Supreme Court permits shareholder class action lawsuit

Supreme Court permits shareholder class action lawsuit

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[JURIST] The US Supreme Court [official website] on Wednesday decided [opinion, PDF] in Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds [SCOTUSblog backgrounder] to permit a class action lawsuit by shareholders against Amgen [corporate website], a biotechnology company. The court ruled that plaintiffs did not have to prove the materiality of their claims of misrepresentation and omission during the class-certification phase of a Rule 23 [Cornell LII backgrounder] class action lawsuit. The opinion was authored by Justice Ruth Bader Ginsburg, who was joined by Chief Justice John Roberts and Justices Stephen Breyer, Samuel Alito, Sonia Sotomayor and Elena Kagan. The Court held:

Although we have cautioned that a court’s class-certification analysis must be “rigorous” and may “entail some overlap with the merits of the plaintiff’s underlying claim,” Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage. Merits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.

This is a clear indication that the merits of the claims themselves are not the issues to be litigated during class certification.

This opinion is a departure from the position taken by the court in other recent class action lawsuits that had a trend of raising the standard for class certification. In June 2011, in Wal-Mart v. Dukes [Cornell LII backgrounder], the court ruled [JURIST report] that a group of women seeking to recover damages from Wal-Mart failed to meet the requirements for class certification by failing to prove that class members have common “questions of law or fact.” In April 2011, in AT&T v. Concepcion [Cornell LII backgrounder], the court ruled [JURIST report] that federal arbitration law preempted state law and prohibited class status when contracts contain arbitration clauses.