With the verdict in its case involving American drug and technology giant Amgen, the U.S. Supreme Court has set forth a precedent that could change the landscape of securities fraud class action cases filed all over the country. Essentially, the Court found that it is not necessary for the plaintiffs in a securities fraud case to prove that they suffered injury because a defendant’s release of incorrect information artificially inflated stock prices in order to get a class certified.
The 6-3 verdict written by Justice Ruth Bader Ginsburg is a boon for the plaintiff’s attorneys and anyone who has been harmed by the alleged improprieties of a publicly traded company. Theoretically, the ruling will make it easier for investor/stockholder class actions to be certified, taking away the hurdle that Justice Ginsburg compared to a “mini-trial,” which is making a determination that the defendant company knowingly acted in a deceptive way to prop up stock prices.
One thing that this decision does not do is decide the merits of the case against Amgen; it only allows the class action to proceed for the time being. It also doesn’t absolve the named plaintiffs in this case – or any other class action – from meeting the legally required criteria for certifying a class, namely:
- The impracticality/impossibility of filing individual cases against a defendant
- Defendant having the same or similar defenses against the entire class
- Making the determination of the class’ scope (who will or will not be included in the class action)
Justices Thomas, Kennedy and Scalia dissented, expressing their concerns about allowing similar shareholder class actions to proceed without preliminary proof that the misconduct or misinformation of the defendant actually affected stock prices. Business associations like the United States Chamber of Commerce also disagree with the majority’s decision. Their fear is that smaller companies in particular will be forced to settle even baseless claims once a class has been certified just to prevent being sucked into a lengthy, costly legal battle.
The plaintiffs in the Amgen case definitely aren’t off the hook just yet. They still have an uphill climb to prove that Amgen was aware of possible safety issues with some of its products and purposely kept that information away from investors to prevent a drop in stock prices. Until the actual class action of Amgen Inc. v. Connecticut Retirement Plans and Trust Funds plays out in court, there is no telling how it will impact the face of class action litigation in America, particularly in the realm of securities fraud.
In the meantime, though, if you or a loved one has suffered financial harm as a shareholder or investor, you do have legal rights. Learn more about them by speaking with an experienced securities fraud attorney in your area.