Amgen Inc. v. Connecticut Retirement Plans and Trust Funds

(Slip Opinion) OCTOBER TERM, 2012 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
AMGEN INC. ET AL. v. CONNECTICUT RETIREMENT
PLANS AND TRUST FUNDS
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
No. 11–1085. Argued November 5, 2012—Decided February 27, 2013
To recover damages in a private securities-fraud action under §10(b) of
the Securities Exchange Act of 1934 and Securities and Exchange
Commission Rule 10b–5, a plaintiff must prove, among other things,
reliance on a material misrepresentation or omission made by the de-
fendant. Matrixx Initiatives, Inc. v. Siracusano, 563 U. S. ___, ___.
Requiring proof of direct reliance “would place an unnecessarily un-
realistic evidentiary burden on [a] plaintiff who has traded on an im-
personal market.” Basic Inc. v. Levinson, 485 U. S. 224, 245. Thus,
this Court has endorsed a “fraud-on-the-market” theory, which per-
mits securities-fraud plaintiffs to invoke a rebuttable presumption of
reliance on public, material misrepresentations regarding securities
traded in an efficient market. Id., at 241–249. The fraud-on-the-
market theory facilitates the certification of securities-fraud class ac-
tions by permitting reliance to be proved on a classwide basis.
Invoking the fraud-on-the-market theory, respondent Connecticut
Retirement Plans and Trust Funds (Connecticut Retirement) sought
certification of a securities-fraud class action under Federal Rule of
Civil Procedure 23(b)(3) against biotechnology company Amgen Inc.
and several of its officers (collectively, Amgen). The District Court
certified the class, and the Ninth Circuit affirmed. The Ninth Circuit
rejected Amgen’s argument that Connecticut Retirement was re-
quired to prove the materiality of Amgen’s alleged misrepresenta-
tions and omissions before class certification in order to satisfy Rule
23(b)(3)’s requirement that “questions of law or fact common to class
members predominate over any questions affecting only individual
members.” The Ninth Circuit also held that the District Court did
not err in refusing to consider rebuttal evidence that Amgen had pre-
2 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Syllabus
sented on the issue of materiality at the class-certification stage.
Held: Proof of materiality is not a prerequisite to certification of a secu-
rities-fraud class action seeking money damages for alleged violations
of §10(b) and Rule 10b–5. Pp. 9–26.
(a) The pivotal inquiry in this case is whether proof of materiality
is needed to ensure that the questions of law or fact common to the
class will “predominate over any questions affecting only individual
members” as the litigation progresses. For two reasons, the answer
to this question is “no.” First, because materiality is judged accord-
ing to an objective standard, it can be proved through evidence com-
mon to the class. TSC Industries, Inc. v. Northway, Inc., 426 U. S.
438, 445. Thus, it is a common question for Rule 23(b)(3) purposes.
Second, a failure of proof on the common question of materiality
would not result in individual questions predominating. Instead, it
would end the case, for materiality is an essential element of a secu-
rities-fraud claim. Pp. 9–14.
(b) Amgen’s arguments to the contrary are unpersuasive. Pp. 14–
24.
(1) Amgen points to the Court’s statement in Erica P. John
Fund, Inc. v. Halliburton Co., 563 U. S. ___, ___, that “securities
fraud plaintiffs must prove certain things in order to invoke Basic’s
rebuttable presumption of reliance,” including “that the alleged mis-
representations were publicly known . . . , that the stock traded in an
efficient market, and that the relevant transaction took place ‘be-
tween the time the misrepresentations were made and the time the
truth was revealed.’ ” If these fraud-on-the-market predicates must
be proved before class certification, Amgen contends, materiality—
another fraud-on-the-market predicate—should be treated no differ-
ently. The Court disagrees. The requirement that a putative class
representative establish that it executed trades “between the time
the misrepresentations were made and the time the truth was re-
vealed” relates primarily to the Rule 23(a)(3) and (a)(4) inquiries into
typicality and adequacy of representation, not to the Rule 23(b)(3)
predominance inquiry. And unlike materiality, market efficiency and
the public nature of the alleged misrepresentations are not indispen-
sable elements of a Rule 10–5 claim. While the failure of common,
classwide proof of market efficiency or publicity leaves open the pro-
spect of individualized proof of reliance, the failure of common proof
on the issue of materiality ends the case for all class members.
Pp. 15–18.
(2) Amgen also contends that “policy considerations” militate in
favor of requiring precertification proof of materiality. Because class
certification can exert substantial pressure on the defendant to settle
rather than risk ruinous liability, Amgen asserts, materiality may
Cite as: 568 U. S. ____ (2013) 3
Syllabus
never be addressed by a court if it is not required to be evaluated at
the class-certification stage. In this regard, however, materiality
does not differ from other essential elements of a Rule 10b–5 claim,
notably, the requirements that the statements or omissions on which
the plaintiff ’s claims are based were false or misleading and that the
alleged statements or omissions caused the plaintiff to suffer econom-
ic loss. Significantly, while addressing the settlement pressures as-
sociated with securities-fraud class actions, Congress has rejected
calls to undo the fraud-on-the-market theory. And contrary to
Amgen’s argument that requiring proof of materiality before class
certification would conserve judicial resources, Amgen’s position
would necessitate time and resource intensive mini-trials on materi-
ality at the class-certification stage. Pp. 18–22.
(c) Also unavailing is Amgen’s claim that the District Court erred
by refusing to consider the rebuttal evidence Amgen proffered in op-
posing Connecticut Retirement’s class-certification motion. The
Ninth Circuit concluded, and Amgen does not contest, that Amgen’s
rebuttal evidence aimed to prove that the misrepresentations and
omissions alleged in Connecticut Retirement’s complaint were imma-
terial. The potential immateriality of Amgen’s alleged misrepresen-
tations and omissions, however, is no barrier to finding that common
questions predominate. Just as a plaintiff class’s inability to prove
materiality creates no risk that individual questions will predomi-
nate, a definitive rebuttal on the issue of materiality would not un-
dermine the predominance of questions common to the class. Pp. 24–
26.
660 F. 3d 1170, affirmed.
GINSBURG, J., delivered the opinion of the Court, in which ROBERTS,
C. J., and BREYER, ALITO, SOTOMAYOR, and KAGAN, JJ., joined. ALITO,
J., filed a concurring opinion. SCALIA, J., filed a dissenting opinion.
THOMAS, J., filed a dissenting opinion, in which KENNEDY, J., joined,
and in which SCALIA, J., joined except for Part I–B.
Cite as: 568 U. S. ____ (2013) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash­
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–1085
_________________
AMGEN INC., ET AL., PETITIONERS v. CONNECTICUT
RETIREMENT PLANS AND TRUST FUNDS
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[February 27, 2013]
JUSTICE GINSBURG delivered the opinion of the Court.
This case involves a securities-fraud complaint filed
by Connecticut Retirement Plans and Trust Funds (Con­
necticut Retirement) against biotechnology company
Amgen Inc. and several of its officers (collectively, Amgen).
Seeking class-action certification under Federal Rule of
Civil Procedure 23, Connecticut Retirement invoked the
“fraud-on-the-market” presumption endorsed by this Court
in Basic Inc. v. Levinson, 485 U. S. 224 (1988), and recog-
nized most recently in Erica P. John Fund, Inc. v. Halli-
burton Co., 563 U. S. ___ (2011). The fraud-on-the-market
premise is that the price of a security traded in an efficient
market will reflect all publicly available information about
a company; accordingly, a buyer of the security may be
presumed to have relied on that information in purchasing
the security.
Amgen has conceded the efficiency of the market for
the securities at issue and has not contested the public
character of the allegedly fraudulent statements on which
Connecticut Retirement’s complaint is based. Nor does
Amgen here dispute that Connecticut Retirement meets
2 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
all of the class-action prerequisites stated in Rule 23(a):
(1) the alleged class “is so numerous that joinder of all
members is impracticable”; (2) “there are questions of law
or fact common to the class”; (3) Connecticut Retirement’s
claims are “typical of the claims . . . of the class”; and (4)
Connecticut Retirement will “fairly and adequately protect
the interests of the class.”
The issue presented concerns the requirement stated in
Rule 23(b)(3) that “the questions of law or fact common to
class members predominate over any questions affecting
only individual members.” Amgen contends that to meet
the predominance requirement, Connecticut Retirement
must do more than plausibly plead that Amgen’s alleged
misrepresentations and misleading omissions materially
affected Amgen’s stock price. According to Amgen, certifi­
cation must be denied unless Connecticut Retirement
proves materiality, for immaterial misrepresentations or
omissions, by definition, would have no impact on Amgen’s
stock price in an efficient market.
While Connecticut Retirement certainly must prove
materiality to prevail on the merits, we hold that such
proof is not a prerequisite to class certification. Rule
23(b)(3) requires a showing that questions common to the
class predominate, not that those questions will be an­
swered, on the merits, in favor of the class. Because mate­
riality is judged according to an objective standard, the
materiality of Amgen’s alleged misrepresentations and
omissions is a question common to all members of the
class Connecticut Retirement would represent. The al­
leged misrepresentations and omissions, whether material
or immaterial, would be so equally for all investors com­
posing the class. As vital, the plaintiff class’s inability to
prove materiality would not result in individual questions
predominating. Instead, a failure of proof on the issue
of materiality would end the case, given that materiality
is an essential element of the class members’ securities­
Cite as: 568 U. S. ____ (2013) 3
Opinion of the Court
fraud claims. As to materiality, therefore, the class is
entirely cohesive: It will prevail or fail in unison. In no
event will the individual circumstances of particular class
members bear on the inquiry.
Essentially, Amgen, also the dissenters from today’s
decision, would have us put the cart before the horse. To
gain certification under Rule 23(b)(3), Amgen and the
dissenters urge, Connecticut Retirement must first estab­
lish that it will win the fray. But the office of a Rule
23(b)(3) certification ruling is not to adjudicate the case;
rather, it is to select the “metho[d]” best suited to adjudi­
cation of the controversy “fairly and efficiently.”
I
A
This case involves the interaction between federal
securities-fraud laws and Rule 23’s requirements for
class certification. To obtain certification of a class ac-
tion for money damages under Rule 23(b)(3), a plaintiff
must satisfy Rule 23(a)’s above-mentioned prerequisites
of numerosity, commonality, typicality, and adequacy of
representation, see supra, at 1–2, and must also establish
that “the questions of law or fact common to class mem­
bers predominate over any questions affecting only indi­
vidual members, and that a class action is superior to
other available methods for fairly and efficiently adjudi­
cating the controversy.” To recover damages in a private
securities-fraud action under §10(b) of the Securities
Exchange Act of 1934, 48 Stat. 891, as amended, 15
U. S. C. §78j(b) (2006 ed., Supp. V), and Securities and
Exchange Commission Rule 10b–5, 17 CFR §240.10b–5
(2011), a plaintiff must prove “(1) a material misrepresen­
tation or omission by the defendant; (2) scienter; (3) a
connection between the misrepresentation or omission and
the purchase or sale of a security; (4) reliance upon the
misrepresentation or omission; (5) economic loss; and (6)
4 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
loss causation.” Matrixx Initiatives, Inc. v. Siracusano,
563 U. S. ___, ___ (2011) (slip op., at 9) (internal quotation
marks omitted).
“Reliance,” we have explained, “is an essential element
of the §10(b) private cause of action” because “proof of
reliance ensures that there is a proper connection between
a defendant’s misrepresentation and a plaintiff ’s injury.”
