Connecticut Retirement Plans & Trust Funds v. Amgen Inc.

To obtain class certification in a 10b-5 securities fraud case, the plaintiff, as required by Federal Rule of Civil Procedure 23(b)(3), must convince the district court that the element of reliance is common to the class. The Supreme Court has held that this can be done in an appropriate case by invoking the “fraud-on-the-market” presumption — the principle that the market price of a security traded in an efficient market reflects all public information and therefore that a buyer of the security is presumed to have relied on the truthfulness of that information in purchasing the security. Were it not for the fraud-on-the-market presumption, a plaintiff seeking class certification would be required to show the impossible — reliance by each individual prospective class member who bought the stock.

What must a plaintiff do to invoke the fraud-on-the-market presumption in aid of class certification? Today we join the Third and Seventh Circuits in holding that the plaintiff must (1) show that the security in question was traded in an efficient market (a fact conceded here), and (2) show that the alleged misrepresentations were public (a fact not contested here). As for the…