US Supreme Court issues major securities class action ruling

On Wednesday, the Supreme Court held that plaintiffs in securities fraud cases do not have to establish materiality before a class can be certified based on the “fraud-on-the-market” theory. Instead, in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, six Justices agreed that materiality is a substantive element of plaintiffs’ fraud claim that can be postponed until summary judgment or trial because it can always be addressed with common proof. 

The Court’s holding reaffirmed the Court’s view that Federal Rule of Civil Procedure 23 is primarily concerned with whether a class is “sufficiently cohesive” so that its common questions can be resolved with common answers, and clarified that investigating the merits of a substantive claim in fraud-on-the-market cases is only appropriate at the class certification stage when it is necessary to ensure that all Rule 23 requirements are met…

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