Halliburton, 563 U. S., at ___ (slip op., at 4) (internal
quotation marks omitted). “The traditional (and most
direct) way” for a plaintiff to demonstrate reliance “is by
showing that he was aware of a company’s statement and
engaged in a relevant transaction . . . based on that specific
misrepresentation.” Ibid. We have recognized, however,
that requiring proof of direct reliance “would place an
unnecessarily unrealistic evidentiary burden on [a] plain­
tiff who has traded on an impersonal market.” Basic, 485
U. S., at 245. Accordingly, in Basic the Court endorsed the
“fraud-on-the-market” theory, which permits certain Rule
10b–5 plaintiffs to invoke a rebuttable presumption of
reliance on material misrepresentations aired to the gen­
eral public. Id., at 241–249.1
The fraud-on-the-market theory rests on the premise
that certain well developed markets are efficient proces­
sors of public information. In such markets, the “market
price of shares” will “reflec[t] all publicly available infor­
mation.” Id., at 246. Few investors in such markets, if
any, can consistently achieve above-market returns by
trading based on publicly available information alone, for
if such above-market returns were readily attainable, it
——————
1 Part IV of Justice Blackmun’s opinion in Basic—the part endors­
ing the fraud-on-the-market theory—was joined by Justices Brennan,
Marshall, and Stevens. Together, these Justices composed a majority
of the quorum of six Justices who participated in the case. See 28
U. S. C. §1 (“The Supreme Court of the United States shall consist of a
Chief Justice of the United States and eight associate justices, any six
of whom shall constitute a quorum.”).
Cite as: 568 U. S. ____ (2013) 5
Opinion of the Court
would mean that market prices were not efficiently incor­
porating the full supply of public information. See R.
Brealey, S. Myers, & F. Allen, Principles of Corporate
Finance 330 (10th ed. 2011) (“[I]n an efficient market,
there is no way for most investors to achieve consistently
superior rates of return.”).
In Basic, we held that if a market is shown to be effi­
cient, courts may presume that investors who traded
securities in that market relied on public, material mis­
representations regarding those securities. See 485 U. S.,
at 245–247. This presumption springs from the very
concept of market efficiency. If a market is generally
efficient in incorporating publicly available information
into a security’s market price, it is reasonable to presume
that a particular public, material misrepresentation will
be reflected in the security’s price. Furthermore, it is
reasonable to presume that most investors—knowing that
they have little hope of outperforming the market in the
long run based solely on their analysis of publicly availa­
ble information—will rely on the security’s market price as
an unbiased assessment of the security’s value in light of
all public information. Thus, courts may presume that
investors trading in efficient markets indirectly rely on
public, material misrepresentations through their “reli­
ance on the integrity of the price set by the market.” Id.,
at 245. “[T]he presumption,” however, is “just that, and
[can] be rebutted by appropriate evidence.” Halliburton,
563 U. S., at ___ (slip op., at 5). See also Basic, 485 U. S.,
at 248–249 (providing examples of showings that would
rebut the fraud-on-the-market presumption).
Although fraud on the market is a substantive doctrine
of federal securities-fraud law that can be invoked by any
Rule 10b–5 plaintiff, see, e.g., Black v. Finantra Capital,
Inc., 418 F. 3d 203, 209 (CA2 2005); Blackie v. Barrack,
524 F. 2d 891, 908 (CA9 1975), the doctrine has particular
significance in securities-fraud class actions. Absent the
6 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
fraud-on-the-market theory, the requirement that Rule
10b–5 plaintiffs establish reliance would ordinarily pre­
clude certification of a class action seeking money dam-
ages because individual reliance issues would overwhelm
questions common to the class. See Basic, 485 U. S., at
242. The fraud-on-the-market theory, however, facilitates
class certification by recognizing a rebuttable presumption
of classwide reliance on public, material misrepresenta­
tions when shares are traded in an efficient market. Ibid.2
B
In its complaint, Connecticut Retirement alleges that
Amgen violated §10(b) and Rule 10b–5 through certain
misrepresentations and misleading omissions regarding
the safety, efficacy, and marketing of two of its flagship
drugs.3 According to Connecticut Retirement, these mis­
representations and omissions artificially inflated the
price of Amgen’s stock at the time Connecticut Retirement
and numerous other securities buyers purchased the
stock. When the truth came to light, Connecticut Retire­
ment asserts, Amgen’s stock price declined, resulting in
financial losses to those who purchased the stock at the
inflated price. In its answer to Connecticut Retirement’s
complaint, Amgen conceded that “[a]t all relevant times,
the market for [its] securities,” which are traded on the
NASDAQ stock exchange, “was an efficient market”; thus,
“the market for Amgen’s securities promptly digested
current information regarding Amgen from all publicly
——————
2 Although describing Basic’s adoption of the fraud-on-the-market
presumption of reliance as “questionable,” JUSTICE THOMAS’ dissent
acknowledges that “the Court has not been asked to revisit” that issue.
Post, at 4–5, n. 4. See also post, p. 1 (ALITO, J., concurring).
3 Amgen’s allegedly improper marketing practices have sparked fed­
eral and state investigations and several whistleblower lawsuits. See
Dye, Amgen to pay $762 million in drug-marketing case, Washington
Post, Dec. 19, 2012, p. A17.
Cite as: 568 U. S. ____ (2013) 7
Opinion of the Court
available sources and reflected such information in
Amgen’s stock price.” Consolidated Amended Class Action
Complaint ¶¶199–200 in No. CV–07–2536 (CD Cal.);
Answer ¶¶199–200.
The District Court granted Connecticut Retirement’s
motion to certify a class action under Rule 23(b)(3) on
behalf of all investors who purchased Amgen stock be­
tween the date of the first alleged misrepresentation and
the date of the last alleged corrective disclosure. After
granting Amgen’s request to take an interlocutory appeal
from the District Court’s class-certification order, see Fed.
Rule Civ. Proc. 23(f), the Court of Appeals affirmed. See
660 F. 3d 1170 (CA9 2011).
Amgen raised two arguments on appeal. First, Amgen
contended that the District Court erred by certifying the
proposed class without first requiring Connecticut Retire­
ment to prove that Amgen’s alleged misrepresentations
and omissions were material. Second, Amgen argued that
the District Court erred by refusing to consider certain
rebuttal evidence that Amgen had proffered in opposition
to Connecticut Retirement’s class-certification motion.
This evidence, in Amgen’s view, demonstrated that the
market was well aware of the truth regarding its alleged
misrepresentations and omissions at the time the class
members purchased their shares.
The Court of Appeals rejected both contentions.
Amgen’s first argument, the Court of Appeals noted, made
the uncontroversial point that immaterial misrepresenta­
tions and omissions “by definition [do] not affect . . . stock
price[s] in an efficient market.” Id., at 1175. Thus,
where misrepresentations and omissions are not material,
there is no basis for presuming classwide reliance on
those misrepresentations and omissions through the
information-processing mechanism of the market price.
“The problem with that argument,” the Court of Appeals ob­
served, is evident: “[B]ecause materiality is an element of
8 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
the merits of their securities fraud claim, the plaintiffs
cannot both fail to prove materiality yet still have a viable
claim for which they would need to prove reliance individ­
ually.” Ibid. The Court of Appeals thus concluded that
“proof of materiality is not necessary” to ensure compli­
ance with Rule 23(b)(3)’s requirement that common ques­
tions predominate. Id., at 1177.
With respect to Amgen’s second argument, the Court of
Appeals determined that Amgen’s proffered rebuttal
evidence was merely “a method of refuting [the] materi-
ality” of the misrepresentations and omissions alleged
in Connecticut Retirement’s complaint. Ibid. Having al-
ready concluded that a securities-fraud plaintiff does not
need to prove materiality before class certification, the
court similarly held that “the district court correctly re­
fused to consider” Amgen’s rebuttal evidence “at the class
certification stage.” Ibid.We granted Amgen’s petition for certiorari, 567 U. S. ___
(2012), to resolve a conflict among the Courts of Appeals
over whether district courts must require plaintiffs to
prove, and must allow defendants to present evidence
rebutting, the element of materiality before certifying a
class action under §10(b) and Rule 10b–5. Compare 660
F. 3d 1170 (case below); and Schleicher v. Wendt, 618 F. 3d
679, 687 (CA7 2010) (materiality need not be proved at the
class-certification stage), with In re Salomon Analyst
Metromedia Litigation, 544 F. 3d 474, 484–485, 486, n. 9
(CA2 2008) (plaintiff must prove, and defendant may
present evidence rebutting, materiality before class certifi­
cation). See also In re DVI, Inc. Securities Litigation, 639
F. 3d 623, 631–632, 637–638 (CA3 2011) (plaintiff need
not prove materiality before class certification, but de­
fendant may present rebuttal evidence on the issue).
Cite as: 568 U. S. ____ (2013) 9
Opinion of the Court
II
A
The only issue before us in this case is whether Connect­
icut Retirement has satisfied Rule 23(b)(3)’s requirement
that “questions of law or fact common to class members
predominate over any questions affecting only individual
members.” Although we have cautioned that a court’s
class-certification analysis must be “rigorous” and may
“entail some overlap with the merits of the plaintiff ’s
underlying claim,” Wal-Mart Stores, Inc. v. Dukes, 564
U. S. ___, ___ (2011) (slip op., at 10) (internal quotation
marks omitted), Rule 23 grants courts no license to engage
in free-ranging merits inquiries at the certification stage.
Merits questions may be considered to the extent—but
only to the extent—that they are relevant to determining
whether the Rule 23 prerequisites for class certification
are satisfied. See id., at ___, n. 6 (slip op., at 10, n. 6) (a
district court has no “ ‘authority to conduct a preliminary
inquiry into the merits of a suit’ ” at class certification
unless it is necessary “to determine the propriety of certi­
fication” (quoting Eisen v. Carlisle & Jacquelin, 417 U. S.
156, 177 (1974))); Advisory Committee’s 2003 Note on
subd. (c)(1) of Fed. Rule Civ. Proc. 23, 28 U. S. C. App.,
p. 144 (“[A]n evaluation of the probable outcome on the
merits is not properly part of the certification decision.”).
Bearing firmly in mind that the focus of Rule 23(b)(3)
is on the predominance of common questions, we turn to
Amgen’s contention that the courts below erred by failing
to require Connecticut Retirement to prove the material­
ity of Amgen’s alleged misrepresentations and omissions
before certifying Connecticut Retirement’s proposed class.
As Amgen notes, materiality is not only an element of the
Rule 10b–5 cause of action; it is also an essential predicate
of the fraud-on-the-market theory. See Basic, 485 U. S., at
247 (“[W]here materially misleading statements have been
disseminated into an impersonal, well-developed market
10 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
for securities, the reliance of individual plaintiffs on the
integrity of the market price may be presumed.” (emphasis
added)). That theory, Amgen correctly observes, is prem­
ised on the understanding that in an efficient market,
all publicly available information is rapidly incorporated
into, and thus transmitted to investors through, the mar­
ket price. See id., at 246–247. Because immaterial in-
formation, by definition, does not affect market price,
it cannot be relied upon indirectly by investors who, as
the fraud-on-the-market theory presumes, rely on the mar­
ket price’s integrity. Therefore, the fraud-on-the-market
theory cannot apply absent a material misrepresentation
or omission. And without the fraud-on-the-market theory,
the element of reliance cannot be proved on a classwide
basis through evidence common to the class. See id., at
242. It thus follows, Amgen contends, that materiality
must be proved before a securities-fraud class action can
be certified.
Contrary to Amgen’s argument, the key question in this
case is not whether materiality is an essential predicate of
the fraud-on-the-market theory; indisputably it is.4 In­
stead, the pivotal inquiry is whether proof of materiality is
needed to ensure that the questions of law or fact common
to the class will “predominate over any questions affecting
only individual members” as the litigation progresses.
Fed. Rule Civ. Proc. 23(b)(3). For two reasons, the answer
to this question is clearly “no.”
——————
4 We agree with JUSTICE THOMAS that “[m]ateriality was central to
the development, analysis, and adoption of the fraud-on-the-market
theory both before Basic and in Basic itself.” Post, at 18. We disagree,
however, that the history of the fraud-on-the-market theory’s develop­
ment “confirms that materiality must be proved at the time that the
theory is invoked—i.e., at certification.” Ibid. As explained below, see
infra this page and 11–13, proof of materiality is not required prior to
class certification because such proof is not necessary to ensure satis­
faction of Rule 23(b)(3)’s predominance requirement.
