Amgen Inc. v. Connecticut Retirement Plans and Trust Funds

Whether a court must require proof of materiality or allow evidence rebutting the applicability of the fraud-on-the-market theory before certifying a class based on that theory.

Respondent sued Petitioner for securities fraud under 17 C.F.R. § 240.10b–5 claiming that Petitioner falsified information which inflated Petitioner's stock price, and that when the information came to light, Respondent was harmed when the stock price fell. Respondent sought class certification for all individuals that purchased stock when it was inflated. According to Fed. R. Civ. Pro. 23(b)(3), one of the elements that must be common to the class is reliance on the false information. Respondent based the reliance element on the "fraud-on-the-market" presumption, which assumes that in an efficient market, the stock price reflects all information, including any fraudulent information, and therefore an individual who purchases the stock automatically relies on the false information.

The District Court certified the class, holding that the Respondent did not need to prove that the fraud existed to certify the class, but that proof was necessary at trial. Additionally, the court did not allow Petitioner to present evidence to rebut the applicability of the fraud-on-the-market theory because rebuttal was also a trial issue. The Court of Appeals for the Ninth Circuit affirmed the class certification on interlocutory appeal.

On appeal, Petitioner argues that the Ninth Circuit's decision is wrong because it deepens a circuit conflict on this issue and that courts should both demand proof and allow rebuttal before granting a class certification.