As most of you following class action-related news know by now, the Supreme Court has granted certiorari to review another class action decision: the Ninth Circuit’s recent opinion in Connecticut Retirement Plans & Trust Funds v. Amgen, Inc. (Hat tip to Paul Karlsgodt of the reliably great ClassActionBlawg for getting the scoop.) As usual, SCOTUSblog has all of the relevant documents.
The issue in this case, is whether a court must decide whether an allegedly fraudulent statement is material before it applies the fraud-on-the-market presumption from Basic, Inc. v. Levinson. As the certiorari petition puts it:
The courts of appeals are split, however, on the question whether plaintiffs must also prove, for class certification, an additional predicate to the fraud-on-the-market theory— that the alleged misrepresentation was material. The courts of appeals also are split on the related question whether a defendant may, at the class certification stage, present evidence rebutting the applicability of the fraud-on-the-market theory.
But I want to focus, briefly, on a few other things this certiorari petition does, because it’s an excellent example of how to get an issue in front of the Court. After all, to get a certiorari petition heard, one has to (1) convince a Supreme Court clerk to pull the petition out of the cert pool (think "slush pile"), and (2) attract the votes of at least four of nine justices who have a lot of other issues to decide. And, much as I would love to think otherwise, most of the justices of the Supreme Court are probably not as fascinated by class action issues as Paul or myself. (This same logic applies to 23(f) petitions, which are themselves an attempt to convince a busy federal appellate court to review an issue it doesn’t have to.) So what does this cert petition do right?
It establishes stakes for the Court. By linking the resolution of securities class actions to the settlement rate, the petition provides a concrete bad outcome if the issue is not heard–settlement of meritless claims. But it also contrasts the Ninth Circuit’s handling of the issue to a recent Supreme Court opinion:
None of the reasons given by the Ninth Circuit for treating the materiality predicate differently from the efficient-market and public-statement predicates has merit. To the contrary, the Ninth Circuit’s reasoning contravenes this Court’s precedents, including Basic and Erica P. John Fund.
It explains why the circuit split matters. There’s a nice reference to the percentages of securities class actions filed in various circuits, which shows that the vast majority are now filed in circuits with different interpretations of this rule.
This circuit split is entrenched and mature. Moreover, with the Ninth Circuit having entered the fray, the split now involves courts of appeals for circuits that account for a substantial majority of securities fraud litigation. In 2010 and 2011, 74% and 73% (respectively) of all securities fraud class actions were filed in the Second, Third, Fifth, Seventh, and Ninth Circuits.
The statistics are a nice touch. They hammer home just how chaotic it would be to have an inconsistent rule in a large sector of class action litigation.
It explains why certiorari is appropriate now. As the brief points out
Now that the Second, Third, Fifth, Seventh, and Ninth Circuits have resolved the questions presented for their respective circuits, the likelihood that the is- sues will be presented again in a discretionary Rule 23(f) appeal is necessarily low. Courts of appeals gen- erally grant permission for a Rule 23(f) appeal only when the district court’s class certification order presents an important question of class-action law that is unsettled within the circuit …
Remember that percentage of securities filings? That plays in here as well. Since the vast majority of securities filings are in courts that have already decided the issue, the petitioners argued that there would likely not be another chance for the Supreme Court to hear this issue.
What’s the takeaway? It’s a simple one, but extremely important and often forgotten: know your audience. Want to get the Supreme Court’s attention? Show them why the opinion endangers one of their recent holdings, and why it won’t get reviewed unless they take it now.