Cite as: 568 U. S. ____ (2013) 11
Opinion of the Court
First, because “[t]he question of materiality . . . is an
objective one, involving the significance of an omitted or
misrepresented fact to a reasonable investor,” materiality
can be proved through evidence common to the class. TSC
Industries, Inc. v. Northway, Inc., 426 U. S. 438, 445
(1976). Consequently, materiality is a “common ques­
tio[n]” for purposes of Rule 23(b)(3). Basic, 485 U. S., at
242 (listing “materiality” as one of the questions common
to the Basic class members).
Second, there is no risk whatever that a failure of proof
on the common question of materiality will result in indi­
vidual questions predominating. Because materiality is
an essential element of a Rule 10b–5 claim, see Matrixx
Initiatives, 563 U. S., at ___ (slip op., at 9), Connecticut
Retirement’s failure to present sufficient evidence of mate­
riality to defeat a summary-judgment motion or to prevail
at trial would not cause individual reliance questions to
overwhelm the questions common to the class. Instead,
the failure of proof on the element of materiality would
end the case for one and for all; no claim would re­
main in which individual reliance issues could potentially
predominate.
Totally misapprehending our essential point, JUSTICE
THOMAS’ dissent asserts that our “entire argument is
based on the assumption that the fraud-on-the-market
presumption need not be shown at certification because it
will be proved later on the merits.” Post, at 11, n. 9. Our
position is not so based. We rest, instead, entirely on the
text of Rule 23(b)(3), which provides for class certification
if “the questions of law or fact common to class members
predominate over any questions affecting only individual
members.” A failure of proof on the common question of
materiality ends the litigation and thus will never cause
individual questions of reliance or anything else to over­
whelm questions common to the class. Therefore, under
the plain language of Rule 23(b)(3), plaintiffs are not
12 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
required to prove materiality at the class-certification
stage. In other words, they need not, at that threshold,
prove that the predominating question will be answered in
their favor.
JUSTICE THOMAS urges that a plaintiff seeking class
certification “must show that the elements of [her] claim
are susceptible to classwide proof.” Post, at 7. See also
post, at 11 (criticizing the Court for failing to focus its
analysis on “whether the element of reliance is susceptible
to classwide proof ”). From this premise, JUSTICE THOMAS
concludes that Rule 10b–5 plaintiffs must prove material-
ity before class certification because (1) “materiality is a
necessary component of fraud on the market,” and (2)
without fraud on the market, the Rule 10b–5 element of
reliance is not “susceptible of a classwide answer.” Post,
at 6, 10–11. See also post, at 12 (“[I]f a plaintiff wishes to
use Basic’s presumption to prove that reliance is a com­
mon question, he must establish the entire presumption,
including materiality, at the class certification stage.”).
Rule 23(b)(3), however, does not require a plaintiff
seeking class certification to prove that each “elemen[t] of
[her] claim [is] susceptible to classwide proof.” Post, at 7.
What the rule does require is that common questions
“predominate over any questions affecting only individual
[class] members.” Fed. Rule Civ. Proc. 23(b)(3) (emphasis
added). Nowhere does JUSTICE THOMAS explain how, in
an action invoking the Basic presumption, a plaintiff
class’s failure to prove an essential element of its claim for
relief will result in individual questions predominating
over common ones. Absent proof of materiality, the claim
of the Rule 10b–5 class will fail in its entirety; there will
be no remaining individual questions to adjudicate.
Consequently, proof of materiality is not required to
establish that a proposed class is “sufficiently cohesive
to warrant adjudication by representation”—the focus of
the predominance inquiry under Rule 23(b)(3). Amchem
Cite as: 568 U. S. ____ (2013) 13
Opinion of the Court
Products, Inc. v. Windsor, 521 U. S. 591, 623 (1997). No
doubt a clever mind could conjure up fantastic scenarios in
which an individual investor might rely on immaterial
information (think of the superstitious investor who sells
her securities based on a CEO’s statement that a black cat
crossed the CEO’s path that morning). But such objectively
unreasonable reliance does not give rise to a Rule 10b–5
claim. See TSC Industries, 426 U. S., at 445 (materiality
is judged by an objective standard). Thus, “the individual­
ized questions of reliance,” post, at 9, n. 8, that hypotheti­
cally might arise when a failure of proof on the issue of
materiality dooms the fraud-on-the-market class are far
more imaginative than real. Such “individualized ques­
tions” do not undermine class cohesion and thus cannot be
said to “predominate” for purposes of Rule 23(b)(3).5
Because the question of materiality is common to the
class, and because a failure of proof on that issue would
not result in questions “affecting only individual members”
predominating, Fed. Rule Civ. Proc. 23(b)(3), Connecticut
Retirement was not required to prove the materiality of
Amgen’s alleged misrepresentations and omissions at the
class-certification stage. This is not a case in which the
asserted problem—i.e., that the plaintiff class cannot
prove materiality—“exhibits some fatal dissimilarity”
among class members that would make use of the class­
action device inefficient or unfair. Nagareda, Class Certi­
fication in the Age of Aggregate Proof, 84 N. Y. U. L. Rev.
97, 107 (2009). Instead, what Amgen alleges is “a fatal
similarity—[an alleged] failure of proof as to an element of
——————
5 JUSTICE THOMAS is also wrong in arguing that a failure of proof on
the issue of materiality would demonstrate that a Rule 10b–5 class
action “should not have been certified in the first place.” Post, at 2.
Quite the contrary. The fact that such a failure of proof resolves all
class members’ claims once and for all, leaving no individual issues to
be adjudicated, confirms that the original certification decision was
proper.
14 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
the plaintiffs’ cause of action.” Ibid. Such a contention is
properly addressed at trial or in a ruling on a summary­
judgment motion. The allegation should not be resolved in
deciding whether to certify a proposed class. Ibid. See
also Schleicher, 618 F. 3d, at 687 (“[W]hether a statement
is materially false is a question common to all class mem­
bers and therefore may be resolved on a class-wide basis
after certification.”).
B
Insisting that materiality must be proved at the class­
certification stage, Amgen relies chiefly on two arguments,
neither of which we find persuasive.6
——————
6 Amgen advances a third argument founded on modern economic
research tending to show that market efficiency is not “ ‘a binary, yes or
no question.’ ” Brief for Petitioners 32 (quoting Langevoort, Basic at
Twenty: Rethinking Fraud on the Market, 2009 Wis. L. Rev. 151, 167).
Instead, this research suggests, differences in efficiency can exist
within a single market. For example, a market may more readily
process certain forms of widely disseminated and easily digestible
information, such as public merger announcements, than information
more difficult to acquire and understand, such as obscure technical
data buried in a filing with the Securities and Exchange Commission.
See, e.g., Macey & Miller, Good Finance, Bad Economics: An Analysis of
the Fraud-on-the-Market Theory, 42 Stan. L. Rev. 1059, 1083–1087
(1990); Stout, The Mechanisms of Market Inefficiency: An Introduction
to the New Finance, 28 J. Corp. L. 635, 653–656 (2003). Amgen,
however, never clearly explains how this research on market efficiency
bolsters its argument that courts should require precertification proof
of materiality. In any event, this case is a poor vehicle for exploring
whatever implications the research Amgen cites may have for the
fraud-on-the-market presumption recognized in Basic. As noted above,
see supra, at 6–7, Amgen conceded in its answer that the market for its
securities is “efficient” and thus “promptly digest[s] current information
regarding Amgen from all publicly available sources and reflect[s] such
information in Amgen’s stock price.” Consolidated Amended Class
Action Complaint ¶¶199–200; Answer ¶¶199–200. See also App. to Pet.
for Cert. 40a (relying on the admission in Amgen’s answer and an
unchallenged expert report submitted by Connecticut Retirement, the
District Court expressly found that the market for Amgen’s stock was
Cite as: 568 U. S. ____ (2013) 15
Opinion of the Court
1
Amgen points first to our statement in Halliburton that
“securities fraud plaintiffs must prove certain things in
order to invoke Basic’s rebuttable presumption of reli­
ance,” including “that the alleged misrepresentations were
publicly known . . . , that the stock traded in an efficient
market, and that the relevant transaction took place
‘between the time the misrepresentations were made and
the time the truth was revealed.’ ” 563 U. S., at ___ (slip
op., at 5–6) (quoting Basic, 485 U. S., at 248, n. 27). See
also Dukes, 564 U. S., at ___, n. 6 (slip op., at 11, n. 6)
(“[P]laintiffs seeking 23(b)(3) certification [of a securities­
fraud class action] must prove that their shares were
traded on an efficient market.”). If these fraud-on-the-market
predicates must be proved before class certification,
Amgen contends, materiality—another fraud-on-the­
market predicate—should be treated no differently.
We disagree. As an initial matter, the requirement that
a putative class representative establish that it executed
trades “between the time the misrepresentations were
made and the time the truth was revealed” relates primar­
ily to the Rule 23(a)(3) and (a)(4) inquiries into typicality
and adequacy of representation, not to the Rule 23(b)(3)
predominance inquiry. Basic, 485 U. S., at 248, n. 27.7 A
——————
efficient). Amgen remains bound by that concession. See American
Title Ins. Co. v. Lacelaw Corp., 861 F. 2d 224, 226 (CA9 1988) (“Factual
assertions in pleadings and pretrial orders, unless amended, are
considered judicial admissions conclusively binding on the party who
made them.”); cf. Christian Legal Soc. Chapter of Univ. of Cal., Has-
tings College of Law v. Martinez, 561 U. S. ___, ___ (2010) (slip op., at
10) (“This Court has . . . refused to consider a party’s argument that
contradicted a joint ‘stipulation [entered] at the outset of th[e] litiga­
tion.’ ” (quoting Board of Regents of Univ. of Wis. System v. Southworth,
529 U. S. 217, 226 (2000))). We thus find nothing in the cited research
that would support requiring precertification proof of materiality in this
case.
7 As earlier noted, see supra, at 1–2, Amgen does not here contest
16 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
security’s market price cannot be affected by a misrepre­
sentation not yet made, and in an efficient market, a
misrepresentation’s impact on market price is quickly
nullified once the truth comes to light. Thus, a plaintiff
whose relevant transactions were not executed between
the time the misrepresentation was made and the time the
truth was revealed cannot be said to have indirectly relied
on the misrepresentation through its reliance on the in­
tegrity of the market price.8 Such a plaintiff ’s claims,
therefore, would not be “typical” of the claims of investors
who did trade during the window between misrepresenta­
tion and truth revelation. Fed. Rule Civ. Proc. 23(a)(3).
Nor could a court confidently conclude that such a plaintiff
would “fairly and adequately protect the interests” of
investors who traded during the relevant window. Rule
23(a)(4). The requirement that the fraud-on-the-market
theory’s trade-timing predicate be established before
class certification thus sheds little light on the question
whether materiality must also be proved at the class­
certification stage.
Amgen is not aided by Halliburton’s statement that
market efficiency and the public nature of the alleged
misrepresentations must be proved before a securities­
fraud class action can be certified. As Amgen notes, mar­
ket efficiency, publicity, and materiality can all be proved
on a classwide basis. Furthermore, they are all essential
predicates of the fraud-on-the-market theory. Unless
——————
Connecticut Retirement’s satisfaction of Rule 23(a)’s requirements.
8 Accordingly, “the timing of the relevant stock trades” is indeed an
“element” of the fraud-on-the-market theory. Post, at 6, n. 6 (opinion of
THOMAS, J.). Unlike JUSTICE THOMAS, however, see ibid., we do not
understand the United States as amicus curiae to take a different view.
See Brief for United States 15, n. 2 (“Precise identification of the times
when the alleged misrepresentation was made and the truth was
subsequently revealed is . . . important to ensure that the named
plaintiff has traded stock during the time the stock price allegedly was
distorted by the defendant’s misrepresentations.”).
