Securities — securities fraud — materiality

Listen to this article

U.S. Supreme Court

Civil

Securities — securities fraud — materiality

Proof of materiality is not a prerequisite to certification of a securities-fraud class action seeking money damages for alleged violations of §10(b) and Rule 10b–5.

Amgen points to the Court’s statement in Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. ___, ___, that “securities fraud plaintiffs must prove certain things in order to invoke Basic’s rebuttable presumption of reliance,” including “that the alleged misrepresentations were publicly known . . . , that the stock traded in an efficient market, and that the relevant transaction took place ‘between the time the misrepresentations were made and the time the truth was revealed.’ ” If these fraud-on-the-market predicates must be proved before class certification, Amgen contends, materiality—another fraud-on-the-market predicate—should be treated no differently. The Court disagrees. The requirement that a putative class representative establish that it executed trades “between the time the misrepresentations were made and the time the truth was revealed” relates primarily to the Rule 23(a)(3) and (a)(4) inquiries into typicality and adequacy of representation, not to the Rule 23(b)(3) predominance inquiry. And unlike materiality, market efficiency and the public nature of the alleged misrepresentations are not indispensable elements of a Rule 10–5 claim. While the failure of common, classwide proof of market efficiency or publicity leaves open the prospect of individualized proof of reliance, the failure of common proof on the issue of materiality ends the case for all class members.

660 F. 3d 1170, affirmed.

11-1085 Amgen, Inc., v. Connecticut Retirement Plans & Trust Funds

Ginsburg, J.; Alito, J., concurring; Scalia, J., dissenting; Thomas, J., dissenting.