FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CONNECTICUT RETIREMENT 

PLANS AND TRUST FUNDS,

Plaintiff-Appellee, No. 09-56965

v. D.C. No.  2:07-cv-02536-PSG AMGEN INC.; KEVIN W. SHARER;

RICHARD D. NANULA; ROGER M. OPINION

PERLMUTTER; GEORGE W. MORROW,

Defendants-Appellants. 

Appeal from the United States District Court

for the Central District of California

Philip S. Gutierrez, District Judge, Presiding

Argued and Submitted

October 14, 2011—Pasadena, California

Filed November 8, 2011

Before: Barry G. Silverman and Kim McLane Wardlaw,

Circuit Judges, and William K. Sessions III,*

District Judge.

Opinion by Judge Silverman

*The Honorable William K. Sessions III, United States District Judge

for the District of Vermont, sitting by designation. 

20101
COUNSEL

Steven O. Kramer (argued), John P. Stigi III, John M. Landry,

and Jonathan D. Moss, Sheppard Mullin Richter & Hampton

LLP, Los Angeles, California, for the defendants-appellants.

J. Michael Hennigan (argued), McKool Smith Hennigan (Los

Angeles, California) and Jonathan M. Plasse, Christopher J.

McDonald, and Richard T. Joffe of Labaton Sucharow LLP,

New York, New York, for the plaintiff-appellee.

James J. Sabella and James R. Banko, Grant & Eisenhofer

P.A., New York, New York, for amici curiae California Public Employees’ Retirement System and California State

Teacher’s Retirement System.

CONNECTICUT RETIREMENT PLANS v. AMGEN 20103
Ira D. Hammerman and Kevin M. Carroll of Securities Industry and Financial Markets Association, Washington, DC,

Andrew N. Vollmer and Judith E. Coleman, Wilmer Cutler

Pickering Hale & Dorr LLP, Washington, DC, Robin S. Conrad and Amar D. Sarwal, National Chamber Litigation Center,

Inc., Washington, DC, and Melissa B. Kimmel, Pharmaceutical Research and Manufacturers of America, Washington,

DC, for amici curiae Securities Industry and Financial Markets Association, Chamber of Commerce of the United States

of America, and Pharmaceutical Research and Manufacturers

of America.

Daniel J. Popeo and Richard A. Samp, Washington Legal

Foundation, Washington, DC, for amicus curiae Washington

Legal Foundation.

OPINION

SILVERMAN, Circuit Judge: 

To obtain class certification in a 10b-5 securities fraud

case, the plaintiff, as required by Federal Rule of Civil Procedure 23(b)(3), must convince the district court that the element of reliance is common to the class. The Supreme Court

has held that this can be done in an appropriate case by invoking the “fraud-on-the-market” presumption — the principle

that the market price of a security traded in an efficient market reflects all public information and therefore that a buyer

of the security is presumed to have relied on the truthfulness

of that information in purchasing the security. Were it not for

the fraud-on-the-market presumption, a plaintiff seeking class

certification would be required to show the impossible — reliance by each individual prospective class member who

bought the stock.

What must a plaintiff do to invoke the fraud-on-the-market

presumption in aid of class certification? Today we join the

20104 CONNECTICUT RETIREMENT PLANS v. AMGEN
Third and Seventh Circuits in holding that the plaintiff must

(1) show that the security in question was traded in an efficient market (a fact conceded here), and (2) show that the

alleged misrepresentations were public (a fact not contested

here). As for the element of materiality, the plaintiff must

plausibly allege — but need not prove at this juncture — that

the claimed misrepresentations were material. Proof of materiality, like all other elements of a 10b-5 claim, is a merits

issue that abides the trial or motion for summary judgment.

Likewise, rebuttal of the fraud-on-the-market presumption, at

least by showing that the alleged misrepresentations were not

material, is a matter for trial or summary judgment, not a matter to be taken up in a class certification motion.

In this case, the plaintiff plausibly alleged that several of

the defendants’ public statements about Amgen’s pharmaceutical products were false and material. Coupled with the concession that Amgen’s stock traded in an efficient market, this

was sufficient to invoke the fraud-on-the-market presumption

of reliance. The district court did not abuse its discretion in

certifying the class.