Cite as: 568 U. S. ____ (2013) 17
Opinion of the Court
those predicates are established, there is no basis for
presuming that the defendant’s alleged misrepresenta­
tions were reflected in the security’s market price, and
hence no grounding for any contention that investors
indirectly relied on those misrepresentations through their
reliance on the integrity of the market price. But unlike
materiality, market efficiency and publicity are not indis­
pensable elements of a Rule 10b–5 claim. See Matrixx
Initiatives, 563 U. S., at ___ (slip op., at 9) (listing ele­
ments of a Rule 10b–5 claim). Thus, where the market for
a security is inefficient or the defendant’s alleged misrep­
resentations were not aired publicly, a plaintiff cannot
invoke the fraud-on-the-market presumption. She can,
however, attempt to establish reliance through the “tradi­
tional” mode of demonstrating that she was personally
“aware of [the defendant’s] statement and engaged in a
relevant transaction . . . based on that specific misrepre­
sentation.” Halliburton, 563 U. S., at ___ (slip op., at 4).
Individualized reliance issues would predominate in such
a lawsuit. See Basic, 485 U. S., at 242. The litigation,
therefore, could not be certified under Rule 23(b)(3) as a
class action, but the initiating plaintiff ’s claim would
remain live; it would not be “dead on arrival.” 660 F. 3d,
at 1175.
A failure of proof on the issue of materiality, in contrast,
not only precludes a plaintiff from invoking the fraud-on­
the-market presumption of classwide reliance; it also
establishes as a matter of law that the plaintiff cannot
prevail on the merits of her Rule 10b–5 claim. Materiality
thus differs from the market-efficiency and publicity pred­
icates in this critical respect: While the failure of common,
classwide proof on the issues of market efficiency and
publicity leaves open the prospect of individualized proof
of reliance, the failure of common proof on the issue of
materiality ends the case for the class and for all indi­
viduals alleged to compose the class. See Brief for United
18 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
States as Amicus Curiae 20 (“Unless the failure of com-
mon proof gives rise to a need for individualized proof, it
does not cast doubt on the propriety of class certifica­
tion.”). In short, there can be no actionable reliance,
individually or collectively, on immaterial information. Be-
cause a failure of proof on the issue of materiality, unlike
the issues of market efficiency and publicity, does not give
rise to any prospect of individual questions overwhelming
common ones, materiality need not be proved prior to Rule
23(b)(3) class certification.
2
Amgen also contends that certain “policy considerations”
militate in favor of requiring precertification proof of
materiality. Brief for Petitioners 28. An order granting
class certification, Amgen observes, can exert substantial
pressure on a defendant “to settle rather than incur the
costs of defending a class action and run the risk of poten­
tially ruinous liability.” Advisory Committee’s 1998 Note
on subd. (f) of Fed. Rule Civ. Proc. 23, 28 U. S. C. App.,
p. 143. See also AT&T Mobility LLC v. Concepcion,
563 U. S. ___, ___ (2011) (slip op., at 16) (class actions
can entail a “risk of ‘in terrorem’ settlements”). Absent
a requirement to evaluate materiality at the class­
certification stage, Amgen contends, the issue may never
be addressed by a court, for the defendant will surrender
and settle soon after a class is certified. Insistence on
proof of materiality before certifying a securities-fraud
class action, Amgen thus urges, ensures that the issue
will be adjudicated and not forgone. See also post, at 4
(SCALIA, J., dissenting) (expressing the same concerns).
In this regard, however, materiality does not differ from
other essential elements of a Rule 10b–5 claim, notably,
the requirements that the statements or omissions on
which the plaintiff ’s claims are based were false or mis­
leading and that the alleged statements or omissions
Cite as: 568 U. S. ____ (2013) 19
Opinion of the Court
caused the plaintiff to suffer economic loss. See Matrixx
Initiatives, 563 U. S., at ___ (slip op., at 9). Settlement
pressure exerted by class certification may prevent judi­
cial resolution of these issues. Yet this Court has held
that loss causation and the falsity or misleading nature of
the defendant’s alleged statements or omissions are com­
mon questions that need not be adjudicated before a class
is certified. See Halliburton, 563 U. S., at ___ (slip op., at
3) (loss causation need not be proved at the class­
certification stage); Basic, 485 U. S., at 242 (“the falsity or
misleading nature of the . . . public statements” allegedly
made by the defendant is a “common questio[n]”). See also
Schleicher, 618 F. 3d, at 685 (falsity of alleged mis-
statements need not be proved before certification of a
securities-fraud class action).
Congress, we count it significant, has addressed the
settlement pressures associated with securities-fraud class
actions through means other than requiring proof of mate­
riality at the class-certification stage. In enacting the
Private Securities Litigation Reform Act of 1995 (PSLRA),
109 Stat. 737, Congress recognized that although private
securities-fraud litigation furthers important public-policy
interests, prime among them, deterring wrongdoing and
providing restitution to defrauded investors, such law-
suits have also been subject to abuse, including the
“extract[ion]” of “extortionate ‘settlements’ ” of frivolous
claims. H. R. Conf. Rep. No. 104–369, pp. 31–32 (1995).
The PSLRA’s response to the perceived abuses was, inter
alia, to “impos[e] heightened pleading requirements” for
securities-fraud actions, “limit recoverable damages and
attorney’s fees, provide a ‘safe harbor’ for forward-looking
statements, impose new restrictions on the selection of
(and compensation awarded to) lead plaintiffs, mandate
imposition of sanctions for frivolous litigation, and author­
ize a stay of discovery pending resolution of any motion to
dismiss.” Merrill Lynch, Pierce, Fenner & Smith Inc. v.
20 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
Dabit, 547 U. S. 71, 81–82 (2006). See also 15 U. S. C.
§78u–4 (2006 ed. and Supp. V). Congress later fortified
the PSLRA by enacting the Securities Litigation Uniform
Standards Act of 1998, 112 Stat. 3227, which curtailed
plaintiffs’ ability to evade the PSLRA’s limitations on
federal securities-fraud litigation by bringing class-action
suits under state rather than federal law. See 15 U. S. C.
§78bb(f)(1) (2006 ed.).
While taking these steps to curb abusive securities­
fraud lawsuits, Congress rejected calls to undo the fraud­
on-the-market presumption of classwide reliance endorsed
in Basic. See Langevoort, Basic at Twenty: Rethinking
Fraud on the Market, 2009 Wis. L. Rev. 151, 153, and n. 8
(noting that the initial version of H. R. 10, 104th Cong.,
1st Sess. (1995), an unenacted bill that, like the PSLRA,
was designed to curtail abuses in private securities litiga­
tion, “would have undone Basic”). See also Common Sense
Legal Reform Act: Hearings before the Subcommittee on
Telecommunications and Finance of the House Committee
on Commerce, 104th Cong., 1st Sess., 92, 236–237, 251–
252, 272 (1995) (witnesses criticized the fraud-on-the­
market presumption and expressed support for H. R. 10’s
requirement that securities-fraud plaintiffs prove direct
reliance). Nor did Congress decree that securities-fraud
plaintiffs prove each element of their claim before obtain­
ing class certification. Because Congress has homed in on
the precise policy concerns raised in Amgen’s brief, “[w]e
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 certifi­
cation in securities-fraud suits.” Schleicher, 618 F. 3d, at
686; cf. Smith v. Bayer Corp., 564 U. S. ___, ___ (2011)
(slip op., at 17–18) (“Congress’s decision to address the
relitigation concerns associated with class actions through
the mechanism of removal provides yet another reason for
federal courts to adhere in this context to longstanding
Cite as: 568 U. S. ____ (2013) 21
Opinion of the Court
principles of preclusion.”).
In addition to seeking our aid in warding off “in ter­
rorem” settlements, Amgen also argues that requiring
proof of materiality before class certification would con­
serve judicial resources by sparing judges the task of
overseeing large class proceedings in which the essential
element of reliance cannot be proved on a classwide basis.
In reality, however, it is Amgen’s position, not the judg­
ments of the lower courts in this case, that would waste
judicial resources. Amgen’s argument, if embraced, would
necessitate a mini-trial on the issue of materiality at the
class-certification stage. Such preliminary adjudications
would entail considerable expenditures of judicial time
and resources, costs scarcely anticipated by Federal Rule
of Civil Procedure 23(c)(1)(A), which instructs that the
decision whether to certify a class action be made “[a]t an
early practicable time.” If the class is certified, materiality
might have to be shown all over again at trial. And if
certification is denied for failure to prove materiality,
nonnamed class members would not be bound by that
determination. See Smith, 564 U. S., at ___ (slip op.,
at 12–18). They would be free to renew the fray, perhaps
in another forum, perhaps with a stronger showing of
materiality.
Given the tenuousness of Amgen’s judicial-economy
argument, Amgen’s policy arguments ultimately return to
the contention that private securities-fraud actions should
be hemmed in to mitigate their potentially “vexatiou[s]”
character. Blue Chip Stamps v. Manor Drug Stores, 421
U. S. 723, 739 (1975). We have already noted what Con­
gress has done to control exorbitant securities-fraud ac­
tions. See supra, at 19–20. Congress, the Executive
Branch, and this Court, moreover, have “recognized that
meritorious private actions to enforce federal antifraud
securities laws are an essential supplement to criminal
prosecutions and civil enforcement actions brought, re­
22 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
spectively, by the Department of Justice and the Securi­
ties and Exchange Commission.” Tellabs, Inc. v. Makor
Issues & Rights, Ltd., 551 U. S. 308, 313 (2007); see H. R.
Conf. Rep. No. 104–369, at 31; Brief for United States as
Amicus Curiae 1. See also Amchem, 521 U. S., at 617(“ ‘The policy at the very core of the class action mecha­
nism is to overcome the problem that small recoveries do
not provide the incentive for any individual to bring a solo
action prosecuting his or her rights.’ ” (quoting Mace v.
Van Ru Credit Corp., 109 F. 3d 338, 344 (CA7 1997))). We
have no warrant to encumber securities-fraud litigation
by adopting an atextual requirement of precertification
proof of materiality that Congress, despite its extensive in-
volvement in the securities field, has not sanctioned.
C
JUSTICE SCALIA acknowledges that proof of materiality
is not required to satisfy Rule 23(b)(3)’s predominance
requirement. See post, at 1. Nevertheless, he maintains
that full satisfaction of Rule 23’s requirements is insuffi­
cient to obtain class certification under Basic. In JUSTICE
SCALIA’s view, the Court’s decision in Basic established a
special rule: A securities-fraud class action cannot be
certified unless all of the prerequisites of the fraud-on-the­
market presumption of reliance, including materiality,
have first been established. Post, at 2.
The purported rule is JUSTICE SCALIA’s invention. It
cannot be attributed to anything the Court said in Basic.
