WASHINGTON — The Supreme Court on Monday considered a pair of cases about how much evidence courts must demand before allowing plaintiffs to band together in class actions.
One case concerned securities fraud, the other antitrust. But both were in a way sequels to the court’s 2011 decision inWal-Mart Stores v. Dukes, which threw out an enormous employment discrimination class action on the ground that the plaintiffs did not have enough in common to pursue their claims in a single lawsuit.
Business groups welcomed the Wal-Mart decision and said its reasoning could be extended to shut down other kinds of class actions at an early stage. Monday’s cases were the first tests of those predictions in the Supreme Court.
Justice Antonin Scalia, the author of the majority opinion in the Wal-Mart case, explained on Monday why defendants wanted courts to examine lawsuits closely before they certified them as class actions. The mere certification of a class action, he said, can prompt defendants to settle in light of the sums at stake
The question in the securities fraud case, Amgen Inc. v. Connecticut Retirement Plans, No. 11-1085, was whether plaintiffs should be required to prove that the defendant had made a material misstatement before a class action was certified. Material information, the court has explained, is the sort of thing that reasonable investors would believe significantly alters the total mix of available information.
The plaintiffs asserted that Amgen, a drug company, had made materially false statements concerning the safety of two drugs that stimulate red blood cell production, reducing the need for transfusions. Those statements, they said, inflated the company’s stock price.
Justice Elena Kagan said the distinctions made in the Wal-Mart case were helpful to the plaintiffs in the Amgen case.
“What we said in Wal-Mart recently,” she said, was “that the question is a question of coherence; it’s a question of whether the class wins or loses together. And here, for materiality, the class wins or loses together. If it’s material, it’s material as to everybody. If it’s not material, it’s not material as to everybody.”
Chief Justice John G. Roberts Jr. and Justice Ruth Bader Ginsburg made similar points.
Seth P. Waxman, a lawyer for Amgen, resisted that argument, saying that whether a statement was material mattered because the plaintiffs had chosen to rely on a legal presumption on a related point. The plaintiffs sought to proceed without proving they had each relied on the asserted misstatement. Instead, they invoked the presumption that the market price had taken account of all relevant information.
In such a “fraud on the market” case, Mr. Waxman said, “a market price will reflect a statement if and only if the statement is material.”
Justice Scalia appeared to agree. “One way of certifying the class is to show,” he said, that “it’s an efficient market and you can presume that everybody in the class relied on the market. But that’s only true if the statement was material to the market.”
The Amgen case seemed likely to produce important guidance from the court. The second case argued Monday, Comcast v. Behrend, No. 11-864, was a less certain proposition in that regard, with several justices expressing a sort of buyer’s remorse about how the case had reached the court.
Well into the argument, Justice Kagan remarked that she was “still in search of a legal question that anybody disagrees about here.”
The case was brought by cable customers in the Philadelphia area who said they were made to pay too much for their service because of violations of the antitrust laws by Comcast involving its acquisitions and swaps of cable systems.
Comcast had asked the justices to address a broad question about how to apply the Wal-Mart decision in other settings. But the court, as it occasionally does, redrafted the question presented by the petitioner, now focusing on whether a trial judge must insist on “admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a classwide basis.”
Justice Kagan explained the court’s thinking and how it might have misfired in an exchange with Comcast’s lawyer, Miguel A. Estrada.
“We wanted to decide a legal question, rather than a question about who was right as to this particular expert’s report and how strong it was,” she said. “And it turns out that as to that legal question, your clients waived their argument that this was inadmissible evidence.”
Mr. Estrada disputed that, but some justices seemed to think the question is at least an open one.
Chief Justice Roberts suggested that the court could offer a sort of conditional answer to the redrafted question.
“We’re a court of review, not first view,” he said. “So it seems to me that one option for the court, since we did reformulate the question, is to answer the question and then send it back” to the lower courts to decide whether the answer actually mattered in the Comcast case.