The US Supreme Court [official website] heard oral arguments [day call, PDF] in two cases Monday. In Comcast v. Behrend [transcript, PDF; JURIST report] the court heard arguments on how much judicial discretion is allowed when certifying a class for a class action lawsuit. In this case, the district court certified a class by judicial discretion, without resolving whether the plaintiff class had introduced admissible expert evidence, and the US Court of Appeals for the Third Circuit affirmed. The attorney for Comcast argued that although "abstract methodology, such as econometrics or regression analysis" might be used in the damages phase of a trial, it is too vague to use when certifying a class. The respondents argued that Comcast completely ignored the Daubert standard [opinion] for admissibility of expert evidence because it was inconvenient to its case. "The district judge has an obligation to serve as a gatekeeper whether there is a jury in the box or not. On a preliminary injunction, the court, if there is a proper Daubert objection, must make the objection at that time."
The Court also heard arguments in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds [transcript, PDF; JURIST report] about whether, in a misrepresentation case under Securities and Exchange Commission Rule 10b-5 [text], the district court must require proof of materiality before certifying a plaintiff class based on the fraud-on-the-market theory and whether a defendant should be given the opportunity to rebut such presumption at the class certification stage. An attorney for Amgen Inc., a pharmaceutical company, argued that a false statement or misrepresentation is not an acceptable substitute for materiality.
[E]very one of the four predicates to the fraud-on-the-market theory, which is a shortcut that—that excuses plaintiffs from proving that I heard the statement and relied on itevery one of those predicates is common. Whether the market is efficient is common. Whether the statement is public is common. Whether the stocks were bought and sold during the period of market distortion is common. And materiality is common. ... The falsity of the statement is common, but it is not a predicate to whether or not you can prove reliance on a statement indirectly by relying on the integrity of the market price, because in an efficient market, material public statements, whether they are true or false, will presumably move the market price.Respondents argued that, "Because materiality always generates a common answer for all class members, it is the quintessential common issue that does not splinter the class or cause it to be noncohesive for purposes of understanding predominance."