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Supreme Court denies Amgen’s class certification challenge

Justice Ginsburg’s ruling allowed a lawsuit filed by
Connecticut pension funds against Amgen to proceed
. The suit alleges that Amgen
assured investors about the safety of anti-anemia drugs Aranesp and Epogen even
while clinical trial were raising doubts about the safety of the drugs. The
funds state that this representation caused Amgen’s share prices to be inflated
until an FDA panel raised concerns on May 10, 2007, an event that thereafter caused
a sharp decline in share prices.

Amgen had challenged the ability
of the lawsuit to proceed as a class action, asking the Court to require
plaintiffs to establish the materiality of alleged misstatements necessary to invoke
the fraud-on-market theory at the time of class certification
. Instead, the
Court stated that plaintiffs only need to plead materiality, and must only
prove the usual requirements during Rule 23 certification.

Rule 23 requires that plaintiffs
establish commonality, numerosity, typicality, adequacy of representation,
superiority, and predominance of common questions. Material misrepresentation is
a required element in a private securities fraud case. Amgen had hoped to
challenge the materiality of the misrepresentation at the certification stage and
 argued that 1) the district court should
have forced the funds to prove materiality before certification, and that 2)
the court ignored Amgen’s evidence that supposedly established an absence of
materiality. The Supreme Court granted cert to resolve a circuit split on the
issue, with some circuits (such as the 2nd) requiring a showing of
materiality before certification.

Justice Ginsburg rejected Amgen’s
arguments, writing that there was no need for the class to prove its ability to
succeed on the merits during certification, and that requiring a showing of
materiality would not protect defendants from meritless claims. She stated that
there was no need to begin a “mini trial” at the certification stage when all
that is required is commonality, not a common likelihood of prevailing on the merits
of the claim. Justice Ginsburg wrote that materiality was to be determined on
an objective basis common to all class members, and that the “particular
circumstances of individual class members” should have no impact, limiting any
risk of a lack of commonality.

While the dissent argued that materiality was
necessary to a class fraud-on-the market claim, the majority was willing to
ease the burden on plaintiffs hoping to file a securities fraud claim. It does
seem possible, however, that the Court will return to this issue in the future
to examine the viability of the fraud-on-the-market presumption given recent
economic developments.