Supreme Court Eases Burden for Securities Class Action Plaintiffs

The U.S. Supreme Court recently rejected the need for plaintiffs to prove materiality at the class certification stage in federal securities fraud class actions, thus allowing shareholders of Amgen to proceed as a class in a lawsuit against the company. Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. ___ (Feb. 27, 2013).

In an action brought under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, a plaintiff must prove (among other things) a “material” misrepresentation or omission made by the defendant. The question facing the Supreme Court was whether this “materiality” element must be proved at the class certification stage. Prior to Amgen, the circuit courts were split as to the answer.

In an opinion written by Justice Ginsburg, joined by Chief Justice Roberts and Justices Breyer, Alito, Sotomayor, and Kagan, the Court held that proof of materiality is not required at the class-certification stage. Instead, as an indispensable element of the 10b-5 claim, materiality should be addressed at trial or in a ruling on a summary judgment motion.

Viewed broadly, Amgen arguably lowered the putative class plaintiffs’ burden that had previously been heightened by cases such as Wal-Mart Stores, Inc. v. Dukes, 564 U.S. __ (2011). As for cases outside of the securities realm, it remains to be seen whether Amgen will have any effect on a putative class plaintiff’s burden of proof.

For more information, please contact Kyle Sawicki or Ashley Bruce Trehan.