U.S. Supreme Court

Supreme Court Considers Class Action Hurdles; Is Materiality a Requirement in Stock Case?

The U.S. Supreme Court heard oral arguments on Monday in a pair of cases in which companies are trying to fend off class action lawsuits by fighting certification.

A comment by Justice Antonin Scalia illustrated why corporate defendants want evidence issues resolved at the certification stage, report the New York Times and the National Law Journal (reg. req.). “There is a reason for deciding it earlier,” Scalia said, “and the reason is the enormous pressure to settle once the class is certified. In most cases, that’s the end of the lawsuit.”

In one case before the court, drug maker Amgen claims the plaintiffs must show a material misstatement by corporate officials to obtain class certification in their suit claiming the incorrect information led to a wrongful boost in stock price. In the other, the justices considered whether plaintiffs seeking class action status in an antitrust suit against Comcast must introduce admissible evidence showing damages can be awarded on a classwide basis.

Both cases “were in a way sequels to the court’s 2011 decision in Wal-Mart Stores v. Dukes,” the New York Times says. The decision tossed a huge class action against Wal-Mart because the plaintiffs—employees claiming bias—didn’t have enough in common. According the NLJ, the Wal-Mart case left open the question of whether federal judges have to use Daubert standards when admitting expert evidence that the case can be tried as a class action.

In the Amgen case, lawyer David Frederick represented plaintiffs seeking class action status, the NLJ says. He argued that front-loading the materiality question at certification amounts to “a mini trial on the merits.” Amgen lawyer Seth Waxman, on the other hand, argued plaintiffs should not be allowed to invoke a presumption that the stock market price took account of the misstatements. “A market price will reflect a statement if and only if the statement is material,” he said.

In the Comcast case, the Times says, several justices expressed “a sort of buyer’s remorse about how the case had reached the court.” The court had rewritten the question presented by the petitioner, and Justice Elena Kagan suggested Amgen had waived the issue.

“What we wanted to talk about was whether a district court at a class certification stage has to conduct a Daubert inquiry, in other words has to decide on the admissibility of expert testimony relating to class-wide damages,” Kagan said. “And it turns out that as to that legal question, your clients waived their argument that this was inadmissible evidence.”

Amgen’s lawyer disagreed that the issue had been waived.

The cases are Amgen Inc. v. Connecticut Retirement Plans, and Comcast Corp. v. Behrend.

Prior coverage:

ABA Journal: “A Touch of Class: Certification, Says One Brief, ‘Is the Ballgame’ “

ABAJournal.com: “Supreme Court to Decide Class Certification Issue; Expert Says Case Could Be ‘the Big One’ “

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