I. Background

Connecticut Retirement Plans and Trust Funds brought this

securities fraud action against biotechnology company Amgen

Inc. and several of its officers, alleging that, by misstating and

failing to disclose safety information about two Amgen products used to treat anemia (a red blood cell deficiency), they

violated Sections 10(b) and 20(a) of the Securities Exchange

Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and Rule 10b-5, 17

C.F.R. § 240.10b-5.

The complaint alleges four actionable misstatements. First,

Amgen supposedly downplayed the FDA’s safety concerns

about its products in advance of an FDA meeting with a group

of oncologists. Second, Amgen allegedly concealed details

about a clinical trial that was canceled over concerns that

CONNECTICUT RETIREMENT PLANS v. AMGEN 20105
Amgen’s product exacerbated tumor growth in a small number of patients. Third, Amgen purportedly exaggerated the onlabel (that is, for FDA-approved uses) safety of its products.

And fourth, Amgen allegedly misrepresented its marketing

practices, claiming that it promoted its products solely for onlabel uses when it in fact promoted significant off-label usage,

in violation of federal drug branding statutes.

Those alleged misstatements and omissions, according to

the complaint, inflated the price of Amgen’s stock when Connecticut Retirement purchased it. Later, corrective disclosures

allegedly caused Amgen’s stock price to fall, injuring Connecticut Retirement.

II. The District Court’s Class Certification Order

Connecticut Retirement moved in the district court to certify the action as a class action under Federal Rule of Civil

Procedure 23(b)(3) on behalf of all purchasers of Amgen

stock between the date of the alleged misstatements and omissions and the date of the corrective disclosures. Rule 23(b)(3)

permits a party to maintain a class action if the Rule 23(a)

prerequisites are satisfied and “the court finds that the questions of law or fact common to class members predominate

over any questions affecting only individual members, and

that a class action is superior to other available methods for

fairly and efficiently adjudicating the controversy.” Fed. R.

Civ. P. 23(b)(3).

The district court found that the Rule 23(a) prerequisites

were satisfied and that common questions predominated. Of

the elements of a claim under Section 10(b) and Rule 10b-5,

the district court found that the following questions were

common to the class: whether Amgen made false statements,

whether those statements were material, whether those statements were connected with the sale of securities, whether

those statements were intentionally false, and whether those

statements caused the class members’ losses. The district

20106 CONNECTICUT RETIREMENT PLANS v. AMGEN
court further found that although the class members’ losses

differed depending on when and how much they bought, the

losses would be simple to calculate.

The district court also ruled that the remaining element —

reliance — was common to the class because the class could

avail itself of the fraud-on-the-market presumption of reliance. That doctrine, first approved by the Supreme Court in

Basic Inc. v. Levinson, 485 U.S. 224 (1988), rests on the efficient capital market hypothesis: The price of a stock traded in

an efficient market fully reflects all publicly available information about the company and its business. See 485 U.S. at

241-42, 244-45, 246-47. If the stock price did not reflect a

piece of publicly available information, the logic goes, then

investors would have a strong incentive to buy the stock (if

the information were positive) or sell it (if negative); in an

efficient market, that activity would drive the stock price up

or down until it fully reflected the information. Anyone who

buys stock at the prevailing market price is presumed to have

relied on that price — and, by extension, each piece of publicly available information it reflects — as a measure of the

stock’s value, even if the investor never saw that information.

See id. at 247. Thus, the fraud-on-the-market presumption is

a way to prove reliance — a causal link from the defendant’s

misrepresentation, reflected in the prevailing market price, to

each class member’s decision to buy the stock. The presumption, however, is rebuttable — for example, by showing that

the market was already aware of the truth behind the defendant’s supposed falsehoods and thus that those falsehoods did

not affect the market price (the so-called “truth-on-themarket” defense), or by showing that a particular plaintiff

would have bought the stock without relying on the integrity

of the market price. See Basic, 485 U.S. at 248-49.

