The case before the Court focuses on alleged misrepresentations about certain products that were made when the defendant was aware of the U.S. Food and Drug Administration's concerns about the products, as well as alleged misrepresentations about on-label safety of the drugs and improperly promoted off-label usage. The district court certified the class after finding that the plaintiffs had a common reliance based on the fraud-on-the-market presumption. It refused to consider the defendant's evidence rebutting the applicability of the fraud-on-the-market doctrine, holding that it was an issue for trial. The Ninth Circuit affirmed the ruling, holding that the class was certified once the plaintiff plausibly alleged that the defendant's misrepresentations were material; the plaintiff did not have to prove the materiality of the misrepresentations at the class certification stage.
This recent challenge from the Ninth Circuit highlights a split in the circuits regarding when proof of materiality is required to invoke the fraud-on-the-market presumption. The Second and Fifth Circuits have held that proof is required at the time of class certification, while the Third, Seventh and Ninth circuits have held that it is not. The Supreme Court's decision in this case may significantly affect the standards for class certification of future securities fraud claims. Should it hold that proof of materiality is required for class certification, many plaintiffs will find it harder to obtain such certification. However, should the Court rule that it is not, defendants may find themselves subject to prolonged litigation and increased costs to defend themselves until they have the opportunity to rebut the fraud-on-the-market presumption.
The Supreme Court will hear arguments in its upcoming October 2012 term.
Links to the petition for certiorari and related documents are available at http://www.scotusblog.com/case-files/amgen-inc-v-connecticut-retirement-plans-and-trust-funds/