On February 27, 2013, the U.S. Supreme Court issued one of the most highly anticipated securities law decisions in recent years in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 568 U.S. __ (2013). The Court’s decision clarified whether a plaintiff who brings a securities fraud class action under Section 10(b) of the Securities Exchange Act of 1934 and U.S. Securities and Exchange Commission Rule 10b-5 has an obligation to prove that the defendant’s alleged misrepresentations and omissions are material in order to obtain class certification – and whether a defendant in such a case can rebut the “fraud-on-the-market” presumption of reliance by showing the lack of materiality of any alleged misrepresentation or omission. In a 6-3 majority opinion written by Justice Ginsburg, the Court ruled that a 10b-5 plaintiff need not prove materiality at the class certification stage and that a defendant is not entitled to rebut the fraud-on-the-market presumption in this fashion, thus resolving an important split among U.S. Courts of Appeals on the issue in favor of securities class action plaintiffs.
The Amgen decision is a high-profile victory for the plaintiffs’ bar and makes it easier for plaintiffs to obtain certification of securities fraud “stock-drop” class actions in various jurisdictions. The impact on securities cases will be most apparent in the First, Second, Third, and Fifth Circuits, where prior to the issuance of the Amgen decision, federal district courts had considered evidence of materiality at the class certification stage.
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