The U.S. Supreme Court has just ruled upon the Amgen v. Connecticut Retirement Plans and Trust Funds case. The securities-fraud case was brought by shareholders that alleged Amgen misled them concerning the dangers of particular drugs that it manufactured. Amgen claims that this information was already well known.
The concern for businesses now is that this lawsuit will make it easier for investors to bring class actions where claims of security fraud are being made. Business groups like the U.S. Chamber of Commerce are of the opinion that class action suits are costly for companies, and that many corporations will out of cost considerations settle these matters rather than contest the lawsuits on the merits.
There were three dissenters in this case, so the matter was anything but open and shut. However, the ruling was considered a victory for shareholders that were led by a Connecticut's public employee pension plans. Individual investors often cannot afford to go it alone on these sorts of cases, so providing class action lawsuits will make it easier for shareholders to air their grievances in court.
We will still need to see what the long term effects will be with regarding to this ruling. Though shareholders will now likely be able to bring more security fraud types cases to court, these sorts of cases remain fact dependent. The shareholders will still have the burden of proving that actual fraud did take place by corporate officers or directors.
It is because securities fraud cases are enormously complex to begin with (class action or no class action) that it's best to consult with attorneys on these matters that understand all of the intricacies of these cases. These cases are enormously time consuming, and involve tremendous understanding of business practices at a corporate level.
Source: Bloomberg, "Securities-Fraud Suits Backed by High Court in Amgen Case," by Greg Stohr, Feb. 27, 2013
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