Amgen Inc. v. Connecticut Retirement Plans and Trust Funds

2013-02-27

Headline: Court allows securities‑fraud class certification without requiring plaintiffs to prove materiality first, letting class status proceed while materiality and truth are decided later at summary judgment or trial.

Holding: The Court held that plaintiffs need not prove materiality before class certification under Rule 23(b)(3), because materiality is an objective, common question and failure of proof would end the case rather than create individualized issues.

Real World Impact:

Makes it easier to certify securities‑fraud class actions without early materiality proof.
Defendants cannot force mini‑trials on materiality at certification.
Materiality can still defeat the class later at summary judgment or trial.

Topics: securities fraud, class actions, stock market rules, investor lawsuits

Summary

Background

Connecticut Retirement Plans and Trust Funds, a large investor, sued biotechnology company Amgen and some officers, alleging misleading statements about two drugs that inflated Amgen’s stock price. The investor sought to certify a class of people who bought the stock and relied on the “fraud‑on‑the‑market” idea—that an efficient market reflects public information. Amgen conceded the market for its stock was efficient. The District Court certified the class and the Ninth Circuit affirmed. The question presented was whether the investor had to prove the statements were material before the court would certify the class.

Reasoning

The Court said the key certification question is whether issues common to the class will predominate, not whether the class will win on the merits. Materiality—whether a statement would have mattered to a reasonable investor—is an objective question that can be proved with classwide evidence, so it is a common question. If the class cannot prove materiality later, that failure ends the case for everyone rather than creating many individual questions. For those reasons, plaintiffs need not prove materiality at the class‑certification stage. The Court also held that defendants’ evidence disputing materiality is properly addressed at summary judgment or trial, not at the certification hearing.

Real world impact

The decision preserves class treatment for many securities‑fraud claims even when materiality will be disputed later. Defendants cannot force a full mini‑trial on materiality at certification, but materiality can still defeat the class later. Amgen’s concession that its market was efficient was important to this case.

Dissents or concurrances

Justice Alito concurred but noted Basic’s presumption might deserve future review. Justices Scalia and Thomas dissented, arguing materiality must be proved before certification to ensure reliance is a common question.