Corporate Accountability

The Supreme Court Sticks to Text and History in Amgen v. Conn. Retirement Plans and Trust Funds

While both big businesses and small investors exhorted the Court to resolve the dispute in Amgen v. Connecticut Retirement Plans and Trust Funds based on policy preferences, the Court hewed instead to text and history in its 6-3 ruling on February 27, allowing the securities fraud case to proceed as a class action. The Court’s opinion, written by Justice Ginsburg (and joined by Chief Justice Roberts and Justices Breyer, Alito, Sotomayor and Kagan), remained true to the text of the Federal Rules of Civil Procedure governing class certification and left policy decisions to Congress, citing relevant legislative history.

The plaintiff-investors in Amgen claimed that misleading statements by the defendant pharmaceutical company regarding the safety and efficacy of its flagship drugs led to an inflated price for the company’s stock.  When the truth came to light, they alleged, the price of the stock plummeted, causing financial harm to investors who had purchased the stock at the inflated price.  The company countered that its alleged misrepresentations were immaterial.  The Court took up the question of whether the district court should have required the investors to prove the materiality of the alleged false statements prior to certifying a class action.

In her opinion for the Court, Justice Ginsburg emphasized that the majority relied “entirely on the text” of the federal class certification rule, which provides for class certification if common questions predominate.  She explained that materiality was a question in the litigation, and the investors needed only to show that the question was common to the class.  The plain language of the federal class certification rules does not require resolution of such questions in order to certify a class.

In a dissent, Justice Scalia protested that the Court’s decision was unjust because of the high “costs and risks” to businesses of litigating class actions.  Justice Ginsburg responded that Congress had “addressed the settlement pressures associated with securities-fraud class actions through means other than requiring proof of materiality at the class-certification stage.”  She cited House Reports and hearings regarding proof in securities litigation in which Congress had rejected “calls to undo” the presumption of classwide reliance on fraudulent representations to the market.  Justice Ginsburg explained that since “Congress has honed in on the precise policy concerns” raised by the company, it was not “appropriate for the judiciary to make its own further adjustments by reinterpreting” the class certification rules.   

In a separate dissenting opinion by Justice Thomas, joined by Justice Kennedy and, in part, by Justice Scalia,  the dissenters insisted that Amgen’s position was consistent with the Court’s precedent, and that the majority was “doctrinally incorrect” under that precedent.

The Amgen decision would have been much less remarkable if the conservative Justices had stuck together.  But instead, Chief Justice Roberts and Justice Alito joined the Court’s four liberal Justices.  By relying on text and history, rather than on policy preferences, Justice Ginsburg forged a consensus that respected the will of Congress.

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