In a much anticipated ruling in the Amgen securities class action litigation, the U.S. Supreme Court, in a 6-3 majority opinion written by Justice Ginsburg, held that a securities plaintiff is not required to prove that the allegedly misleading statements are material as a prerequisite to class certification. Justice Thomas, Scalia and Kennedy dissented. A copy of the court's February 27, 2013 opinion can be found here.
As detailed here, the plaintiffs alleged that Amgen and certain of its directors and officers has issued misrepresentations and omissions regarding the safety, efficacy and marketing of two of its flagship drugs. The plaintiffs moved for class certification. The District Court granted the motion to certify a class, rejecting the defendants arguments that the before certifying the class, the plaintiff should be required first to prove that the alleged misrepresentations were material, or in the alternative that the defendants should be permitted to present information rebutting the contention that the class certification was material. The defendants pursued an interlocutory appeal to the Ninth Circuit, which affirmed the district court. The Supreme Court granted the defendants' petition for a writ of certiorari.
The questions before the Supreme Court had to do with the "predominance" requirement under Rule 23(b)(3) of the Federal Rules of Civil Procedure. This Rule provides that as a prerequisite to certifying a class, the court must determine that "questions of law of fact common to class members predominate." Because it would be difficult for securities claimants to show that a class of shareholders had all relied on misrepresentations, the Court has recognized the "fraud on the market" presumption, which holds that investors rely on an efficient market to include into a company's share price the public information about the company.
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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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