That decision is best known for its endorsement of the
fraud-on-the-market theory. But the opinion also estab­
lished something more. It stated the proper standard for
judging the materiality of misleading statements regard­
ing the existence and status of preliminary merger discus­
sions. See 485 U. S., at 230–241, 250 (“Materiality in the
merger context depends on the probability that the trans­
action will be consummated, and its significance to the
Cite as: 568 U. S. ____ (2013) 23
Opinion of the Court
issuer of the securities.”). The District Court in Basic
certified a class of investors whose share prices were
allegedly depressed by misleading statements that dis­
guised ongoing merger negotiations. Id., at 228. Postcer­
tification, the court granted summary judgment to the
defendants on the ground that the alleged misstatements
were immaterial as a matter of law. Id., at 228–229. The
Court of Appeals affirmed the class certification but re­
versed the grant of summary judgment. Id., at 229. This
Court, in turn, vacated the Court of Appeals’ judgment
and remanded for further proceedings on the defendants’
summary-judgment motion in light of the materiality
standard set forth in the Court’s opinion. Id., at 240–241,
250. Notably, however, we did not disturb the District
Court’s class-certification order, which we stated “was
appropriate when made.” Id., at 250.9
If JUSTICE SCALIA were correct that our decision in
Basic demands proof of materiality before class certifica­
tion, the Court in Basic should have ordered the lower
courts to reconsider on remand both the defendants’ enti­
tlement to summary judgment and the propriety of class
certification. Instead, the Court expressly endorsed the
District Court’s class-certification order while at the same
time recognizing that further proceedings were necessary
to determine whether the plaintiffs had mustered suffi­
cient evidence to satisfy the relatively lenient standard for
——————
9 Scouring the Court’s decision in Basic for some semblance of support
for his position, JUSTICE SCALIA attaches portentous significance to
Basic’s statement that the District Court’s class-certification order,
although “ ‘appropriate when made,’ ” was “ ‘subject on remand to such
adjustment, if any, as developing circumstances demand[ed].’ ” Post, at
2 (quoting Basic, 485 U. S., at 250). This statement, however, merely
reminds that certifications are not frozen once made. Rule 23 empow­
ers district courts to “alte[r] or amen[d]” class-certification orders based
on circumstances developing as the case unfolds. Fed. Rule Civ. Proc.
23(c)(1) (1988). See also Rule 23(c)(1)(C) (2013).
24 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
avoiding summary judgment. See Anderson v. Liberty
Lobby, Inc., 477 U. S. 242, 248 (1986) (“[S]ummary judg­
ment will not lie if . . . the evidence is such that a reasona­
ble jury could return a verdict for the nonmoving party.”).
Unlike JUSTICE SCALIA, we are unwilling to presume that
Basic announced a rule requiring precertification proof of
materiality when Basic failed to apply any such rule to the
very case before it.10
III
Amgen also argues that the District Court erred by
refusing to consider the rebuttal evidence Amgen proffered
in opposing Connecticut Retirement’s class-certification
motion. This evidence, Amgen contends, showed that “in
light of all the information available to the market,” its
alleged misrepresentations and misleading omissions
“could not be presumed to have altered the market price
because they would not have ‘significantly altered the
total mix of information made available.’ ” Brief for Peti­
tioners 40–41 (quoting Basic, 485 U. S., at 232). For ex­
ample, Connecticut Retirement’s complaint alleges that an
Amgen executive misleadingly downplayed the signifi­
cance of an upcoming Food and Drug Administration
advisory committee meeting by incorrectly stating that the
meeting would not focus on one of Amgen’s leading drugs.
See App. to Pet. for Cert. 17a. Amgen responded to this
allegation by presenting public documents—including the
committee’s meeting agenda, which was published in the
——————
10 JUSTICE SCALIA suggests that the Court’s approach in Basic might
have been influenced by the obsolete view that “ ‘Rule 23 . . . set[s] forth
a mere pleading standard.’ ” Post, at 3 (quoting Wal-Mart Stores, Inc. v.
Dukes, 564 U. S. ___, ___ (2011) (slip op., at 10)). The opinion in Basic,
however, provides no indication that the Court perceived any issue
before it to turn on the question whether a plaintiff must merely plead,
rather than “affirmatively demonstrate,” her satisfaction of Rule 23’s
certification requirements. Dukes, 564 U. S., at ___ (slip op., at 10).
Cite as: 568 U. S. ____ (2013) 25
Opinion of the Court
Federal Register more than a month before the meeting—
stating that safety concerns associated with Amgen’s drug
would be discussed at the meeting. See id., at 41a–42a.
See also 69 Fed. Reg. 16582 (2004).
The District Court did not err, we agree with the Court
of Appeals, by disregarding Amgen’s rebuttal evidence in
deciding whether Connecticut Retirement’s proposed class
satisfied Rule 23(b)(3)’s predominance requirement. The
Court of Appeals concluded, and Amgen does not contest,
that Amgen’s rebuttal evidence aimed to prove that the
misrepresentations and omissions alleged in Connecticut
Retirement’s complaint were immaterial. 660 F. 3d,
at 1177 (characterizing Amgen’s rebuttal evidence as
an attempt to present a “ ‘truth-on-the-market’ defense,”
which the Court of Appeals explained “is a method of
refuting an alleged misrepresentation’s materiality”). See
also Reply Brief 17 (Amgen’s evidence was offered to rebut
the “materiality predicate” of the fraud-on-the-market
theory). As explained above, however, the potential im­
materiality of Amgen’s alleged misrepresentations and
omissions is no barrier to finding that common questions
predominate. See Part II, supra. If the alleged misrepre­
sentations and omissions are ultimately found immaterial,
the fraud-on-the-market presumption of classwide reliance
will collapse. But again, as earlier explained, see supra, at
10–13, individual reliance questions will not overwhelm
questions common to the class, for the class members’
claims will have failed on their merits, thus bringing the
litigation to a close. Therefore, just as a plaintiff class’s
inability to prove materiality creates no risk that individ­
ual questions will predominate, so even a definitive rebut­
tal on the issue of materiality would not undermine the
predominance of questions common to the class.
We recognized as much in Basic itself. A defendant
could “rebut the [fraud-on-the-market] presumption of
reliance,” we observed in Basic, by demonstrating that
“news of the [truth] credibly entered the market and dissi­
26 AMGEN INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
Opinion of the Court
pated the effects of [prior] misstatements.” 485 U. S., at248–249. We emphasized, however, that “[p]roof of that
sort is a matter for trial” (and presumably also for a sum­
mary-judgment motion under Federal Rule of Civil Proce­
dure 56). Id., at 249, n. 29.11 The District Court thus
correctly reserved consideration of Amgen’s rebuttal evi­
dence for summary judgment or trial. It was not required
to consider the evidence in determining whether common
questions predominated under Rule 23(b)(3).
* * *
For the reasons stated, the judgment of the Court of
Appeals for the Ninth Circuit is affirmed.
It is so ordered.
——————
11 Amgen attempts to minimize the import of this statement by noting
that it was made prior to a 2003 amendment to Rule 23 that eliminated
district courts’ authority to conditionally certify class actions. See
Advisory Committee’s 2003 Note on subd. (c)(1) of Fed. Rule Civ.
Proc. 23, 28 U. S. C. App., p. 144. Nothing in our opinion in Basic,
however, suggests that the statement relied in any way on district
courts’ conditional-certification authority. To the contrary, the Court in
Basic stated: “Proof of that sort [i.e., that news of the truth had entered
the market and dissipated the effects of prior misstatements] is a
matter for trial, throughout which the District Court retains the
authority to amend the certification order as may be appropriate.” 485
U. S., at 249, n. 29 (emphasis added). Rule 23(c)(1)(C) continues to
provide that a class-certification order “may be altered or amended
before final judgment.”
Cite as: 568 U. S. ____ (2013) 1
ALITO, J., concurring
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–1085
_________________
AMGEN INC., ET AL., PETITIONERS v. CONNECTICUT
RETIREMENT PLANS AND TRUST FUNDS
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[February 27, 2013]
JUSTICE ALITO, concurring.
I join the opinion of the Court with the understanding
that the petitioners did not ask us to revisit Basic’s fraud-
on-the-market presumption. See Basic Inc. v. Levinson,
485 U. S. 224 (1988). As the dissent observes, more re-
cent evidence suggests that the presumption may rest on
a faulty economic premise. Post, at 4, n. 4 (opinion of
THOMAS, J.); see Langevoort, Basic at Twenty: Rethinking
Fraud on the Market, 2009 Wis. L. Rev. 151, 175–176. In
light of this development, reconsideration of the Basic
presumption may be appropriate.
Cite as: 568 U. S. ____ (2013) 1
SCALIA, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–1085
_________________
AMGEN INC., ET AL., PETITIONERS v. CONNECTICUT
RETIREMENT PLANS AND TRUST FUNDS
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[February 27, 2013]
JUSTICE SCALIA, dissenting.
I join the principal dissent, that of JUSTICE THOMAS,
except for Part I–B.
The fraud-on-the-market rule says that purchase or
sale of a security in a well functioning market establishes
reliance on a material misrepresentation known to the
market. This rule is to be found nowhere in the United
States Code or in the common law of fraud or deception; it
was invented by the Court in Basic Inc. v. Levinson, 485
U. S. 224 (1988). Today’s Court applies to that rule the
principles of Federal Rule of Civil Procedure 23(b)(3), and
thereby concludes (logically enough) that commonality is
established at the certification stage even when material-
ity has not been shown. That would be a correct procedure
if Basic meant the rule it announced to govern only the
question of substantive liability—what must be shown in
order to prevail. If that were so, the new substantive rule,
like the more general substantive rule that reliance must
be proved, would be subject, at the certification stage, to
the commonality analysis of Rule 23(b)(3). In my view,
however, the Basic rule of fraud-on-the-market—a well
functioning market plus purchase or sale in the market
plus material misrepresentation known to the market
establishes a necessary showing of reliance—governs not
only the question of substantive liability, but also the
2 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
SCALIA, J., dissenting
question whether certification is proper. All of the ele-
ments of that rule, including materiality, must be estab-
lished if and when it is relied upon to justify certification.
The answer to the question before us today is to be found
not in Rule 23(b)(3), but in the opinion of Basic.
Basic established a presumption that the misrepresen-
tation was relied upon, not a mere presumption that the
plaintiffs relied on the market price. And it established
that presumption not just for the question of substantive
liability but also for the question of certification. “We
granted certiorari . . . to determine whether the courts
below properly applied a presumption of reliance in certify-
ing the class, rather than requiring each class member to
show direct reliance on Basic’s statements.” 485 U. S., at
230 (emphasis added). Of course it makes no sense to
“presume reliance” on the misrepresentation merely be-
cause the plaintiff relied on the market price, unless the
alleged misrepresentation would likely have affected the
market price—that is, unless it was material. Thus, as
JUSTICE THOMAS’ dissent shows, the Basic opinion is shot
through with references to the necessary materiality. The
presumption of reliance does not apply, and hence neither
substantive liability will attach nor will certification be
proper, unless materiality is shown. The necessity of
materiality for certification is demonstrated by the last
sentence of the Basic opinion, which comes after the Court
has decided to remand the case for reconsideration of
materiality under the appropriate legal standard: “The
District Court’s certification of the class here was appro-
priate when made but is subject on remand to such ad-
justment, if any, as developing circumstances demand.”
Id., at 250. Those circumstances are the establishment of
facts that rebut the presumption, including of facts that
show the misrepresentation was not material, or was not
known to the market.
The Court argues that if materiality were a predicate to
Cite as: 568 U. S. ____ (2013) 3
SCALIA, J., dissenting
certification on a fraud-on-the-market theory, the Basic
Court would not have approved the class certification
order while remanding for reconsideration of “whether
the plaintiffs had mustered sufficient evidence to satisfy
the relatively lenient standard for avoiding summary judg-
ment.” See ante, at 23–24. The Court manufactures an
inconsistency on the basis of doctrine that did not govern
class certification at the time of Basic. We recently clari-
fied that “Rule 23 does not set forth a mere pleading
standard.” Wal-Mart Stores, Inc. v. Dukes, 564 U. S. ___,
___ (2011) (slip op., at 10). But review of the Basic certifi-
cation order shows that the District Court’s fraud-on-the-
market analysis was based exclusively on the pleadings:
“[T]he allegations of plaintiffs’ complaint are sufficient to
bring this section 10(b) and Rule 10(b)(5) claim within the
so-called ‘fraud on the market’ theory.” App. to Pet. for
Cert. in Basic Inc. v. Levinson, O. T. 1987, No. 86–279,
p. 115a (emphasis added); see also ibid. (citing complaint
paragraphs as establishing fraud on the market). Under a
pleadings standard, the District Court found that the
plaintiffs had satisfied Rule 23(b)(3) with regard to fraud
on the market, including its materiality predicate. See id.,at 133a (denial of reconsideration) (“This court ruled on
December 10 that transaction causation [i.e., reliance]
could be established by the following: proof of a material
misrepresentation which affected the market price of the
stocks with a resulting injury to the plaintiffs” (emphasis
added)). Thus, even if the plaintiffs sufficiently pleaded
materiality that the certification order “was appropriate
when made,” Basic, supra, at 250, the defendants retained
an opportunity on remand to rebut the pleading in order to
defeat certification.*
——————
* As for the Court’s contention that I have “[s]cour[ed] the Court’s
decision in Basic” to find “some semblance of support” for my reading of
the case, ante, at 23, n. 9: It does not take much scouring to come across
4 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
SCALIA, J., dissenting
Certification of the class is often, if not usually, the
prelude to a substantial settlement by the defendant
because the costs and risks of litigating further are so
high. It does an injustice to the Basic Court to presume
without clear evidence—and indeed in the face of language
to the contrary—that it was establishing a regime in
which not only those market class-action suits that have
earned the presumption of reliance pass beyond the cru-
cial certification stage, but all market-purchase and
market-sale class-action suits do so, no matter what the al-
leged misrepresentation. The opinion need not be read
this way, and it should not.
