Connecticut Retirement Plans and Trust Funds v. Amgen Inc.: Ninth Circuit Defers Proof of “Materiality” to Post-Certification Merits Phase

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The Ninth Circuit recently held that proof of the materiality of misrepresentations alleged in a securities fraud class action is not a prerequisite to class certification. Connecticut Retirement Plans and Trust Funds v. Amgen Inc., No. 09-56965, 2011 U.S. App. LEXIS 22540, *15-16 (9th Cir. Nov. 8, 2011) (citing, inter alia, Erica P. John Fund v. Halliburton, 131 S. Ct. 2179 (2011)) (available here). Rather, the court found that materiality is to be resolved during the post-certification “merits” phase, stating,  “[a]s 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 . . . is a merits issue that abides the trial or motion for summary judgment.” Id. at *3.

The John Fund and Connecticut Retirement decisions are likely to have implications beyond their immediate application to securities cases. There is an increasing trend toward a presumption of reliance in consumer class actions, akin to the reliance presumption that has been adopted in securities class action jurisprudence since the landmark decision in Basic v. Levinson, 108 S. Ct. 978 (1988). Current consumer class action decisions closely resemble the case law leading to Basic v. Levinson. See generally Wolph v. Acer, 272 F.R.D. 477 (N.D. Cal. Mar. 25, 2011) (class-wide reliance presumed from showing that misrepresentation is material); Fitzpartick v. General Mills, No. 10-11064, 2011 U.S. App. LEXIS 6047 (11th Cir. Mar. 25, 2011) (same); Cole v. Asurion Corp., 267 F.R.D. 322 (C.D. Cal. 2010) (same). As the doctrine of presumed reliance in consumer class actions evolves and matures, therefore, it is reasonable to expect that courts will also adopt the view that proof of materiality is a post-certification, merits determination.