In an amicus brief filed in the recently cert. granted Amgen case, the US Chamber of Commerce urged the Supreme Court to reverse the Ninth Circuit ruling that plaintiffs need not show materiality in a fraud-on-the-market case at the class certification stage. The Chamber said that the Ninth Cicuit decision conflicts with the Court’s opinions in both Basic Inc. v. Levinson, 485 U.S. 224 (1988), and Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179 (2011), because in those cases the Court declared that the “fundamental premise” of the presumption of reliance is a misrepresentation’s impact on the market price. If an alleged misrepresentation is not material, it will not move the market price of a stock that trades in an efficient market. And if the market price is not distorted, said the brief, there is no basis for presuming that the entire class relied on misrepresentations by relying on a market price that reflects the misrepresentation. Individual class members will need to prove actual reliance on the misrepresentation, rendering class certification impossible. (Amgen Inc. v. Connecticutt Retirement Plans and Funds, Dkt. No. 11-1085)
Amicus also argued that the panle's decision contradicts the Court's ruling in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), which established that a plaintiff must prove that the Rule 23 requirements are in fact satisfied. In this case, as in most Rule 10b-5 cases, the lead plaintiff cannot satisfy Rule 23(b)(3)’s predominance requirement unless it can trigger and sustain the presumption of classwide reliance. The court of appeals failed to put plaintiff to its proof. It relieved the plaintiff of the duty to prove the materiality prerequisite to the presumption of reliance. And it prevented defendant from introducing relevant evidence to rebut the presumption. Thus, contended the Chamber, the court of appeals improperly allowed class certification without determining whether plaintiff can in fact satisfy Rule 23(b)(3).