June 14, 2013 (PLANSPONSOR.com) – An appellate court reversed the
dismissal of an Employee Retirement Income Security Act (ERISA) class action against
Amgen, Inc. and an Amgen subsidiary.
9th U.S. Circuit Court of Appeals held that a presumption of prudence
did not apply and that, in the absence of the presumption, the current and
former employees who filed the lawsuit sufficiently alleged violation of defendants’
fiduciary duties regarding two of Amgen’s retirement plans. The U.S. District
Court for the Central District of California had dismissed the case, applying the
Moench presumption of prudence (see “Court Dismisses Claims Against Amgen in Stock Drop Case”).
with a recent 2nd U.S. Circuit Court of Appeals opinion (see “No Presumption of Prudence if Stock Fund Not Required”), the 9th
Circuit concluded that the plan terms did not require or encourage the
defendant fiduciaries to invest primarily in employer stock. Accordingly, the
presumption of prudence did not apply to a claim that defendants acted imprudently
and violated their duty of care by continuing to provide Amgen common stock as
an investment alternative when they knew or should have known that the stock
was being sold at an artificially inflated price due to material omissions and
misrepresentations, as well as illegal off-label sales.
appellate court also held that the plaintiffs sufficiently alleged that
defendants violated their duties of loyalty and care by failing to provide
material information to plan participants about investment in the Amgen Common
Stock Fund. The panel stated that defendants’ duties of loyalty and care to
plan participants under ERISA, with respect to company stock, were not less
than the duties they owed the general public under securities laws. “[P]laintiffs,
like other investors in publicly traded stock, could rely on a rebuttable
presumption of reliance based on the ‘fraud-on-the-market’ theory,” the opinion
March, the U.S. Supreme Court cleared the way for the Connecticut Retirement
Plans and Trust Funds to assert claims against Amgen on behalf of a class of
injured investors (see “Conn. Retirement Funds Can Sue Amgen”). The 9th
Circuit’s opinion is here.