{{Cite journal |last=Chevalier-Watts |first=Juliet |date=1 December 2007 |title=Civil liability for animals |url=https://pure.solent.ac.uk/en/publications/civil-liability-for-animals |journal=Mountbatten Journal of Legal Studies |volume=11 |issue=12 |pages=56–101 |via=Southampton Solent University}}</ref><ref>{{Cite journal |last=Barker |first=Francois |date=1993–1994 |title=The Animals Act 1971: A Dog's Breakfast |url=https://heinonline.org/HOL/LandingPage?handle=hein.journals/holdslr16&div=15&id=&page= |journal=Holdsworth Law Review |volume=16 |issue=2 |pages=145–169 |via=HeinOnline}}</ref> An action in the [[common law jurisdictions]] in which it has not been extinguished by statute is in addition to the torts of [[negligence]] and [[nuisance]] or more bespoke torts like [[cattle trespass]].<ref name = "Osborough">{{Cite journal |last=Osborough |first=W. N. |date=1978 |title=Strict Liability for Animals |url=https://www.jstor.org/stable/44027564 |journal=Irish Jurist (1966–) |volume=13 |issue=1 |pages=182–185 |issn=0021-1273 |jstor=44027564}}</ref> If an animal is known to behave in a certain way and is expressed on a person causing injury, an action can be taken in this tort, which also is not available in [[New South Wales]], the [[Australian Capital Territory]], [[South Australia]], or New Zealand. In those jurisdictions, the actions involving animals need to be in nuisance or negligence.<ref>{{Cite web |title=Civil Liability for Animals [1970] NSWLRC 8 |url=https://www6.austlii.edu.au/cgi-bin/viewdoc/au/other/nswlrc/1970/8.html |access-date=21 February 2025 |website=New South Wales Law Reform Commission&nbsp;— Reports}}</ref>

[[File:CH cow 2 cropped.jpg|thumb|left|Cattle trespass has been a common tort that involves proving scienter.]]
To be successful, the [[plaintiff]] needs to [[lawsuit|take action]] against the [[domestication|person in control]] of the animal. The plaintiff can file a [[complaint (law)|complaint]] to initiate a [[lawsuit]] to recover damages.<ref>{{Cite web |title=tort |url=https://www.law.cornell.edu/wex/tort |access-date=17 March 2025 |website=LII / Legal Information Institute}}</ref> It is [[strict liability]], requiring no more than proof of injury, the animal's having a problematic trait, and the knowledge of the person in control about the trait in the animal. Strict liability means that there is no need to argue fault in the form of [[intention|wilful intent]] or negligence on the part of the animal or its controller. The only [[Defense (legal)|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.<ref name="Osborough"/><ref>{{Cite journal |last1=Karp |first1=Adam P. |last2=Fershtman |first2=Julie I. |date=2009 |title=Recent Developments in Animal Tort and Insurance Law |url=https://www.jstor.org/stable/25763916 |journal=Tort Trial & Insurance Practice Law Journal |volume=44 |issue=2 |pages=185–244 |issn=1543-3234 |jstor=25763916}}</ref>

It is common to distinguish between [[domestication|harmless animal]]s and [[wild animal]]s, as no scienter is needed for wild animals as long as they are native to their respective regions.<ref>{{Cite journal |last=Donaldson |first=James H. |date=April 1969 |title=Liability Arising from Owning or Harboring Animals |url=https://heinonline.org/HOL/LandingPage?handle=hein.journals/defcon36&div=52&id=&page= |journal=Insurance Counsel Journal |volume=36 |issue=2 |pages=268-278 |via=HeinOnline}}</ref> Animals are classed as wild or harmless on the basis of species or kind, not on the basis of being a tame individual.<ref>{{Cite journal |last=Cook |first=Peter |date=1993–1994 |title=Before the Animals Act: The Historical Fiction of a Base Property in Dogs and the Paradox of Scienter Liability |url=https://heinonline.org/HOL/LandingPage?handle=hein.journals/holdslr16&div=14&id=&page= |journal=Holdsworth Law Review |volume=16 |pages=119 |via=HeinOnline}}</ref> An elephant is considered wild regardless of its use.<ref>{{Cite journal |last=S. |first=E. O. |date=1899 |title=Injuries by Domestic Animals |url=https://www.jstor.org/stable/751893 |journal=Journal of the Society of Comparative Legislation |volume=1 |issue=1 |pages=54–61 |issn=1479-5973 |jstor=751893}}</ref> 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.<ref>{{cite court |litigants=Rylands v Fletcher |reporter=LR 3 HL 330 |court=House of Lords |date=1868 |url=https://www.bailii.org/uk/cases/UKHL/1868/1.html}}
</ref><ref>{{Cite journal |last=Fordham |first=Margaret |date=1995 |title=The Demise of the Rule in Rylands v Fletcher? |url=https://www.jstor.org/stable/24866734 |journal=Singapore Journal of Legal Studies |pages=1–28 |issn=0218-2173 |jstor=24866734}}</ref>

