The U.S. Supreme Court is considering appeals by Comcast Corp. and Amgen Inc. that could help determine what kind of evidence must be presented before companies may be the subject of class-action lawsuits. The companies want to further limit class actions, which are needed so that large groups of corporate victims can have access to justice. Most recently, in June 2011 the Court decertified a class of as many as 1.5 million Wal-Mart Stores Inc. female workers who accused the world’s largest retailer of bias in pay and promotions, saying they raised too many different claims.
In the Comcast case, subscribers led by Caroline Behrend accused the largest U.S. cable TV company, which is also majority owner of NBC Universal, of overcharges that resulted from Comcast’s effort to monopolize the market in the Philadelphia area. The $875 million lawsuit was brought on behalf of a potential 2 million customers in Pennsylvania, New Jersey and Delaware. Comcast said the subscribers were too different to sue as a class, but in August 2011 the 3rd U.S. Circuit Court of Appeals in Philadelphia said a trial judge could decide whether they had a common methodology to justify awarding damages to a class.
The main issue, as framed by the Justices ahead of oral arguments, had been whether the trial judge could rely on testimony from an expert witness for the subscribers before certifying a class. The subscribers’ lawyer, Barry Barnett, and some Justices suggested during oral arguments that Philadelphia-based Comcast could not press that issue because it had not done so in the lower courts, and that perhaps the Supreme Court should not rule on the company’s appeal for that reason.
In the Amgen case, shareholders accused the Thousand Oaks, Calif.-based biotechnology company of fraudulently inflating its stock price between April 2004 and May 2007 by exaggerating the safety of its anti-anemia drugs Aranesp and Epogen. Shareholders led by the Connecticut Retirement Plans and Trust Funds sought class certification based on the “fraud on the market” theory endorsed by the Supreme Court in a 1988 case. This assumes that the price of a stock in an efficient market reflects all public information, and that a purchaser is presumed to have relied on the truthfulness of that information.
Amgen said the shareholders should have been forced at the class certification stage, rather than at trial, to prove that alleged misstatements materially inflated the company’s stock price. But last November, the 9th U.S. Circuit Court of Appeals in Pasadena, Calif., let the class action proceed. Amgen’s lawyer told the Court the shareholders cannot raise the “fraud on the market” theory without showing material misstatements. It was argued by the lawyer that “Absent materiality, the market price cannot be presumed to reflect the statement in question.”
Comcast and Amgen were supported in their appeals by various business groups, including the U.S. Chamber of Commerce, as well as former commissioners and officials at the U.S. Securities and Exchange Commission. Decisions are expected by the end of June 2013. The cases are Comcast Corp. et al v. Behrend et al, U.S. Supreme Court, No. 11-864; and Amgen Inc. et al v. Connecticut Retirement Plans and Trust Funds, U.S. Supreme Court, No. 11-1085.
Source: Insurance Journal
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