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U.S. Supreme Court Upholds Investor Rights

The Court rejected imposition of a high hurdle that would have prevented many investors alleging violation of federal securities laws from challenging the allegedly fraudulent actions in court.


Investors challenged Amgen’s omissions from statutory filings of disclosures and the truth of actual representations pertaining to two of the company’s pharmaceutical products. The company argued that before a court can certify the action as a class action, plaintiffs must show not only that the representations upon which they relied were fraudulent but that they were also material to the investors’ claimed losses.

AARP’s friend-of-the-court brief, filed by attorneys with AARP Foundation Litigation, argued that  materiality is not a proper question at the class certification stage, but rather it is a substantive law question for later in the proceedings.  The brief parsed the language of Rule 23 of the Federal Rules of Civil Procedure, the provision regarding class action certification, to urge that the review of materiality at this stage of the proceedings was improper.

The U.S. Supreme Court agreed.  Ruling that the plaintiffs would have to prove the materiality element of the claim at trial, the Court said that requiring the plaintiffs to prove it at the class certification stage was improper. The Court noted that the entire claim would rise or fall based on the materiality issue, and thus it is a critical issue for trial.   

“While Connecticut Retirement certainly must prove materiality to prevail on the merits, we hold that such proof is not a prerequisite to class certification. Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class. Because materiality is judged according to an objective standard, the materiality of Amgen’s alleged misrepresentations and omissions is a question common to all members of the class Connecticut Retirement would represent,” wrote Justice Ginsburg for the majority.

What’s at Stake

Class action litigation is often the only way individuals can practically challenge practices that cost a large number of people a small amount of money as to each individual. Few attorneys would take on complicated cases against well-funded defendants on an individual basis for such small potential recovery.

Case Status

Amgen v. Conn. Ret. Plans was decided by the U.S. Supreme Court.