The district court ruled that Connecticut Retirement successfully invoked the fraud-on-the-market presumption by

showing that Amgen’s stock traded in an efficient market

(which Amgen conceded) and that the alleged misstatements

CONNECTICUT RETIREMENT PLANS v. AMGEN 20107
were public (which Amgen did not contest). The district court

further held that at the class certification stage, Connecticut

Retirement did not need to prove — but rather could merely

allege — that Amgen’s supposed falsehoods were material to

invoke the fraud-on-the-market presumption. Materiality

would, of course, have to be proven at trial.

Moreover, the district court declined to afford Amgen an

opportunity to rebut the presumption of reliance at the class

certification stage, holding again that rebuttal of the presumption was a trial issue. Amgen’s proposed rebuttal consisted of

evidence purportedly showing that the truth behind each of

the supposed misstatements had already entered the market by

the time the misstatements were made. Amgen argued that the

misstatements therefore could not have affected Amgen’s

stock price, or, by extension, anyone relying on the integrity

of that stock price.

Having found that the Rule 23(a) prerequisites were satisfied and that common questions predominated, the district

court certified the action as a class action under Rule 23(b)(3).

III. Amgen’s Interlocutory Appeal

We granted Amgen’s Rule 23(f) request for permission to

appeal the district court’s class certification order. See Chamberlan v. Ford Motor Co., 402 F.3d 952, 959 (9th Cir. 2005).

We have jurisdiction under 28 U.S.C. § 1292(e).

IV. Analysis

A. Connecticut Retirement’s Motion to Vacate Grant of 

Permission to Appeal

At the outset, Connecticut Retirement moves to vacate our

grant of permission to appeal the certification order, arguing

that the central issue in this appeal has been settled by three

cases decided since the district court certified the class:

20108 CONNECTICUT RETIREMENT PLANS v. AMGEN
United Steel, Paper & Forestry, Rubber, Manufacturing

Energy, Allied Industrial & Service Workers International

Union v. ConocoPhillips Co., 593 F.3d 802 (9th Cir. 2010),

Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010)

(en banc), rev’d, 131 S. Ct. 2541 (2011), and Miller v. Thane

International, Inc., 615 F.3d 1095 (9th Cir. 2010). But neither

United Steel Workers nor Dukes was a securities fraud case,

and thus neither had occasion to decide whether a securities

fraud plaintiff must prove materiality to avail herself of the

fraud-on-the-market presumption of reliance. See United

Steel, 593 F.3d at 804 (state law wage and hour claim);

Dukes, 131 S. Ct. at 2547 (sex discrimination claim). And

Miller had no occasion to decide the question either, because

that case was brought under a securities fraud statute that —

unlike Section 10(b) here — does not require the plaintiff to

show reliance. See Miller, 615 F.3d at 1102 n.2. Accordingly,

because the question remains unsettled, we deny Connecticut

Retirement’s motion.

B. Elements That Must Be Proved at the Class Certification

Stage to Invoke the Fraud-on-the-Market Presumption of

Reliance

We review a district court’s class certification order for

abuse of discretion, and any error of law on which a certification order rests is deemed a per se abuse of discretion. See

United Steel, 593 F.3d at 807; Yokoyama v. Midland Nat’l

Life Ins. Co., 594 F.3d 1087, 1090-91 (9th Cir. 2010).

As the party seeking class certification, Connecticut Retirement “bears the burden of demonstrating that the requirements of Rules 23(a) and (b) are met.” See United Steel, 593

F.3d at 807. And the district court facing a class certification

motion is required to conduct “a rigorous analysis” to ensure

that the Rule 23 requirements are satisfied. Gen. Tel. Co. of

Sw. v. Falcon, 457 U.S. 147, 161 (1982).

Amgen argues that Connecticut Retirement failed to carry

that burden because it did not prove that Amgen’s supposedly

CONNECTICUT RETIREMENT PLANS v. AMGEN 20109
false statements were material. If those misrepresentations

were immaterial, Amgen contends, they by definition would

not affect Amgen’s stock price in an efficient market, and

thus no buyer could claim to have been misled by an artificially inflated stock price. Thus, Amgen concludes, each individual plaintiff would be left to prove reliance at trial

individually — making a class proceeding unwieldy.

