568 U.S. 455, 459 (2013)
Connecticut Retirement Plans and Trust Funds filed a securities-fraud complaint against biotechnology company Amgen Inc. and several of its officers.1
The complaint alleged that Amgen violated §10(b) and Rule 10b–5 through certain misrepresentations and misleading omissions regarding the safety, efficacy, and marketing of two of its flagship drugs.2 These misrepresentations and omissions artificially inflated the price of Amgen’s stock at the time Connecticut Retirement and numerous other securities buyers purchased the stock.3
When the truth came to light, Amgen’s stock price declined, resulting in financial losses to those who purchased the stock at the inflated price.4 Amgen conceded in its answer that at all relevant times the market for its securities was an efficient market and that the market for Amgen’s securities promptly digested current information regarding Amgen from all publicly available sources and reflected such information in Amgen’s stock price.5
Connecticut Retirement sought certification of a class action under Rule 23(b)(3) on behalf of all investors who purchased Amgen stock between the date of the first alleged misrepresentation and the date of the last alleged corrective disclosure.6 The District Court granted the motion.7 After granting Amgen’s request to take an interlocutory appeal from the District Court’s class-certification order, the Court of Appeals affirmed.8
Amgen raised two arguments on appeal.9 First, Amgen contended that the District Court erred by certifying the proposed class without first requiring Connecticut Retirement to prove that Amgen’s alleged misrepresentations and omissions were material.10 Second, Amgen argued that the District Court erred by refusing to consider certain rebuttal evidence that Amgen had proffered in opposition to Connecticut Retirement’s class-certification motion.11 The Court of Appeals rejected both contentions.12 The Supreme Court granted Amgen’s petition for certiorari to resolve a conflict among the Courts of Appeals over whether district courts must require plaintiffs to prove, and must allow defendants to present evidence rebutting, the element of materiality before certifying a class action under §10(b) and Rule 10b–5.13
Whether proof of materiality is required before a securities-fraud class action invoking the fraud-on-the-market theory can be certified under Federal Rule of Civil Procedure 23(b)(3)?14
Under Rule 23(b)(3), common questions of law or fact must predominate over questions affecting only individual members.15 Materiality is judged according to an objective standard and thus can be proved through evidence common to the class.16 A failure of proof on materiality ends the case for the entire class because materiality is an essential element of a Rule 10b-5 claim and does not leave individualized reliance questions to predominate.17
No. This case involves a securities-fraud complaint filed by Connecticut Retirement Plans and Trust Funds (Connecticut Retirement) against biotechnology company Amgen Inc. and several of its officers (collectively, Amgen).18 Amgen conceded that the market for its securities was efficient at all relevant times and that the market for Amgen’s securities promptly digested current information regarding Amgen from all publicly available sources and reflected such information in Amgen’s stock price.19 Connecticut Retirement sought certification of a class action under Rule 23(b)(3) on behalf of all investors who purchased Amgen stock between the date of the first alleged misrepresentation and the date of the last alleged corrective disclosure. Because materiality is an objective inquiry, it presents a common question.20
If the class fails to prove materiality, the claims fail for all members alike, so individual reliance issues never predominate.21 The Court of Appeals thus concluded that proof of materiality is not necessary to ensure compliance with Rule 23(b)(3)’s requirement that common questions predominate.22 The District Court and Ninth Circuit therefore correctly certified the class without requiring precertification proof of materiality.
Proof of materiality is not a prerequisite to class certification under Rule 23(b)(3).23
Related opinions on this issue
Justice Alito joined the opinion of the Court.24 He did so with the understanding that the petitioners did not ask the Court to revisit Basic's fraud-on-the-market presumption.25 As the dissent observes, more recent evidence suggests that the presumption may rest on a faulty economic premise.26 In light of this development, reconsideration of the Basic presumption may be appropriate.27
Justice Scalia dissented, arguing that the Basic rule governs not only substantive liability but also the question of certification.28 He maintained that all elements of the fraud-on-the-market rule, including materiality, must be established if and when the presumption is relied upon to justify certification.29 Scalia contended that the majority's approach expands the consequences of Basic from the arguably regrettable to the unquestionably disastrous.30
He emphasized that the fraud-on-the-market theory approved by Basic envisions a demonstration of materiality not just for substantive recovery but for certification.31
Joined by Justice Kennedy
Justice Thomas dissented, contending that plaintiffs must prove materiality at the class-certification stage to invoke the fraud-on-the-market presumption and demonstrate that reliance is a common question under Rule 23(b)(3).32 He argued that the majority's assumption that failure to prove materiality will simply end the case for all is incorrect because individualized reliance evidence might then predominate.33 Thomas further explained that the history of the fraud-on-the-market theory confirms materiality must be proved when the theory is invoked at certification.34
Without that proof, individualized questions of reliance defeat certification under Rule 23(b)(3).35
Whether a district court must consider a defendant's rebuttal evidence aimed at disproving materiality when deciding a motion for class certification under Rule 23(b)(3)?36
Rebuttal evidence aimed at disproving materiality does not undermine predominance under Rule 23(b)(3) because the potential immateriality of alleged misrepresentations is no barrier to finding that common questions predominate.37 Even a definitive rebuttal on materiality would not cause individual questions to predominate; it would simply end the case for the class.38
No. Amgen also argues that the District Court erred by refusing to consider the rebuttal evidence Amgen proffered in opposing Connecticut Retirement’s class-certification motion.39 The Court of Appeals concluded, and Amgen does not contest, that Amgen’s rebuttal evidence aimed to prove that the misrepresentations and omissions alleged in Connecticut Retirement’s complaint were immaterial.40 The potential immateriality of Amgen’s alleged misrepresentations and omissions, however, is no barrier to finding that common questions predominate. Just as a plaintiff class’s inability to prove materiality creates no risk that individual questions will predominate, a definitive rebuttal on the issue of materiality would not undermine the predominance of questions common to the class.
The District Court did not err by disregarding Amgen’s rebuttal evidence in deciding whether Connecticut Retirement’s proposed class satisfied Rule 23(b)(3)’s predominance requirement.41
A district court is not required to consider a defendant's rebuttal evidence aimed at disproving materiality when deciding a motion for class certification under Rule 23(b)(3).42