The highest court in the land – the United States Supreme Court – recently issued a ruling that protects the rights of those bringing class action lawsuits against large corporations.
Amgen, one of the world’s largest biotechnology companies, appealed to the U.S. Supreme Court a decision by a lower court in a securities class action lawsuit in which it is the defendant. A Connecticut public employee retirement plan that owns Amgen stocks brought the class action against Amgen on behalf of the individual investors in the plan.
The lawsuit alleges fraud; that Amgen knowingly misrepresented the safety of two of its top-selling drugs and, therefore, fraudulently inflated the price of its stock. Clinical trials showed the drugs could hurt cancer patients. On May 10, 2007, the Food and Drug Administration recommended a limited use of these drugs based on such concerns. Following the announcement, shares in Amgen plunged 9 percent.
Amgen fought to stop the lawsuit, arguing that the shareholders had to prove their damages before the case actually went to trial. The company said that concerns over the drugs were publicly known so the information hadn’t affected the price of the shares. The United States Court of Appeals for the Ninth Circuit disagreed and Amgen appealed to the Supreme Court.
In a 6-3 decision in late February, the Supreme Court upheld the lower court’s ruling. In essence, the court provided for the certification of the class and allowed the lawsuit to continue. Once a class is certified, the defendant faces a foe that is much more substantial in size and resources. That is why Amgen fought so hard to stop the lawsuit.
The good news for investors: this recent ruling should clear some of the obstacles for individuals and businesses in bringing forth securities class action lawsuits. However, those who feel they have been the victims of security fraud should seek experienced legal counsel to fully explore their options.