The fraud-on-the-market theory approved by Basic en-
visions a demonstration of materiality not just for sub-
stantive recovery but for certification. Today’s holding
does not merely accept what some consider the regrettable
consequences of the four-Justice opinion in Basic; it ex-
pands those consequences from the arguably regrettable to
the unquestionably disastrous.
——————
the Court’s opening statement that “[w]e granted certiorari . . . to
determine whether the courts below properly applied a presumption of
reliance in certifying the class.” 485 U. S., at 230 (emphasis added).
Cite as: 568 U. S. ____ (2013) 1
THOMAS, J., dissenting
SUPREME COURT OF THE UNITED STATES
_________________
No. 11–1085
_________________
AMGEN INC., ET AL., PETITIONERS v. CONNECTICUT
RETIREMENT PLANS AND TRUST FUNDS
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE NINTH CIRCUIT
[February 27, 2013]
JUSTICE THOMAS, with whom JUSTICE KENNEDY joins,
and with whom JUSTICE SCALIA joins except for Part I–B,
dissenting.
I
The Court today allows plaintiffs to obtain certification
of securities-fraud class actions without proof that com-
mon questions predominate over individualized questions
of reliance, in contravention of Federal Rule of Civil Pro-
cedure 23(b)(3). The Court does so by all but eliminating
materiality as one of the predicates of the fraud-on-the-
market theory, which serves as an alternative mode of es-
tablishing reliance. See Basic Inc. v. Levinson, 485 U. S.
224, 241–250 (1988). Without demonstrating materiality
at certification, plaintiffs cannot establish Basic’s fraud-
on-the-market presumption. Without proof of fraud on the
market, plaintiffs cannot show that otherwise individual-
ized questions of reliance will predominate, as required
by Rule 23(b)(3). And without satisfying Rule 23(b)(3),
class certification is improper. Fraud on the market is
thus a condition precedent to class certification, without
which individualized questions of reliance will defeat
certification.
The Court’s opinion depends on the following assump-
tion: Plaintiffs will either (1) establish materiality at the
merits stage, in which case class certification was proper
2 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
because reliance turned out to be a common question, or
(2) fail to establish materiality, in which case the claim
would fail on the merits, notwithstanding the fact that
the class should not have been certified in the first place,
because reliance was never a common question. The
failure to establish materiality retrospectively confirms
that fraud on the market was never established, that
questions regarding the element of reliance were not
common under Rule 23(b)(3), and, by extension, that
certification was never proper. Plaintiffs cannot be ex-
cused of their Rule 23 burden to show at certification that
questions of reliance are common merely because they
might lose later on the merits element of materiality.
Because a securities-fraud plaintiff invoking Basic’s fraud-
on-the-market presumption to satisfy Rule 23(b)(3) should
be required to prove each of the predicates of that theory
at certification in order to demonstrate that questions of
reliance are common to the class, I respectfully dissent.
A
We begin with §10 of the Securities Exchange Act of
1934, 15 U. S. C. §78j (2006 ed. and Supp. V).1 We “have
implied a private cause of action from the text and pur-
poses of §10(b)” and Securities and Exchange Commission
Rule 10b–5, 17 CFR §240.10b–5 (2011).2 Matrixx Initia-
——————
1 Section10 states, in relevant part:
“It shall be unlawful for any person, directly or indirectly, by the use
of any means or instrumentality of interstate commerce or of the mails,
or of any facility of any national securities exchange—
. . . . .
“(b) To use or employ, in connection with the purchase or sale of any
security registered on a national securities exchange . . . any manipu-
lative or deceptive device or contrivance in contravention of such rules
and regulations as the Commission may prescribe . . . .”
2 Rule 10b–5 states:
“It shall be unlawful for any person, directly or indirectly, by the use
of any means or instrumentality of interstate commerce, or of the mails
Cite as: 568 U. S. ____ (2013) 3
THOMAS, J., dissenting
tives, Inc. v. Siracusano, 563 U. S. ___, ___ (2011) (slip op.,
at 9). See also Superintendent of Ins. of N. Y. v. Bankers
Life & Casualty Co., 404 U. S. 6, 13, n. 9 (1971) (“It is now
established that a private right of action is implied under
§10(b)”). The elements of an implied §10(b) cause of action
for securities fraud are “ ‘(1) a material misrepresentation
or omission by the defendant; (2) scienter; (3) a connection
between the misrepresentation or omission and the pur-
chase or sale of a security; (4) reliance upon the misrep-
resentation or omission; (5) economic loss; and (6) loss
causation.’ ” Matrixx, supra, at ___ (slip op., at 9) (quoting
Stoneridge Investment Partners, LLC v. Scientific-Atlanta,
Inc., 552 U. S. 148, 157 (2008)). This case concerns the
reliance element of the §10(b) claim and its interaction
with Rule 23(b)(3).
To prove reliance, a plaintiff, whether proceeding indi-
vidually or as a class member, must show that his stock
transaction was caused by the specific alleged misstate-
ment. “[P]roof of reliance ensures that there is a proper
‘connection between a defendant’s misrepresentation and
a plaintiff ’s injury.’ ” Erica P. John Fund, Inc. v. Hal-
liburton Co., 563 U. S. ___, ___ (2011) (slip op., at 4)
(quoting Basic, supra, at 243).3 To satisfy this element, a
——————
or of any facility of any national securities exchange,
“(a) To employ any device, scheme, or artifice to defraud,
“(b) To make any untrue statement of a material fact or to omit to
state a material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not
misleading, or
“(c) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person, in
connection with the purchase or sale of any security.”
3 Courts have also “referred to the element of reliance as ‘transaction
causation.’ ” Erica P. John Fund, 563 U. S., at ___ (slip op., at 6)
(quoting Dura Pharmaceuticals, Inc. v. Broudo, 544 U. S. 336, 341–342
(2005), in turn citing Basic Inc. v. Levinson, 485 U. S. 224, 248–249
(1988)). This alternative phrasing recognizes that the reliance inquiry
4 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
plaintiff traditionally was required to “sho[w] that he was
aware of a company’s statement and engaged in a relevant
transaction . . . based on that specific misrepresentation.”
Erica P. John Fund, supra, at ___ (slip op., at 4) (emphasis
added). In the face-to-face fraud cases from which securi-
ties claims historically arose, see, e.g., Dura Pharmaceuti-
cals, Inc. v. Broudo, 544 U. S. 336, 343–344 (2005)
(discussing common-law roots of securities-fraud actions),
this requirement was easily met by showing that the seller
made statements directly to the purchaser and that the
purchaser bought stock in reliance on those statements.
However, in a modern securities market many, if not most,
individuals who purchase stock from third parties on an
impersonal exchange will be unaware of statements made
by the issuer of those securities. As a result, such pur-
chaser-plaintiffs are unable to meet the traditional reli-
ance requirement because they cannot establish that they
“engaged in a relevant transaction . . . based on [a] specific
misrepresentation.” Erica P. John Fund, supra, at ___
(slip op., at 4).
This concern was the driving force behind the develop-
ment of the fraud-on-the-market theory adopted in Basic.
Because individuals trading stock on an impersonal mar-
ket often cannot show reliance even for purposes of an
individual securities-fraud action, Basic permitted “plain-
tiffs to invoke a rebuttable presumption of reliance.” Erica
P. John Fund, supra, at ___ (slip op., at 5).4 Basic pre-
——————
is directed at determining whether a particular piece of information
caused an individual to enter into a given transaction.
4 The Basic decision itself is questionable. Only four Justices joined
the portion of the opinion adopting the fraud-on-the-market theory.
Justice White, joined by Justice O’Connor, dissented from that section,
emphasizing that “[c]onfusion and contradiction in court rulings are
inevitable when traditional legal analysis is replaced with economic
theorization by the federal courts” and that the Court is “not well
equipped to embrace novel constructions of a statute based on contem-
porary microeconomic theory.” 485 U. S., at 252–253 (concurring in
Cite as: 568 U. S. ____ (2013) 5
THOMAS, J., dissenting
sumes that “ ‘in an open and developed securities market,
the price of a company’s stock is determined by the avail-
able material information regarding the company and its
business.’ ” 485 U. S., at 241 (quoting Peil v. Speiser, 806
F. 2d 1154, 1160–1161 (CA3 1986); emphasis added).5
“ ‘Misleading statements will therefore defraud purchasers
of stock even if the purchasers do not directly rely on the
misstatements.’ ” 485 U. S., at 241–242. As a result, “[a]n
investor who buys or sells stock at the price set by the
market does so in reliance on the integrity of that price,”
and “an investor’s reliance on any public material misrep-
resentations” may therefore “be presumed for purposes of a
Rule 10b–5 action.” Id., at 247 (emphasis added).
If a plaintiff opts to show reliance through fraud on the
market, Basic is clear that the plaintiff must show the
following predicates in order to prevail: (1) an efficient
market, (2) a public statement, (3) that the stock was
traded after the statement was made but before the truth
——————
part and dissenting in part). Justice White’s concerns remain valid
today, but the Court has not been asked to revisit Basic’s fraud-on-the-
market presumption. I thus limit my dissent to demonstrating that the
Court is not following Basic’s dictates.
Moreover, the Court acknowledges there is disagreement as to
whether market efficiency is “ ‘ “a binary, yes or no question,” ’ ” or in-
stead operates differently depending on the information at issue, see
ante, at 14, n. 6 (quoting Brief for Petitioners 32, in turn quoting
Langevoort, Basic at Twenty: Rethinking Fraud on the Market, 2009
Wis. L. Rev. 151, 167).
5 Basic “adopt[ed] the TSC Industries standard of materiality for the
§10(b) and Rule 10b–5 context.” 485 U. S., at 232. That standard
indicates that “ ‘[a]n omitted fact is material if there is a substantial
likelihood that a reasonable shareholder would consider it important in
deciding how to vote.’ ” Id., at 231 (quoting TSC Industries, Inc. v.
Northway, Inc., 426 U. S. 438, 449 (1976); alteration in original). “[T]o
fulfill the materiality requirement ‘there must be a substantial likeli-
hood that the disclosure of the omitted fact would have been viewed by
the reasonable investor as having significantly altered the “total mix” of
information made available.’ ” 485 U. S., at 231–232 (quoting TSC
Industries, supra, at 449).
6 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
was revealed, and (4) the materiality of the statement.
Id., at 248, n. 27.6 Both the Court and respondent agree
that materiality is a necessary component of fraud on the
market. See, e.g., ante, at 9 (materiality is “indisputably”
“an essential predicate of the fraud-on-the-market the-
ory”); Brief for Respondent 29 (“If the statement is not
materially false, then no one in the class can establish
reliance via the integrity of the market”). The materiality
of a specific statement is, therefore, essential to the fraud-
on-the-market presumption, which in turn enables a
plaintiff to prove reliance.
