U.S. Supreme Court Paves the Way for Securities Class Actions

On February 27, 2013, the U.S. Supreme Court issued its decision in Amgen, Inc. et al. v. Connecticut Retirement Plans and Trust Funds, U.S. Supreme Court, No. 11-1085 (2013). In Amgen, the Court addressed the issue of whether plaintiffs seeking class certification of a securities fraud claim brought under Rule 10b-5 must prove the materiality of the alleged misstatements and omissions as a predicate to class certification.

In a much-anticipated decision, the U.S. Supreme Court allowed shareholders of Amgen to sue Amgen, as a group, without first having to show that Amgen had materially and fraudulently inflated its stock price.

According to the majority, the early stages of class action litigation are intended to ensure that cases are litigated fairly and efficiently. In the Court’s eyes, to hold otherwise "would have us put the cart before the horse." Moreover, the Court believes this holding does not run afoul of Federal Rule of Civil Procedure 23 (governing class actions) because the question of materiality is one that is common to all class members.

Of course, while plaintiffs do not have to meet this hurdle at the class certification stage, plaintiffs will need to meet this requirement once the case is evaluated on the merits, either at trial or by summary judgment. With this decision, there is also the likelihood for more motions for summary judgment filed sooner than later following class certification in Rule 10b-5 cases.