The 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”).
Agreeing 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.
The 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 said.
In 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.