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Amgen ERISA Case Is Back Again to Haunt the 9th Circuit

It looks like Ninth Circuit Judge Kozinski was particularly prescient in his prediction. SCOTUS has handed down a reversal to the federal appeals court, thus starting another round of litigation of securities allegations against the pharma maker, Amgen.

Amgen has been through the Ninth Circuit for two rounds already on grounds that the company knew long ago that the company's stock was overvalued and yet continued to allegedly violate ERISA. An excellently written summary of Amgen's court troubles was summarized by FindLaw's Casey Sullivan.

Dual Suits

The suit originates from issues that began long before news got out that several of its most profitable drugs could have been potentially fatal for millions of people. This is because company retirees say that the company actually knew that trials for the drugs were already pointing to bad news as early as the late 1990s.

Amgen is an unenviable position of having to handle at least two major lawsuits from multiple angles. The ERISA lawsuit is coming from one group of investors alleging what essentially amount to knowing violations of fiduciary duties owed to investors. Yet another group of plaintiffs are suing based on the company's alleged pumping up of the stock price.

A "Presumption of Prudence"

The Supreme Court upheld class certification for those who were allegedly injured because of artificial inflation of the Amgen stock. But the ERISA case is actually more telling. It appears that there is some fundamental disconnect between how the Ninth Circuit and SCOTUS understands the ruling in FifthThird, a case that is directly on point because it settles the issue of "presumption of prudence." In that case, SCOTUS ruled that there is no "presumption of prudence" for employee stock ownership plan fiduciaries except save only for their "duty to diversify."

In the words of the ruling: "The court leaves to the District Court in the first instance whether the stockholders may amend it in order to adequately plead a claim for breach of the duty of prudence guided by the standards provided in Fifth Third." In any case, "[the court] has not found sufficient facts and allegations to state a claim for breach of the duty of prudence."

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