==General use==
Scienter is generally used as a necessary condition of certain causes of civil action and as a standard for civil liability or criminal [[guilt (law)|guilt]].<ref name="Bolger"/> For instance, Section 1960 of Title 18 of the [[United States Code]] provides a ''scienter'' condition, requiring that the accused "knowingly conducts, controls, manages, supervises, directs, or owns" a prohibited type of business.<ref>{{usc|18|1960}}</ref>

The concept of scienter is uniformly expressed in the text of the U.S. Code as the word ''know'', appearing as "knowingly", "actual knowledge", "known", "knowledge fairly implied", etc.<ref>{{cite court |litigants=[[Rehaif v. United States]] |vol=558 |reporter=U.S. |opinion=225 |court=[[Supreme Court of the United States]] |date=2019 |url=https://www.supremecourt.gov/opinions/18pdf/17-9560_e2p3.pdf}}</ref><ref>{{Cite tech report |url=https://crsreports.congress.gov/product/pdf/R/R46836 |title=Mens Rea: An Overview of State-of-Mind Requirements for Federal Criminal Offenses |date=7 July 2021 |url-status=live |publisher=Congressional Research Service|archive-url=https://web.archive.org/web/20250320124855/https://www.congress.gov/crs-product/R46836 |archive-date=March 20, 2025 }}</ref>  The word ''scienter'' is not used in the text of the U.S. Code, although it appears once in a section title.<ref>{{usc|15|7706}}</ref>  This use reflects the development of American law speaking plainly in its statutes.<ref>{{USPL | 111 | 274 | Plain Writing Act of 2010}}</ref>

==In contract law==
''Scienter'' is also an element of the [[contract law]] [[cause of action]] for [[breach of contract]] in which the aggrieved party alleges some destruction of the [[meeting of the minds]], also known as mutual assent, because of [[fraud]], [[misrepresentation]], or duress [[per minas]].<ref>{{Cite journal |last=Parchomovsky |first=Gideon |last2=Stein |first2=Alex |date=1 July 2017 |title=Empowering Individual Plaintiffs |url=https://scholarship.law.cornell.edu/clr/vol102/iss5/3/ |journal=Cornell Law Review |volume=102 |issue=5 |pages=1319-1366 |issn=0010-8847 |via=Cornell University Law Library}}</ref>  Distinguishing [[innocent misrepresentation]] and [[fraudulent misrepresentation]] involves determining if scienter exists.  In contract fraud, scienter is defined as intent to deceive.<ref>{{Cite journal |last=Hunter |first=Richard J. |last2=Shannon |first2=John H. |last3=Amoroso |first3=Henry J. |date=30 December 2023 |title=A Teaching Note on Contracts |url=https://www.asianinstituteofresearch.org/EQRarchives/A-Teaching-Note-on-Contracts |journal=Education Quarterly Reviews |volume=6 |issue=4 |pages=12-38 |doi=10.31014/aior.1993.06.04.783}}</ref><ref>{{Cite journal |last=Powers |first=William |last2=Niver |first2=Margaret |date=1992 |title=Negligence, Breach of Contract, and the “Economic Loss” Rule |url=https://ttu-ir.tdl.org/items/43141dc4-3119-4d38-85f8-6d650cb48f09 |journal=Texas Tech Law Review |volume=23 |pages=477-523 |via=Texas Tech University Libraries}}</ref>

