As we wrote previously, the 9th US Circuit Court of Appeals last year upheld a lower court ruling that an ‘element of reliance’ was common to all investors and ‘fraud on the market’ had been committed. The court ruled that, to win class certification, the fund must plausibly allege, but does not have to prove, the misrepresentations were material (here is the ruling).
In a 6-to-3 vote, the Supreme Court decided that investors can pursue a class-action lawsuit without first proving that they relied on misrepresentations. "Proof of materiality is not a prerequisite to certification of a securities fraud class action seeking money damages for alleged violations," Justice Ruth Bader Ginsberg wrote for the majority. The dissenters - Anthony Kennedy, Clarence Thomas and Antonin Scalia - countered that the burden is on the plaintiff (here is the ruling).
Here is the background: The lawsuit was filed in May 2007 after an FDA advisory committee recommended added warnings about the risk of death, blood clots and other side effects should be added to product labeling, and also voted unanimously that more safety studies were needed. The pronouncement sent Amgen shares spiraling downward more than 9 percent (back story). The FDA already added warnings two months earlier in response to studies showing usage outside of approved guidelines could increase the growth of tumors and the risk of death in some patients
In its appeal, Amgen (AMGN) argued that a US District Court must demand proof of a material impact in securities fraud lawsuits before a class can be certified. The biotech also maintains that investors had readily available access to the safety information and that the Connecticut Retirement Plans and Trust Funds failed to prove any alleged misrepresentations had a material impact on the Amgen stock price (here was the Amgen petition to the court and the response from the fund).
And as reported prevoiusly, with the support of the US Chamber of Commerce, Amgen attempted to make a larger point that the appeals court ruling too easily allows investors to file class-action lawsuits and that companies should be able to defeat these complaints at the early stages of litigation. Otherwise, the biotech warned that companies may feel pressured to settle lawsuits even when allegations are frivolous.
supreme court pic thx to robcrawley on flickr