(CN) – With the 9th Circuit refusing to rehear securities claims against drugmaker Amgen, several judges traded heated words Tuesday over the case.
“We’re at it again,” Judge Alex Kozinski said, chastising his colleagues for falling prey to a habit of ignoring dictates from the U.S. Supreme Court.
The Amgen case at hand has already gone before the 9th Circuit twice.
Though a majority of the 9th Circuit voted not to give it a third go Tuesday, this time before an en banc panel, Kozinski and three others belong to a dissenting contingent of the court.
The case involves claims that Amgen violated the Employee Retirement Income Security Act, or ERISA, by failing to yank the company stock option when its executives knew or should have known that the stock’s price was inflated.
Amgen stock prices tanked by one third when safety concerns about its anemia drugs Epogen and Aranes became public, but the company’s retirees say Amgen had the results of damning clinical trials since the late 1990s and early 2000s.
While one group of investors accused Amgen of violating its fiduciary duty under ERISA, another alleged violations of federal securities law in artificial inflation of the company’s stock price.
The U.S. Supreme Court upheld class certification in the securities-law case, but U.S. District Judge Philip Gutierrez dismissed Amgen from the ERISA lawsuit on the basis that the company was not a fiduciary.
Gutierrez rejected the remaining claims in light of the “presumption of prudence,” a three-judge panel of the 9th Circuit reversed after finding that the presumption does not shield Amgen because the company’s pension plans did not require or encourage employees to invest in company stock.
The Supreme Court weighed in on the presumption of prudence while assessing similar claims in 2013 with the case Fifth Third Bancorp v. Dudenhoeffer .
Though both a federal judge and the 6th Circuit found that the plan fiduciaries enjoy that presumption, the unanimous Supreme Court rejected Fifth Third’s claim “that the presumption at issue here is an appropriate way to weed out meritless lawsuits or to provide the requisite ‘balancing.'”
“The proposed presumption makes it impossible for a plaintiff to state a duty-of-prudence claim, no matter how meritorious, unless the employer is in very bad economic circumstances,” Justice Stephen Breyer wrote for the court. “Such a rule does not readily divide the plausible sheep from the meritless goats. That important task can be better accomplished through careful, context-sensitive scrutiny of a complaint’s allegations. We consequently stand by our conclusion that the law does not create a special presumption of prudence for [certain] fiduciaries.”
With Fifth Third in mind, the Supreme Court later vacated the Amgen holding and ordered the 9th Circuit to take another look.
When the 9th Circuit did just that last year, it found no reason to affirm dismissal of the investors’ case.
Kozinski complained Tuesday that this ruling “not only fails to give effect to those requirements, but also insulates our circuit law from important aspects of the Supreme Court’s holding.”
“The panel’s decision creates almost unbounded liability for ERISA fiduciaries, plainly at odds with what the Court instructed,” he wrote. “Worse still, the panel’s rule will have grave consequences for corporations across America, leaving them acutely vulnerable to meritless lawsuits and subjecting them to novel, judicially-fashioned disclosure requirements that conflict with those of the securities laws. I sincerely regret that a majority of our court did not see fit to take this case en banc. I expect the Supreme Court will promptly correct our error.”
Judge William Fletcher, a member of the original three-judge panel, snapped back at Kozinski in an opinion concurring in the court’s denial to rehear the case en banc.
“The panel’s opinion speaks for itself, and I will not repeat our analysis, much of which is directly responsive to concerns expressed by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer,” the seven-page opinion begins.
Fletcher goes on to correct three of Kozinski’s supposed misrepresentations of last year’s opinion.
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