On February 26, 2014, the U. S. Supreme Court (“the Court”) held that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) did not preclude Stanford Ponzi scheme plaintiffs’ state-law class action claims because the claims did not involve covered securities. The 7-2 majority opinion in Chadbourne & Parke, LLC v. Troice was written by Justice Breyer, joined by Justices Kagan, Sotomayor, Ginsburg, Scalia and Chief Justice Roberts. Justice Thomas concurred, and Justices Kennedy and Alito dissented.
The Court’s decision is significant because it resolves a long-standing circuit split over the interpretation of the “in connection with” requirement in SLUSA. As a result of the decision, plaintiffs may increasingly bring state law claims based on investment vehicles that are not covered securities themselves but whose performance implicates or is backed by covered securities. Investment managers and entities that market such investments, as well as lawyers and accountants, may face an increased risk of liability as a result of this decision. Read More
On Wednesday, the Supreme Court issued its decision in Amgen, Inc. v. Connecticut Retirement Plans. In a 6-3 decision authored by Justice Ginsburg, the Supreme Court handed a win to plaintiffs in securities fraud class actions, holding that plaintiffs do not have to prove materiality at the class certification stage. The decision marks a departure from some of the Court’s more recent class action rulings, which seemed to narrow class action litigation. Justices Scalia, Thomas and Kennedy dissented.
In their complaint, plaintiff shareholders alleged that Amgen and its executives misled investors about the safety and efficacy of two anemia drugs, thereby violating Section 10(b) and Rule 10b-5. During class certification, Amgen argued that Rule 23(b)(3) required that plaintiffs needed to prove materiality in order to ensure that the questions of law or fact common to the class will “predominate over any questions affecting only individual members.” Both the district court and the Ninth Circuit Court of Appeals rejected Amgen’s argument. The Supreme Court followed suit, affirming the Court of Appeal’s judgment and holding that proof of materiality is not a prerequisite to class certification in securities fraud cases. Read More