Two types of shareholder lawsuits. Two significant developments that promise to affect future shareholder suits. On the one hand, the U.S. Supreme Court has agreed to weigh a class-action suit against Amgen ($AMGN), looking specifically at whether shareholders have to prove company misinformation directly affected its stock price, before gaining class-action status for their claims. On the other, an Allergan ($AGN) case could clear the way for more shareholder derivative suits.
If the Supreme Court supports Amgen's view--which is backed by the U.S. Chamber of Commerce and PhRMA--then shareholders could find it more difficult to gain a payoff from similar cases. The company and its supporters say judges should weigh the evidence on stock-price effects before certifying a class action, while the 9th Circuit ruled that the evidence about share prices should wait for the actual trial, Bloomberg reports.
The problem, Amgen says, is that companies often settle class-action claims before trial to avoid the risk of huge damages. The company said the "practical realities" frequently force companies "to settle cases for enormous sums." In Amgen's case, the investors allege that the company misled investors about safety concerns involving its anemia drugs, which lost sales after restrictions were placed on their use.
Meanwhile, a judge in Delaware may have eased the path for more shareholder derivative lawsuits in that state, Reuters reports. Judge Travis Laster ruled that Allergan's board of directors has to face shareholder claims in connection with the company's $600 million off-label marketing settlement with the Justice Department. In derivative suits, shareholders aren't suing directors on their own behalf, for repayment of their own alleged losses, but on behalf of the company itself.