B
Basic’s fraud-on-the-market presumption is highly sig-
——————
6 The United States as amicus curiae invokes Rule 23(a)(3) to suggest
that the third element, the timing of the relevant stock trades, is a
“limit on the definition of the class.” Brief for United States 15, n. 2.
But it is also necessary to establish the timing of the allegedly material,
public misstatement made into an allegedly efficient market (as well as
when the fraud ended due to entry of truth on the market) before the
fraud-on-the-market theory can be evaluated under Rule 23(b)(3).
Thus, the lower court opinion in Basic expressly identified “the time the
misrepresentations were made and the time the truth was revealed” as
part of fraud on the market. Levinson v. Basic Inc., 786 F. 2d 741, 750
(CA6 1986). The Basic Court cited the formulation approvingly, 485
U. S., at 248, n. 27, and recently in Erica P. John Fund, Inc. v. Halli-
burton Co., 563 U. S. ___ (2011), the Court cited the same language as
part of the “undisputed” elements a securities-fraud plaintiff must
prove to invoke Basic. 563 U. S., at ___ (slip op., at 5–6) (quoting Basic,
supra, at 248, n. 27). Unless the timing of the misrepresentation and
truth is established at certification, there is no framework within which
to determine whether fraud on the market renders reliance a common
question. Thus, insofar as the majority recognizes that timing is a
factor of the fraud-on-the-market theory, ante, at 16, n. 8, I agree. It
would be incorrect to suggest that timing solely relates to Rules 23(a)(3)
and (4). It is equally important to establish the timing range at certifi-
cation for Rule 23(b)(3) reliance purposes. This fact undercuts the
majority’s attempt to isolate materiality as the only factor of fraud on
the market that need not be shown at certification to demonstrate that
reliance is a common question.
Cite as: 568 U. S. ____ (2013) 7
THOMAS, J., dissenting
nificant because it makes securities-fraud class actions
possible by converting the inherently individual reliance
inquiry into a question common to the class, which is
necessary to satisfy the dictates of Rule 23(b)(3).7 Rule
23(b)(3) requires the party seeking certification to prove
that “questions of law or fact common to class members
predominate over any questions affecting only individual
members.” A plaintiff seeking class certification is not
required to prove the elements of his claim at the certifi-
cation stage, but he must show that the elements of the
claim are susceptible to classwide proof. See, e.g., Wal-
Mart Stores, Inc. v. Dukes, 564 U. S. ___, ___, n. 6 (2011)
(slip op., at 11, n. 6) (“[P]laintiffs seeking 23(b)(3) certifi-
cation must prove that their shares were traded on an ef-
ficient market,” an element of the fraud-on-the-market
theory (emphasis added)). Without that proof, there is
no justification for certifying a class because there is no
“ ‘capacity of a classwide proceeding to generate common
answers apt to drive the resolution of the litigation.’ ” Id.,
at ___ (slip op., at 9–10) (quoting Nagareda, Class Certifi-
cation in the Age of Aggregate Proof, 84 N. Y. U. L. Rev.
97, 132 (2009)).
If plaintiffs fail to show that reliance is a common ques-
tion at the time of certification, certification is improper.
For if reliance is not a common question, each plaintiff
would be required to prove that he in fact relied on a
misstatement, a showing which is simply not susceptible
to classwide proof. Individuals make stock transactions
for divergent, even idiosyncratic, reasons. As the leading
pre-Basic fraud-on-the-market case recognized, “[a] pur-
chaser on the stock exchanges may be either unaware of a
specific false representation, or may not directly rely on it;
he may purchase because of a favorable price trend, price
——————
7 There is no dispute that respondent meets the prerequisites of Fed.
Rule Civ. Proc. 23(a).
8 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
earnings ratio, or some other factor.” Blackie v. Barrack,
524 F. 2d 891, 907 (CA9 1975). The inquiry’s inherently
individualized nature renders it impossible to generate the
common answers necessary for certification under Rule
23(b)(3). See Basic, 485 U. S., at 242 (“Requiring proof of
individualized reliance from each member of the proposed
plaintiff class effectively would have prevented respond-
ents from proceeding with a class action, since individual
issues then would have overwhelmed the common ones”).
The Court’s solution in Basic was to allow putative class
members to prove reliance through the fraud-on-the-
market presumption. Id., at 241–250. As the Court today
recognizes, failure to establish fraud on the market “leaves
open the prospect of individualized proof of reliance.”
Ante, at 17. Notably, the Court and the Ninth Circuit both
acknowledge that in order to obtain the benefit of the
presumption, plaintiffs must establish two of the fraud-on-
the-market predicates at class certification: (1) that the
market was generally efficient, and (2) that the alleged
misstatement was public. See ante, at 16 (acknowledging
“that market efficiency and the public nature of the alleged
misrepresentations must be proved before a securities-
fraud class action can be certified”); 660 F. 3d 1170, 1175
(CA9 2011) (same). See also Erica P. John Fund, 563
U. S., at ___ (slip op., at 5) (“It is undisputed that
securities fraud plaintiffs must prove,” at certification
inter alia, “that the alleged misrepresentations were pub-
licly known . . . [and] that the stock traded in an efficient
market”). The Court is correct insofar as its statements
recognize that fraud on the market is a condition prece-
dent to showing that there are common questions of reli-
ance at the time of class certification.
Nevertheless, the Court asserts that materiality—by its
own admission an essential predicate to invoking fraud
on the market—need not be established at certification
because it will ultimately be proved at the merits stage.
Cite as: 568 U. S. ____ (2013) 9
THOMAS, J., dissenting
Ante, at 16–18. This assertion is an express admission
that parties will not know at certification whether reliance
is an individual or common question.
To support its position, the Court transforms the predi-
cate certification inquiry into a novel either-or inquiry
occurring much later on the merits. According to the
Court, either (1) plaintiffs will prove materiality on the
merits, thus demonstrating ex post that common questions
predominated at certification, or (2) they will fail to prove
materiality, at which point we learn ex post that certifica-
tion was inappropriate because reliance was not, in fact, a
common question. In the Court’s second scenario, fraud
on the market was never established, reliance for each
class member was inherently individualized, and Rule
23(b)(3) in fact should have barred certification long ago.8
The Court suggests that the problem created by the second
scenario is excusable because the plaintiffs will lose any-
way on alternative merits grounds, and the case will be
——————
8 The majority ignores this explanation of the fundamental flaw in
its position, asserting that I never “explain how . . . a plaintiff class’s
failure to prove an essential element of its claim for relief will result in
individual questions predominating over common ones.” Ante, at 12.
But a plaintiff, who is excused from his burden of showing, at certifi-
cation that reliance is a common question, fails to demonstrate that
common questions predominate over the individualized questions of re-
liance that are inherent in a securities fraud claim. A plaintiff must
carry this burden at certification for certification to be proper. The
majority does not respond to the inherent timing problem in its posi-
tion. It does not explain how ignoring questions of reliance—that
undeniably will be individualized in some cases—at certification is
justified by the fact that those questions will be resolved months or
years later on the merits in a way that indicates reliance was indeed an
individualized question all along. Far from obeying the dictates of Rule
23(b)(3) as it claims, ante, at 12–13, the majority unjustifiably puts off a
critical part of the Rule 23(b)(3) inquiry until the merits. The only way
the majority can purport to follow Rule 23(b)(3) is by ignoring the fact
that, under its own analysis, reliance may be an individualized ques-
tion that predominates over common questions at certification.
10 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
over. See ante, at 17 (“[F]ailure of proof on the issue of
materiality [at the merits stage] . . . not only precludes a
plaintiff from invoking the fraud-on-the-market presump-
tion of classwide reliance; it also establishes as a matter of
law that the plaintiff cannot prevail on the merits of her
Rule 10b–5 claim”). But nothing in logic or precedent
justifies ignoring at certification whether reliance is sus-
ceptible to Rule 23(b)(3) classwide proof simply because
one predicate of reliance—materiality—will be resolved, if
at all, much later in the litigation on an independent
merits element.
It is the Court, not Amgen, that “would have us put the
cart before the horse,” ante, at 3, by jumping chronologi-
cally to the §10(b) merits element of materiality. But Rule
23, as well as common sense, requires class certification
issues to be addressed first. See Rule 23(c)(1)(A) (“At an
early practicable time after a person sues or is sued . . .
the court must determine by order whether to certify the
action as a class action”). A plaintiff who cannot prove
materiality does not simply have a claim that is “ ‘dead on
arrival’ ” at the merits, ante, at 17 (quoting 660 F. 3d, at
1175); he has a class that should never have arrived at the
merits at all because it failed Rule 23(b)(3) certification
from the outset. Without materiality, there is no fraud-
on-the-market presumption, questions of reliance remain
individualized, and Rule 23(b)(3) certification is impossi-
ble. And the fact that evidence of materiality goes to both
fraud on the market at certification and an independent
merits element is no issue; Wal-Mart expressly held that a
court at certification may inquire into questions that also
have later relevance on the merits. See 564 U. S., at ___
(slip op., at 10–11). The Court reverses that inquiry,
effectively saying that certification may be put off until
later because an adverse merits determination will retro-
actively wipe out the entire class. However, a plaintiff
who cannot prove materiality cannot prove fraud on the
Cite as: 568 U. S. ____ (2013) 11
THOMAS, J., dissenting
market and, thus, cannot demonstrate that the question of
reliance is susceptible of a classwide answer.
The fact that a statement may prove to be material at
the merits stage does not justify conflating the doctrinally
independent (and distinct) elements of materiality and
reliance.9 The Court’s error occurs when, instead of ask-
ing whether the element of reliance is susceptible to
classwide proof, the Court focuses on whether materiality
is susceptible to classwide proof. Ante, at 10 (“[T]he piv-
otal inquiry is whether proof of materiality is needed to
ensure that the questions of law or fact common to the
class will ‘predominate’ ”). The result is that the Court
effectively equates §10(b) materiality with fraud-on-the-
market materiality and elides reliance as a §10(b) ele-
ment. But a plaintiff seeking certification under Rule 23
bears the burden of proof with regard to all the elements
of a §10(b) claim, which includes materiality and reliance.
As Wal-Mart explained, “[a] party seeking class certifica-
tion must affirmatively demonstrate his compliance with
——————
9 Of course, the Court’s assertion that materiality will be resolved on
the merits presumes that certification will not bring in terrorem settle-
ment pressures to bear, foreclosing any materiality inquiry at all. The
Court dismisses this concern, ante, at 18–20, attempting to give fraud-
on-the-market analysis the imprimatur of congressional enactment
instead of recognizing it as a judicially created doctrine grafted onto an
implied cause of action. But the fact that Congress has enacted legisla-
tion to curb excesses in securities litigation while leaving Basic intact,
see ante, at 19–20, says nothing about the proper interpretation of
Basic at issue here. The Court retains discretion over the contours of
Basic unless and until Congress sees fit to alter them—a fact Congress
must also have realized when it passed the Private Securities Litiga-
tion Reform Act of 1995, 109 Stat. 737, and other legislation. The
Court’s entire argument is based on the assumption that the fraud-on-
the-market presumption need not be shown at certification because it
will be proved later on the merits; insofar as certification makes that
later determination unlikely to occur, it at least counsels against the
certitude with which the Court assures us that its gloss on Basic is
correct.
12 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
the Rule—that is, he must be prepared to prove that there
are in fact sufficiently numerous parties, common ques-
tions of law or fact, etc.” 564 U. S., at ___ (slip op., at 10).
If the elements of fraud on the market are not proved at
certification, a plaintiff has failed to carry his burden of
establishing that questions of individualized reliance will
not predominate, without which the plaintiff class cannot
obtain certification. Cf. id., at ___ (slip op., at 12) (holding
in Rule 23(a)(2) context that “[w]ithout some glue hold-
ing the alleged reasons for all those decisions together, it
will be impossible to say that examination of all the class
members’ claims for relief will produce a common an-
swer”). It is only by establishing all of the elements of the
fraud-on-the-market presumption that reliance can be
proved on a classwide basis. Therefore, if a plaintiff wishes
to use Basic’s presumption to prove that reliance is a
common question, he must establish the entire presump-
tion, including materiality, at the class certification stage.