The problem with that argument is that, because materiality

is an element of 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 individually. See Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 341

(2005). If the misrepresentations turn out to be material, then

the fraud-on-the-market presumption makes the reliance issue

common to the class, and class treatment is appropriate. But

if the misrepresentations turn out to be immaterial, then every

plaintiff’s claim fails on the merits (materiality being a standalone merits element), and there would be no need for a trial

on each plaintiff’s individual reliance. Either way, the plaintiffs’ claims stand or fall together — the critical question in

the Rule 23 inquiry. As the Supreme Court said in Dukes,

“[w]hat matters to class certification . . . is not the

raising of common ‘questions’ — even in droves —

but, rather the capacity of a classwide proceeding to

generate common answers apt to drive the resolution

of the litigation. Dissimilarities within the proposed

class are what have the potential to impede the generation of common answers.”

131 S. Ct. at 2551 (quoting Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97,

132 (2009)).

By contrast, the elements of the fraud-on-the-market presumption — whether the securities market was efficient and

whether the defendant’s purported falsehoods were public —

20110 CONNECTICUT RETIREMENT PLANS v. AMGEN
are not elements of the merits of a securities fraud claim. See

Dura Pharm., 544 U.S. at 341-42. Thus, if the plaintiffs failed

to prove those elements, they could not use the fraud-on-themarket presumption, but their claims would not be dead on

arrival; they could seek to prove reliance individually. That

scenario, however, would be inappropriate for a class proceeding. Accordingly, the district court was correct to require

Connecticut Retirement to prove at the class certification

stage that the market for Amgen’s stock was efficient and that

Amgen’s supposed misstatements were public. (Because

those elements were uncontested, we need not decide the

applicable standard of proof for proving those elements at the

class certification stage.)

[1] The Seventh Circuit, recently faced with this same

issue, held that proving materiality is not a precondition to

invoking the fraud-on-the-market presumption at the class

certification stage: 

Defendants say that, before certifying a class, a court

must determine whether false statements materially

affected the price. But whether statements were

false, or whether the effects were large enough to be

called material, are questions on the merits.

Although we concluded in [a prior case] that a court

may take a peek at the merits before certifying a

class, [we] insisted that this peek be limited to those

aspects of the merits that affect the decisions essential under Rule 23. If something about “the merits”

also shows that individual questions predominate

over common ones, then certification may be inappropriate. Falsehood and materiality affect investors

alike, however. It is possible to certify a class under

Rule 23(b)(3) even though all statements turn out to

have only trivial effects on stock prices. Certification

is appropriate, but the class will lose on the merits.

Schleicher v. Wendt, 618 F.3d 679, 685 (7th Cir. 2010). The

Third Circuit agrees. See In re DVI, Inc. Sec. Litig., 639 F.3d

CONNECTICUT RETIREMENT PLANS v. AMGEN 20111
623, 631 (3d Cir. 2011) (“To invoke the fraud-on-the-market

presumption of reliance, plaintiffs must show they traded

shares in an efficient market, and the misrepresentation at

issue became public.”) (citations omitted).

The three circuits that require a plaintiff to prove materiality at the class certification stage do so on the apparent rationale that a footnote in Basic Inc. v. Levinson, 485 U.S. 224

(1988), compels it. See id. at 248 n.27 (“The Court of Appeals

held that in order to invoke the presumption, a plaintiff must

allege and prove . . . that the misrepresentations were material

. . . .”); see also In re Salomon Analyst Metromedia Litig., 544

F.3d 474, 481 (2d Cir. 2008) (“The Basic Court thereby set

forth a test of general applicability that where a defendant has

(1) publicly made (2) a material misrepresentation (3) about

stock traded on an impersonal, well-developed (i.e., efficient)

market, investors’ reliance on those misrepresentations may

be presumed.”) (citing Basic, 485 U.S. at 248 n.27); Oscar

Private Equity Invs. v. Allegiance Telecom, Inc., 487 F.3d

261, 264 (5th Cir. 2007) (“The Supreme Court in Basic

adopted this presumption of reliance . . . . Reliance is presumed if the plaintiffs can show that ‘(1) the defendant made

public material misrepresentations . . . .’ ”) (citation omitted),

abrogated on other grounds by Erica P. John Fund, 131

S. Ct. at 2183, 2186; In re PolyMedica Corp. Sec. Litig., 432

F.3d 1, 8 n.11 (1st Cir. 2005) (noting in a dictum that to

invoke fraud-on-the-market presumption at class certification

stage, plaintiff must prove materiality) (quoting Basic, 485

U.S. at 248 n.27).

