On September 22, 2010, the U.S. Court of Appeals for the Sixth Circuit affirmed dismissal of a class action lawsuit brought by shareholders of Accredo Health Group, Inc. against Ernst & Young LLP for failure to make a case that Ernst & Young committed fraud in audit reports issued in connection with Accredo's acquisition of Gentiva Health Services, Inc. On appeal, plaintiffs argued that the district court applied the stricter Sixth Circuit pleading standard for scienter instead of the standard set forth by the Supreme Court in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007). The Sixth Circuit held that the district court correctly applied the Tellabs standard. The appeals court further held that making a determination of scienter based on the magnitude of the alleged fraud would be contrary to its prior decision holding that the magnitude of financial fraud does not create an inference of scienter. The court also held that the existence of alleged "red flags" were insufficient to raise an inference of scienter because the allegations were conclusory. Opinion.