11th Sep 2013
On June 11, 2012, the United States Supreme Court announced that it would review a class-action securities fraud lawsuit against Amgen, the largest biotechnology company in the world. The Court will determine at what point plaintiffs in class-action stock fraud lawsuits must prove that the alleged fraud had an impact on share prices.
The Connecticut Retirement Plans and Trust Funds, a state pension fund, is leading the class of investors claiming that Amgen committed fraud by failing to disclose evidence that two of its drugs, Aranesp and Epogen, intended to treat anemia, increased the likelihood of cancerous tumor growth in those taking the medications. The plaintiffs alleged that the company overstated the safety of the drugs for FDA-approved uses from April 2004 through May 2007 and promoted off-label use of the drugs. Investors argue that if the risks of the drugs had been publicized, the stock price would have been lower – since the value of the stock dropped by nine percent after an important FDA meeting in May 2007.
Amgen’s executives claimed that the information about the link between the medications and tumor growth was readily available and that the stock price reflected the potential dangers.
Class Action Suit Certification
Investors originally brought the class-action suit in the Ninth Circuit, looking to certify a class of people who had purchased Amgen stock during the time of the alleged misrepresentations. Amgen opposed class certification, arguing that even if the company did withhold information, it did not affect the price of the stock. The company also argued that the plaintiffs needed to prove that the alleged misrepresentation inflated the stock price before the court could certify the class.
The court certified the class and the Court of Appeals upheld the certification, rejecting Amgen’s argument that plaintiffs need to prove that a misrepresentation affected stock prices before certifying a class. The court held that evidence about the effect of a company’s actions on share prices should be heard at trial, not prior to it. The court noted in its opinion, however, that there is a split among federal courts on the issue.
Appeal to the Supreme Court
Amgen appealed the class certification to the U.S. Supreme Court. In its petition to the Court to hear the case, Amgen raised two issues:
- Whether plaintiffs in a class-action securities fraud case must prove that misrepresentation had a material effect on stock price prior to class certification
- Whether district courts must allow defendants in such cases to offer evidence rebutting the plaintiffs’ evidence before certifying the class
Consult an Attorney
Allegations of fraud in the marketplace often lead to complex litigation. Those who have questions about fraud and other business improprieties should seek input from a seasoned business lawyer.