Nor is it relevant, as respondent argues, that requiring
plaintiffs to establish all predicates of fraud on the market
at certification will make it more difficult to obtain certifi-
cation. See Brief for Respondent 35–38. In Basic, four
Justices of a six-Justice Court created the fraud-on-the-
market presumption from a combination of newly minted
economic theories, 485 U. S., at 250–251, n. 1 (White, J.,
concurring in part and dissenting in part), and “considera-
tions of fairness, public policy, and probability,” id., at 245(majority opinion), to allow claims that otherwise would
have been barred due to the plaintiffs’ inability to show
reliance, id., at 242. Basic is a judicially invented doctrine
based on an economic theory adopted to ease the burden
on plaintiffs bringing claims under an implied cause of
action. There is nothing untoward about requiring plain-
tiffs to take the steps that the Basic Court created in an
effort to save otherwise inadequate claims.
Cite as: 568 U. S. ____ (2013)
13
THOMAS, J., dissenting
II
The majority’s approach is, thus, doctrinally incorrect
under Basic. Its shortcomings are further highlighted by
the role that materiality played in the pre-Basic develop-
ment of the fraud-on-the-market theory as a condition
precedent to showing that there are common questions of
reliance in the class-action context. Materiality, at the
time of certification, has been a driving force behind
the theory from the outset. This fact further supports the
need to prove materiality at the time the fraud-on-the-
market theory is invoked to show that questions of reli-
ance can be answered on a classwide basis.
A
Before Basic, two signposts marked the way for courts
applying the fraud-on-the-market theory. Both demon-
strate that the materiality of an alleged falsehood was not
a mere afterthought but rather one of the primary reasons
for allowing traditional proof of reliance to be brushed
aside at certification. This fact weighs strongly in favor of
the conclusion that materiality must be resolved at certi-
fication when the fraud-on-the-market presumption is
invoked to show that reliance can be proved on a classwide
basis.
The first signpost was the Ninth Circuit’s 1975 opinion
in Blackie, termed by one pre-Basic court the “seminal
fraud on the market case.” Peil, 806 F. 2d, at 1163, n. 16.
See also Basic, supra, at 251, n. 1 (White, J., dissenting)
(“The earliest Court of Appeals case adopting this theory
cited by the Court is Blackie v. Barrack, 524 F. 2d 891(CA9 1975), cert. denied, 429 U. S. 816 (1976)”).
Blackie arose from a $90 million loss reported by audio
equipment manufacturer Ampex Corp. in its 1972 annual
report. 524 F. 2d, at 894.10 Ampex’s independent auditors
——————
10 Ampex’s sales for 1971 were just under $284 million. See Reckert,
14 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
not only refused to certify the 1972 annual report but also
withdrew certification of all 1971 financial statements
“because of doubts that the loss reported for 1972 was in
fact suffered in that year.” Ibid. In resultant class ac-
tions, the defendants argued that reliance stood in the
way of class certification under Rule 23(b)(3) because it
was not a common question.
The Ninth Circuit disagreed. Instead, it relieved plain-
tiffs from providing traditional proof of reliance, ex-
plaining that “causation is adequately established in the
impersonal stock exchange context by proof of purchase and
of the materiality of misrepresentations, without direct proof
of reliance.” Id., at 906 (emphasis added). The court left
no doubt that the materiality of the $90 million shortfall
in Ampex’s financial statements was central to its deter-
mination that reliance could be presumed. It asserted
that “[m]ateriality circumstantially establishes the reli-
ance of some market traders and hence the inflation in the
stock price—when the purchase is made[,] the causational
chain between defendant’s conduct and plaintiff ’s loss is
sufficiently established to make out a prima facie case.”
Ibid. Materiality was not merely an important factor that
allowed reliance to be presumed at certification; materiali-
ty was the factor. It demonstrated that the defendants
had committed a fraud on the market, that all putative
class plaintiffs had relied on it in purchasing stock, and,
therefore, that questions of reliance would be susceptible
to common answers.11
——————
A. & P. Registers Deficit for First Fiscal Quarter, N. Y. Times, July 1,
1972, p. 30 (discussing Ampex’s revenue and net loss in its 1972 Annual
Report).
11 Blackie’s use of materiality to satisfy reliance for purposes of Rule
23(b)(3) predominance continued to form the foundation for the fraud-
on-the-market concept in subsequent pre-Basic appellate cases. See,
e.g., Peil v. Speiser, 806 F. 2d 1154, 1161 (CA3 1986) (“[W]e hold that
plaintiffs who purchase in an open and developed market need not
Cite as: 568 U. S. ____ (2013) 15
THOMAS, J., dissenting
The second fraud-on-the-market signpost prior to Basic
was a note in the Harvard Law Review, which described
the nascent theory. See Note, The Fraud-on-the-Market
Theory, 95 Harv. L. Rev. 1143 (1982) (hereinafter Harv.
L. Rev. Note). The Sixth Circuit opinion reviewed in Basic
termed the Note “[t]he clearest statement of the theory of
presumption of reliance.” Levinson v. Basic Inc., 786 F. 2d
741, 750 (1986). Indeed, in the briefing for Basic itself,
the plaintiffs, the United States, and plaintiffs’ amicus cited
the article repeatedly as an authoritative statement on the
subject. See Brief for Respondent 43, n. 18, 46, n. 20 (cited
in Peil, supra, at 1160), Brief for Securities and Exchange
Commission as Amicus Curiae 22, n. 25, 24, n. 30, 26, n.
32, and Brief for Joseph Harris et al. as Amicus Curiae 4,
n. 2, in Basic Inc. v. Levinson, O. T. 1987, No. 86–279.
Like Blackie, the Note also hinged the fraud-on-the-
market presumption of reliance on proof of materiality.
Harv. L. Rev. Note 1161 (“In developed markets, which
are apparently efficient, reliance should be presumed from
the materiality of the deception” (emphasis added)). Ulti-
mately, in language that will be familiar to anyone who
has read Basic, the Note formulated a “pivotal assump-
tion” underlying the fraud-on-the-market theory as the
belief that:
“market prices respond to information disseminated
(or not disseminated) concerning the companies whose
securities are traded. In such a setting—often de-
scribed as an ‘efficient market’—the reliance of some
traders upon a material deception influences market
——————
prove direct reliance on defendants' misrepresentations, but can satisfy
their burden of proof on the element of causation by showing that the
defendants made material misrepresentations” (footnote omitted));
Panzirer v. Wolf, 663 F. 2d 365, 368 (CA2 1981) (“Blackie held that the
materiality of a fraud creates a presumption of reliance through its
presumed effect on the market. . . . Our holding is no more than an
extension of Blackie”).
16 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
prices and thereby affects even traders who never
read or hear of the deception.” Harv. L. Rev. Note
1154 (footnote omitted).
Again, the materiality of the alleged misstatement was
a key component, without which the market could not be
presumed to move. As a result, without materiality it is
impossible to say that there has been a fraud on the mar-
ket at all, and if that is not the case there is no reason to
believe that the market price at which stock transactions
occurred was affected by an alleged misstatement or, by
extension, that any market participants relied on it.
Materiality should thus be proved when the fraud-on-the-
market presumption is invoked, or there is no common-
ality with respect to questions of reliance.
B
Nor did the importance of materiality diminish in the
Sixth Circuit opinion reviewed in Basic. Rather, the court
followed the path marked by the signposts discussed
above. It excused plaintiffs from offering traditional evi-
dence of reliance, so long as “a defendant is shown to have
made a material public misrepresentation that, if relied
on directly, would fraudulently induce an individual to mis-
judge the value of the stock.” Levinson, 786 F. 2d, at 750(emphasis added). The court’s analysis made clear that
materiality should be demonstrated at the time the pre-
sumption was invoked: “In order to invoke the presump-
tion of reliance based upon the fraud on the market theory,
a plaintiff must allege and prove . . . that the mis-
representations were material . . . .” Ibid. (citing Blackie,
524 F. 2d, at 906).
C
Finally, the briefing before this Court in Basic itself
built upon this framework and the foundational principle
that materiality is an integral part of the theory. Criti-
Cite as: 568 U. S. ____ (2013) 17
THOMAS, J., dissenting
cally, the Basic defendants argued that the plaintiffs could
not establish fraud on the market at certification even if
the theory were valid because the alleged misstatement
was immaterial. They “contrast[ed] the likely market
impact of disclosure of the [$90 million Blackie loss] . . .
with the disclosure of the information which respondents
contend[ed] rendered Basic’s statements materially mis-
leading.” See Brief for Petitioners in O. T. 1987, No. 86–
279, p. 42. The Basic defendants concluded that “the
differences between a company’s $90 million loss and a
company’s sporadic contacts with a friendly suitor are sub-
stantial. . . . [T]he fraud on the market theory, if it has
vitality, should not be applied in a case such as this.” Id.,
at 43.
In response, the plaintiffs in Basic did not argue that
the defendants misunderstood the role of materiality in
the fraud-on-the-market theory. They instead advanced a
now-foreclosed interpretation of dicta from Eisen v. Car-
lisle & Jacquelin, 417 U. S. 156, 177 (1974):
“Petitioners’ final argument—that respondents will be
unable to establish that Basic’s repeated false and
misleading statements impacted the price of Basic
stock over a fourteen month period—represents an ef-
fort to litigate the merits of this case on the motion for
class certification. . . . As this Court held in Eisen v.
Carlisle & Jacquelin, 417 U. S. 156, 177 (1974): ‘We
find nothing in either the language or history of Rule
23 that gives a court any authority to conduct a pre-
liminary inquiry into the merits of a suit in order to
determine whether it may be maintained as a class
action.’ ” Brief for Respondents in O. T. 1987, No. 86–
279, p. 54.
The Court rejected this reading of Eisen two Terms ago,
explaining that the very language the Basic plaintiffs
quoted was “sometimes mistakenly cited” as prohibiting
18 AMGEN, INC. v. CONNECTICUT RETIREMENT PLANS
AND TRUST FUNDS
THOMAS, J., dissenting
inquiry into “the propriety of certification under Rules
23(a) and (b).” Wal-Mart Stores, Inc., 564 U. S., at ___,
n. 6 (slip op., at 10, n. 6). That reading, the Court ex-
plained, “is the purest dictum and is contradicted by our
other cases.” Ibid. The Basic defendants’ reply is con-
sistent with Wal-Mart:
“Putative class representatives, such as respondents,
should not be permitted to invoke the fraud on the
market theory while, at the same time, arguing that
courts may not make any preliminary inquiry into the
claimed impact on the market. See, e.g., Resp. Br.,
p. 54. By seeking the benefit of the presumption, re-
spondents necessarily invite judicial scrutiny of the
circumstances in which it is invoked.” Reply Brief for
Petitioners in O. T. 1987, No. 86–279, p. 18.
Well said. The history of Basic is worth the volume of
argument offered by the majority. Cf. New York Trust Co.
v. Eisner, 256 U. S. 345, 349 (1921) (majority opinion of
Holmes, J.). Materiality was central to the development,
analysis, and adoption of the fraud-on-the-market theory
both before Basic and in Basic itself. Materiality, there-
fore, must be demonstrated to prove fraud on the market,
and until materiality of an alleged misstatement is shown
there is no reason to believe that all market participants
have relied equally on it. Otherwise individualized ques-
tions of reliance remain. This history confirms that mate-
riality must be proved at the time that the theory is
invoked—i.e., at certification.
III
I, thus, would reverse the judgment of the Ninth Circuit
and hold that a plaintiff invoking the fraud-on-the-market
presumption bears the burden to establish all the ele-
ments of fraud on the market at certification, including
the materiality of the alleged misstatement.