WASHINGTON, D.C. - (Mealey's) A shareholder plaintiff and
a pharmaceutical company debated in front of the U.S. Supreme Court on Nov. 5 whether
a securities lawsuit may proceed as a class action even if the plaintiff is
unable to plead materiality (Amgen Inc., Kevin W. Sharer, Richard D. Nanula,
Roger M. Perlmutter and George J. Morrow v. Connecticut Retirement Plans and
Trust Funds, No. 11-1085, U.S. Sup.; See October 2012, Page 30).
Arguing for petitioners Amgen Inc., Kevin W. Sharer,
Richard D. Nanula, Roger M. Perlmutter and George J. Morrow, attorney Seth P.
Waxman of Wilmer Cutler Pickering Hale and Dorr said that "[o]ur case is about
whether the claim of liability is in a fundamental sense class wide or
Waxman argued that an inability to prove to a judge at
the class certification stage "that class-wide reliance can be - that
class-wide reliance exists because the statement was material doesn't preclude
a plaintiff like [shareholder] Connecticut Retirement [Plans and Trust Funds
(CRPTF)], which has said it's going to proceed whether there's a class or not,
or any other member of the class, from coming to court and saying either, 'I
directly relied on this statement and here's my proof that it's material to the
trier-of-fact,' because the decision that the judge makes at certification is
not binding on the trier-of-fact; or even to say, 'I relied on the integrity of
the market price, and I have proof that the market price was affected because
here are three investors, they're all reasonable people, and they say that it
was relevant, important to them in the total mix of information involved.'"
But Justice Elena Kagan questioned whether, if at the
class certification stage, the court "holds that a statement is immaterial,
it's immaterial for all members of the class, and the suit has to be
dismissed? Isn't that right?"
Justice Kagan also questioned whether, under Amgen's
theory, the class certification stage becomes a sort of "super merits inquiry."
Arguing for CRPTF, attorney David C. Frederick of
Kellogg, Huber, Hansen, Todd, Evans & Figel said, "In a fraud-on-the-market
case, the idea of reliance, the only theory of reliance that is being advanced,
is indirect reliance on the integrity of the market."
"There is no other theory of reliance," Frederick said.
CRPTF sued the defendants in the U.S. District Court for
the Central District of California under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Securities and Exchange Commission Rule
CRPTF alleged that Amgen made misrepresentations
regarding the safety of two of its products, Aranesp and Epogen, causing
artificial inflation of the market price for Amgen stock. CRPTF moved to
certify a class of people who bought Amgen stock from April 22, 2004, through
May 10, 2007. The start of the period corresponds to a public statement
by Amgen regarding a May 2004 Food and Drug Administration advisory committee
meeting. CRPTF alleges that Amgen misrepresented that the meeting would
not focus on the safety of Aranesp. The end of the class period
corresponds with a later meeting of the same FDA committee. CRPTF alleged
that the meeting constituted a corrective disclosure.
Amgen opposed class certification principally on the
ground that CRPTF did not, and could not, establish that the alleged
misrepresentations were material. The District Court rejected Amgen's
arguments and granted CRPTF's motion for class certification, holding that
CRPTF could invoke the presumption of reliance arising from the
fraud-on-the-market theory because to trigger the presumption, CRPTF "need only
establish that an efficient market exists." Amgen appealed to the Ninth
Circuit U.S. Court of Appeals, which affirmed. The Ninth Circuit rejected
Amgen's contention that CRPTF must provide proof of materiality at the class
On March 1, Amgen and the individual defendants filed a
petition for writ of certiorari with the U.S. Supreme Court.
The petition presented two questions: "Whether, in
a misrepresentation case under SEC Rule 10b-5, the district court must require
proof of materiality before certifying a plaintiff class based on the
fraud-on-the-market theory" and "Whether, in such a case, the district court
must allow the defendant to present evidence rebutting the applicability of the
fraud-on-the-market theory before certifying a plaintiff class based on that
The Supreme Court granted the petition on June 11.
On Aug. 18, the petitioners filed a petitioners' brief, and on Sept. 20, CRPTF
filed a respondent's brief.
Former SEC commissioners and officials and law and
finance professors filed an amicus curiae brief in support of the
petitioners on Aug. 14.
On Sept. 27, the following entities each filed amicus
curiae briefs in support of CRPTF: the United
States; the National Association of Shareholder and
Consumer Attorneys; Public Justice P.C., civil procedure and securities law
professors; AARP, New York City pension funds
and the Colorado Public Employees' Retirement Association of the City of New York; Public Citizen
Inc.; and financial economists.
The petitioners are represented by Noah A. Levine of
Wilmer Cutler in New York, Waxman, Louis R. Cohen, Andrew N. Vollmer, Daniel S.
Volchok and Weili J. Shaw of Wilmer Cutler in Washington, and Steven O. Kramer,
John P. Stigi III, John M. Landry and Jonathan D. Moss of Shephard, Mullin,
Richter & Hampton in Los Angeles. CRPTF is represented by Frederick,
Derek T. Ho and Emily T.P. Rosen of Kellogg, Huber, Hansen, Todd, Evans &
Figel in Washington and Edward Labaton, Jonathan M. Plasse and Christopher J.
McDonald of Labaton Sucharow in New
The former SEC commissioners and officials and law and
finance professors are represented by Timothy S. Bishop, Joshua D. Yount and
Frank M. Dickerson of Mayer Brown in Chicago.
The United States is
represented by Mark D. Cahn, Michael A. Conley, Jacob H. Stillman, John W.
Wavery, Benjamin L. Schiffrin and Jeffrey A. Berger of the Securities and
Exchange Commission in Washington and Donald B. Verrilli Jr., Malcolm L. Stewart
and Nicole A. Saharsky of the Department of Justice in Washington. The National Association
of Shareholder and Consumer Attorneys is represented by William C. Fredericks
and Ann M. Lipton of Bernstein Litowitz Berger & Grossman in New York.
Public Justice P.C. is represented by Arthur Bryant of
Public Justice P.C. in Oakland, Calif., and Earl Landers Vickery of Austin, Texas.
The civil procedure and securities law professors are represented by David
Marcus of the University of Arizona Rogers College of Law in Tucson,
Ariz., and Darren J. Robbins and Eric Alan
Isaacson of Robbins Geller Rudman & Dowd in San Diego. AARP is represented by Jay
Sushelsky of AARP Foundation Litigation and Michael Shuster of AARP, both in Washington. The New York City pension funds are represented by Michael A.
Cardozo of the City of New York.
The Colorado Public Employees' Retirement Association of
the City of New York is represented by Gregory
W. Smith of the Colorado Public Employees' Retirement Association in Denver. Public
Citizen Inc. is represented by Scott L. Nelson and Allison M. Zieve of the
Public Citizen Litigation Group in Washington.
The financial economists are represented by Ernest A. Young in Durham,
N.C., and William C. Fredericks and Ann M.
Lipton of Bernstein Litowitz Berger & Grossman in New York.
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