Supreme Court Will Review Holding that Proof of Materiality Is Not Required For Class Certification in a Fraud-on-the-Market Action
On June 11, 2012, the Supreme Court granted certiorari with respect to the unanimous decision of the Court of Appeals for the Ninth Circuit in Connecticut Retirement Plans and Trust Funds v. Amgen, Inc., et al. The Court certified two questions for review:
1. Whether, in a misrepresentation case under Securities and Exchange Commission 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
2. 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 theory.
The Court of Appeals held in Amgen that “plaintiffs need not prove materiality to avail themselves of the fraud-on-the-market presumption of reliance at the class certification stage,” and that the district court had “correctly refused to consider Amgen’s truth-on-the-market defense” during the class certification process. It therefore affirmed the certification of the class under Rule 23(b)(3) of the Federal Rules of Civil Procedure.