Last week, the Ninth Circuit handed down a decision in a securities class action, Connecticut Retirement Plans and Trust Funds v. Amgen Inc., ___ F.3d ___ (9th Cir. Nov. 8, 2011). The panel interpreted the U.S. Supreme Court's decision last Term, Erica P. John Fund v. Halliburton, 131 S. Ct. 2179 (2011), and also placed clear limits on merits determinations at the class certification stage. Among other things, the materiality of the alleged misrepresentations is a merits issue not to be resolved at the class certification stage in a securities fraud action.
From the introduction:
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 thealleged misrepresentations were public (a fact not contested here). As for the element of materiality, the plaintiff must plausibly allege — but need not prove at this juncture — that the claimed misrepresentations were material. Proof of materiality, like all other elements of a 10b-5 claim, is a merits issue that abides the trial or motion for summary judgment. Likewise, rebuttal of the fraud-on-the-market presumption, at least by showing that the alleged misrepresentations were not material, is a matter for trial or summary judgment, not a matter to be taken up in a class certification motion.
Slip op. at 20104-05 (italics in original; bold added).