Harris v. Amgen, Inc.

• Decision Date: 23 October 2013
• Docket Number: No. 10–56014.,10–56014.
• Citation: 738 F.3d 1026
• Parties: Steve HARRIS; Dennis F. Ramos, aka Dennis Ramos; Donald Hanks; Jorge Torres; Albert Cappa, On Behalf of Themselves and All Others Similarly Situated, Plaintiffs–Appellants, v. AMGEN, INC.; Amgen Manufacturing, Limited; Frank J. Biondi, Jr.; Jerry D. Choate; Frank C. Herringer; Gilbert S. Omenn; David Baltimore; Judith C. Pelham; Kevin W. Sharer; Frederick W. Gluck; Leonard D. Schaeffer; Charles Bell; Jacqueline Allred; Amgen Plan Fiduciary Committee; Raul Cermeno; Jackie Crouse; Fiduciary Committee Of The Amgen Manufacturing Limited Plan; Lori Johnston; Michael Kelly, Defendants–Appellees, Dennis M. Fenton; Richard Nanula; The Fiduciary Committee; Amgen Global Benefits Committee; Amgen Fiduciary Committee, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

738 F.3d 1026

Steve HARRIS; Dennis F. Ramos, aka Dennis Ramos; Donald Hanks; Jorge Torres; Albert Cappa, On Behalf of Themselves and All Others Similarly Situated, Plaintiffs–Appellants,

v. AMGEN, INC.; Amgen Manufacturing, Limited; Frank J. Biondi, Jr.; Jerry D. Choate; Frank C. Herringer; Gilbert S. Omenn; David Baltimore; Judith C. Pelham; Kevin W. Sharer; Frederick W. Gluck; Leonard D. Schaeffer; Charles Bell; Jacqueline Allred; Amgen Plan Fiduciary Committee; Raul Cermeno; Jackie Crouse; Fiduciary Committee Of The Amgen Manufacturing Limited Plan; Lori Johnston; Michael Kelly, Defendants–Appellees,Dennis M. Fenton; Richard Nanula; The Fiduciary Committee; Amgen Global Benefits Committee; Amgen Fiduciary Committee, Defendants.

No. 10–56014.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 17, 2012.

Filed Oct. 23, 2013.

Stephen J. Fearon, Jr. and Garry T. Stevens, Jr., Squitieri & Fearon, LLP, New York, New York; Stephen M. Fishback and Daniel L. Keller, Keller, Fishback & Jackson, LLP, Tarzana, CA; Francis M. Gregorek, Betsy C. Manifold, and Rachele R. Rickert, Wolf Haldenstein Adler Freeman & