U.S. Supreme Court

Supreme Court sides with securities fraud plaintiffs, lowers class action hurdle


Plaintiffs alleging companies made material misstatements in securities fraud cases won an important ruling on the requirements for class certification from the U.S. Supreme Court on Wednesday.

The court ruled in a 6-3 decision (PDF) that plaintiffs in such cases may obtain class certification without having to prove a misrepresentation materially affected the stock price. The opposite approach would “put the cart before the horse,” Justice Ruth Bader Ginsburg wrote for the majority.

Ginburg’s opinion was joined by Chief Justice John G. Roberts Jr. and Justices Stephen G. Breyer, Samuel A. Alito Jr., Sonia Sotomayor and Elena Kagan.

The defendant in the case, biotech company Amgen, had claimed materiality must be proven before certification under the dictates of Rule 23(b)(3) of the Federal Rules of Procedure, which requires common questions of law or fact to predominate in class actions. Ginsburg disagreed.

“Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage,” she wrote.

Connecticut Retirement Plans and Trust Funds had sued Amgen for alleged misstatements about two of its flagship drugs. The case is Amgen Inc. v. Connecticut Retirement Plans.

Prior coverage:

ABAJournal.com: “Supreme Court Considers Class Action Hurdles; Is Materiality a Requirement in Stock Case?”

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

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