The Evolution of Securities Class Action Law: Amgen v. Connecticut Retirement Plans and Trust Funds (2013)

Class actions are a way to sue, not something to sue over. Therefore, any successful class action must overcome two challenges: it must establish that the case should be certified as a class action, which is a matter of legal procedure, and it must also establish that the case deserves to win, which is a matter of legal substance. In practice, these issues of procedure and substance are not always addressed in the same sequence, and there is always a complicated interplay between them. Still, a few generalizations can be made about how they come up in class action litigation.

 Amgen v. Connecticut Retirement Plans and Trust Funds

In Amgen v. Connecticut Retirement Plans and Trust Funds, Connecticut Retirement Plans and Trust Funds (CRPTF) filed a securities fraud complaint against Amgen, a biotechnology company, based on the allegation that Amgen had made misleading statements between 2004 and 2007 regarding the safety of two drugs. Amgen’s stock price had increased when these statements were made and it declined after the company released corrections, causing some investors to lose money. CRPTF sought class certification under the fraud on the market theory.

The issue that came before the Supreme Court was whether the class could be certified without proof of materiality. Amgen conceded that the other elements necessary for class certification were present, including an efficient market and the statements being of a public nature. However, Amgen argued that it had to be established that the statement was material in order for the fraud on the market presumption to be invoked because, by definition, an immaterial misleading statement would have no impact on the price in an efficient market, meaning that the fraud on the market theory would not be applicable.

 The Supreme Court rejected Amgen’s argument, holding that materiality does not need to be proven at the class certification stage. Read the full article to learn how the Amgen case preserved the effectiveness of Rule 10b-5 class actions as a vehicle for obtaining favorable settlements for victims of securities fraud.