The Ninth Circuit Court of Appeals has just issued a decision that upholds the class certification for the plaintiffs in a 10b-5 securities fraud action. The case involves Amgen, a pharmaceutical company. In order to get certified as a class, the plaintiffs must show that the element of reliance is present and common for class members under Federal Rule of Civil Procedure 23(b).
Under United States Supreme Court decisions, this element can be shown by a “fraud-on-the-market” presumption. This means that a buyer is presumed to have relied on the truth of public information that is reflected in the market price of a security. This presumption allows a plaintiff seeking class certification to show reliance where it would be otherwise very difficult, if not impossible, to do.
The Ninth Circuit has joined two other circuit courts of appeal (the Third and Seventh) to hold that a plaintiff must show two things to invoke the fraud-on-the-market presumption. These are first, showing that the security in question was traded in an efficient market; and second, showing that the alleged misrepresentations were public. Neither of these requirements were contested in the case.
With regard to the element of materiality of the misrepresentations, the plaintiffs need only allege this plausibly, rather than prove it at this stage. This is also true, according to the court, of the rebuttal of fraud on the market.
In the case before the court, the plaintiff did properly allege that several public statements made by the defendant pharmaceutical company were false and material. In the court’s view, this “coupled with the concession that Amgen’s stock traded in an efficient market, … was sufficient to invoke the fraud-on-the-market presumption of reliance. The district court did not abuse its discretion in certifying the class.”
The California consumer law firm of Hersh & Hersh has handled major class action litigations over many decades. Please contact our law firm to talk with one of our lawyers at no charge to you, about any matter involving defective drugs, defective medical devices, personal injury, motor vehicle or other related injuries or matters.