WASHINGTON—The U.S. Supreme Court will decide whether investors must prove that misinformation from Amgen Inc. propped up its stock price before they can pursue a class-action stock-fraud suit against the world’s largest biotechnology company.
The justices today agreed to review an appeal by Amgen in a case alleging the company and its executives misled investors for more than three years about safety questions involving its Aranesp and Epogen anemia drugs.
Amgen says a federal appeals court ruling makes it too easy to mount class-action lawsuits representing thousands of people, pressuring companies to pay settlements for even frivolous allegations rather than risk huge damages in a trial. Amgen’s appeal is backed by the U.S. Chamber of Commerce and the pharmaceutical industry’s trade group.
“Securities class actions are almost always settled once a class is certified, because the risks to a defendant of going to trial are so substantial,” a group of law professors and former Securities and Exchange Commission members said in a brief supporting Amgen’s bid for a Supreme Court hearing.
All sides agree that the investors alleging securities fraud must, at some point, show that misrepresentations by Amgen had an effect on its share price.
The company says judges should resolve disputes about the relevance of misleading information before letting multiple investors band together in a class-action suit. The San Francisco-based 9th U.S. Circuit Court of Appeals disagreed, saying that, if a case meets other requirements for class-action status, evidence about the effect on share price must wait for the trial itself.