But as the Seventh Circuit pointed out, those circuits misread the Basic footnote: “All note 27 [in Basic] does . . . is

state that the court of appeals deemed materiality essential;

the Justices did not adopt it as a precondition to class certification.” See Schleicher, 618 F.3d at 687; see also Basic, 485

U.S. at 248 n.27. That reading of Basic also enjoys support

from the Supreme Court’s more recent formulations of the

presumption in Erica P. John Fund and Dukes, which require

20112 CONNECTICUT RETIREMENT PLANS v. AMGEN
the plaintiff to show that the stock was traded in an efficient

market but do not mention materiality as a requirement. See

Erica P. John Fund v. Halliburton, 131 S. Ct. 2179, 2185

(2011); Dukes, 131 S. Ct. at 2552 n.6.

[2] Moreover, two Ninth Circuit cases have mentioned

materiality as an element of the presumption, but neither

squarely held that a plaintiff must prove materiality at the

class certification stage. See Binder v. Gillespie, 184 F.3d

1059, 1064 (9th Cir. 1999) (noting that “the presumption of

reliance is available only when a plaintiff alleges that a defendant made material misrepresentations or omissions concerning a security that is actively traded in an ‘efficient market,’ ”

but holding that presumption did not apply because market

was not efficient); Blackie v. Barrack, 524 F.2d 891, 900-01

& n.17, 905-08 (9th Cir. 1975) (holding, in pre-Basic case,

that complaint’s allegation of materiality sufficed to trigger

presumption).

[3] In sum, because proof of materiality is not necessary to

ensure that the question of reliance is common among all prospective class members’ securities fraud claims, we hold that

plaintiffs need not prove materiality to avail themselves of the

fraud-on-the-market presumption of reliance at the class certification stage. They need only allege materiality with sufficient plausibility to withstand a 12(b)(6) motion. See Ashcroft

v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009).

C. Opportunity to Rebut the Presumption at the Class 

Certification Stage

Amgen also argues that the district court erred by not

affording it an opportunity to rebut the fraud-on-the-market

presumption at the class certification stage. Specifically,

Amgen sought to introduce evidence that FDA announcements and analyst reports about Amgen’s business publicized

the truth about the safety issues looming over Amgen’s drugs,

and thus that Amgen’s alleged misrepresentations could not

CONNECTICUT RETIREMENT PLANS v. AMGEN 20113
have affected the stock price — the so-called “truth-on-themarket” defense. See, e.g., Basic, 485 U.S. at 248-49 (“[I]f,

despite [defendants’] allegedly fraudulent attempt to manipulate market price, [the truth] credibly entered the market and

dissipated the effects of the misstatements, those who traded

. . . after the corrective statements would have no direct or

indirect connection with the fraud.”).

[4] But as the Supreme Court and Ninth Circuit have

explained, the truth-on-the-market defense is a method of

refuting an alleged misrepresentation’s materiality. See, e.g.,

Va. Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1097-98

(1991); Provenz v. Miller, 102 F.3d 1478, 1492 (9th Cir.

1996). As explained above, a plaintiff need not prove materiality at the class certification stage to invoke the presumption;

materiality is a merits issue to be reached at trial or by summary judgment motion if the facts are uncontested. The only

elements a plaintiff must prove at the class certification stage

are whether the market for the stock was efficient and whether

the alleged misrepresentations were public — issues that

Amgen does not contest here.

[5] Thus, the district court correctly refused to consider

Amgen’s truth-on-the-market defense at the class certification

stage.

AFFIRMED.

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