On June 11, 2012, the US Supreme Court granted certiorari to hear Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, a case involving two questions that could have a substantial impact on securities class actions. The Supreme Court will address (1) whether a district court must require proof regarding the materiality of alleged misrepresentations prior to class certification based on a fraud-on-the-market theory and (2) whether a district court must allow a defendant to present evidence to rebut a fraud-on-the-market theory prior to class certification. The resolution of these issues will bear on the viability of securities class actions based on fraud-on-the-market theories.
The case arose when Amgen was sued for securities fraud, based on allegations that it had failed to disclose safety information about two of its products and had thereby inflated its own stock price. The district court did not require, prior to class certification, that there be any demonstration that material misrepresentations had been made. Nor did the district court entertain Amgen’s “truth-on-the-market” defense, an argument that the court said went to the merits of the misrepresentations and was not appropriate at the class certification stage. The Ninth Circuit upheld the district court’s holdings on both issues.
The Supreme Court granted certiorari in order to resolve a circuit split. Oral arguments will be heard during the Supreme Court’s 2012-13 term.