''Scienter'' can also be used as a [[defense (legal)|defence]] to a breach of contract [[lawsuit]].<ref>{{Cite web |last=Christian |first=George |date=5 May 2023 |title=SCOTX Maintains Common Law Scienter Requirement for Misrepresentations on Insurance Application |url=https://tcjl.com/scotx-maintains-common-law-scienter-requirement-for-misrepresentations-on-insurance-application/ |url-status=live |archive-url=https://web.archive.org/web/20230515195415/https://tcjl.com/scotx-maintains-common-law-scienter-requirement-for-misrepresentations-on-insurance-application/ |archive-date=15 May 2023 |access-date=22 February 2025 |website=Texas Civil Justice League}}</ref>

==Element of claim of securities fraud==
In the United States, 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''.<ref>{{usc|15|78u-4}}</ref><ref>{{cite court |litigants= Aaron v. SEC |vol=446 |reporter=U.S. |opinion=680 |court=[[Supreme Court of the United States]] |date=1980 |url=https://supreme.justia.com/cases/federal/us/446/680/}}
</ref>

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''.<ref>{{Cite journal |last=Choi |first=Stephen J. |date=2007 |title=Do the Merits Matter Less after the Private Securities Litigation Reform Act? |url=https://www.jstor.org/stable/40058194 |journal=Journal of Law, Economics, & Organization |volume=23 |issue=3 |pages=598–626 |doi=10.1093/jleo/ewm014 |issn=8756-6222 |jstor=40058194}}</ref><ref>{{Cite journal |last=Klausner |first=Michael |date=October 2009 |title=Personal Liability of Officers in US Securities Class Actions |url=https://www.tandfonline.com/doi/full/10.1080/14735970.2009.11421545 |journal=Journal of Corporate Law Studies |volume=9 |issue=2 |pages=349–366 |doi=10.1080/14735970.2009.11421545 |issn=1473-5970 |via=Taylor & Francis Online|url-access=subscription }}</ref>  The meaning of ''scienter'' under the 1995 law has been controversial since its enactment. The [[United States Supreme Court]] issued a decision that clarified what was to be understood as a "strong inference." In ''[[Tellabs, Inc. v. Makor Issues & Rights, Ltd.]]'', an 8–1 ruling of the Court defined the standard that the plaintiff had to meet to proceed with a securities fraud litigation. A complaint must show "cogent and compelling evidence" of ''scienter''.<ref>{{cite court |litigants=Tellabs, Inc. v. Makor Issues & Rights, Ltd. |vol=551 |reporter=U.S. |opinion=308 |court=[[Supreme Court of the United States]] |date=2007 |url=https://supreme.justia.com/cases/federal/us/551/308/}}</ref><ref>{{Cite journal |last=Ball |first=Ray |date=May 2009 |title=Market and Political/Regulatory Perspectives on the Recent Accounting Scandals |url=https://onlinelibrary.wiley.com/doi/10.1111/j.1475-679X.2009.00325.x |journal=Journal of Accounting Research |volume=47 |issue=2 |pages=277–323 |doi=10.1111/j.1475-679X.2009.00325.x |issn=0021-8456 |via=Wiley Online Library}}</ref><ref>{{Cite news |last=Labaton |first=Stephen |date=22 June 2007 |title=Investors’ Suits Face Higher Bar, Justices Rule |url=https://www.nytimes.com/2007/06/22/washington/22bizcourt.html |url-status=live |archive-url=https://web.archive.org/web/20230217025621/https://www.nytimes.com/2007/06/22/washington/22bizcourt.html |archive-date=17 February 2023 |access-date=23 February 2025 |work=The New York Times |issn=0362-4331}}</ref>

==See also==
*[[Intrinsic fraud]]
*[[Fraud]]
*[[Mens rea]]
*[[Per minas]]
*[[Relativism]]

==References==
<references />

==External links==
* [https://corporate.findlaw.com/finance/split-widens-on-scienter-pleading-standard-under-the-pslra.html Split Widens on Scienter Pleading Standard Under the PSLRA], ''[[Cadwalader, Wickersham & Taft]]''
{{Subject bar|portal1=Law|wikt=scienter|d=y}}
[[Category:Contract law]]
[[Category:United States securities law]]
[[Category:Criminal law]]
[[Category:Tort law]]
[[Category:Lawsuits]]
[[Category:Intention]]

[[ko:고의 (법)]]