The U.S. Supreme Court made it easier for shareholders to press class action securities-fraud suits, ruling that Amgen Inc. (AMGN:US) must defend against claims that it misled investors about the safety of two drugs for anemia.
The justices, voting 6-3, today said investors can sue as a group without having to first show that misinformation propped up a company’s stock price.
The ruling is a defeat for business groups, including the U.S. Chamber of Commerce. They say class action cases are so expensive that companies are pressured to pay settlements regardless of the merits of the suit itself. Shareholder advocates said a ruling for Amgen would especially hurt small investors who can’t afford to press individual cases.
Writing for the court, Justice Ruth Bader Ginsburg, said it would “waste judicial resources” to require investors to show that an alleged deception affected stock prices before a case could go forward as a class action. Amgen’s position “would necessitate a mini-trial” at a preliminary stage in the litigation, she wrote.
Justices Anthony Kennedy, Clarence Thomas and Antonin Scalia dissented.
Investors, led by Connecticut’s public employee pension plans, allege that they were misled by Amgen and its executives for more than three years about its Aranesp and Epogen anemia drugs. Amgen, based Thousand Oaks, California, is the world’s largest biotechnology company.
The suing shareholders say the company played down safety concerns, including possible links between the drugs and the growth of cancerous tumors. Amgen says that it didn’t mislead investors and that information about drug-safety questions was widely known and reflected in the company’s share price.
“The issue pending before the Supreme Court was solely procedural and was not ruling on the merits of the case,” Ashleigh Koss, an Amgen spokeswoman, said in an e-mail. “Amgen will vigorously defend itself” after the case returns to a federal trial court, she said.
All sides agreed that the investors must, at some point, show that misrepresentations by Amgen had an effect on its share price. The question was whether judges should resolve disputes about stock impact before letting investors band together in a class action suit.
Lower courts had been divided on the issue. In the Amgen case, the San Francisco-based 9th U.S. Circuit Court of Appeals said evidence about the effect on share price should wait for the trial itself. The appeals court said the case against Amgen could proceed as a class action.
The case is Amgen v. Connecticut Retirement Plans and Trust Funds, 11-1085.
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