Plaintiff’s brief in U.S. Supreme Court case debunks Amgen’s arguments

Posted on: October 3rd, 2012 by Steve Larson
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In Plaintiff’s brief filed in the U.S. Supreme Court regarding whether materiality must be resolved at class certification stage, plaintiffs wrote as follows:

Amgen’s primary argument is the tired and out-dated mantra by defendants that class certification must be curbed because it creates irresistible settlement pressures.  See Br. 10, 20,24-30.  But that policy argument should be directed to Congress, which has twice addressed it by electing “to require more at the pleading stage and to ensure that litigation occurs in federal court under these special standards rather than state court under looser ones.”  Schleicher, 618 F.3d at 686.

Congress chose not to alter the rules for certification of federal securities class actions, and this Court should not do so unilaterally in the face of that congressional choice.  See id. (“We do not think it appropriate for the judiciary to make its own further adjustments by reinterpreting Rule 23 to make likely success on the merits essential to class certification in securities-fraud suits.”); In re Cavanaugh, 306 F.3d 726, 738-39 (9th Cir. 2002) (“Although Congress made several important changes in the [PSLRA], it pointedly did not change the requirements of Rule 23.”); see also supra pp. 22-23 (explaining that Rule 23 does not permit courts to alter its requirements based on perceived unfairness to defendants.)

Even if Amgen’s policy arguments were relevant in this forum, they are misplaced.  The assertion that class certification breeds rampant settlements of meritless actions is dubious generally and contradicted by empirical data in the context of federal securities class actions.  In 2011, there were only 188 federal securities class action filings out of 289,252 civil lawsuits filed in federal courts.  And there were only 65 class action settlements approved in 2011.  The data simply do not support the idea that the courts are inundated with securities class action filings and settlements.

The data also do not support the idea that these settlements are for exorbitant amounts.  The median amount of the settlements in 2011 was only $5.8 million.  and, “[d]espite the publicity that often accompanies mega-settlements, more than half of the post-[PLSRA] cases have settled for less than $10 million …. Approximately 80 percent of the post-[PSLRA] cases have settled for less than $25 million, and only 7 percent of cases have settled for $100 million or higher.”

It also is not the case that all securities class actions end in settlement.  More than one-third of securities class actions filed in the year 2000 (all of which have reached resolution by now) resulted in dismissal, not settlement.  For securities class actions filed in 2005 (almost 97% of which had reached resolution), nearly half ended in dismissal. Those data strongly demonstrate that the PSLRA and the SLUSA are achieving Congress’ goal of minimizing any strike suits while permitting meritorius cases to proceed.  Further, the failure to proceed to trial is not unique to class actions but is a feature of civil litigation.