In an important vindication of shareholder rights, the U.S. Supreme Court in Februarys Amgen v. Connecticut Retirement Plans and Trust Funds, 568 U. S. ____ (2013), on a 6-3 vote, held that securities fraud plaintiffs have no obligation to prove that defendants misrepresentations and omissions were material at the class certification stage. Months later, Amgen is still the topic of conversation, although some question whether plaintiffs won a total victory.
Amgen involved fraud-on-the-market allegations. That doctrine (introduced by the Supreme Court in 1988 through Basic v. Levinson, 485 U.S. 224 (1988)) states that if a security trades in an efficient market, all public information is considered to be reflected in the price of the security. Securities fraud plaintiffs would never be able to proceed with a class action if they had to prove individual reliance, and thus under Basic, classwide reliance may be presumed, although this is a rebuttable presumption. Amgen, when sued for making misrepresentations about the safety of two of its flagship drugs to artificially inflate the price of its stock, sought to rebut the applicability of the Basic doctrine and defeat class certification by presenting evidence that market analysts were already aware that the Food and Drug Administration advisory committee would discuss possible safety concerns at its meeting in May 2004.
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