Supreme Court Rules for Plaintiffs in Class Action Securities Fraud
On February 27, our nation’s highest court released its decision in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 568 U.S. ___ (2013) with the Court’s majority deciding in favor of certifying the class in a securities-fraud case filed by named plaintiff Connecticut Retirement.
The question before court concerned the requirement in Rule 23(b)(3) that “the questions of law or fact common to class members predominate over any questions affecting only individual members.” Defendant Amgen argued that to meet this predominance requirement, the plaintiffs would have to prove that the alleged misrepresentations and misleading omissions materially affected the stock price at issue.
Plaintiffs disagreed, arguing that they do not have to “prove” this fact for class certification, that they are only required to plead allegations. In ruling in favor of plaintiffs and affirming the class certification, Justice Ginsburg notes that the defendants and dissenters “would have us put the cart before the horse.” Id. at 3. She noted that a 23(b)(3) ruling is not an adjudication of the case, rather only to select the method best suited to adjudicate the controversy “fairly and efficiently.” Id.
This is a good decision for plaintiff class action lawsuits in securities claims based on “fraud on the market” theories. Had the court decided otherwise, it would have impacted not only the ability to bring a class action suit, but the timing, cost and amount of electronic discovery necessary prior to class certification. Now that the class is certified, the necessary plaintiff electronic discovery requests can be issued to collect the evidence to prove the merits of the case.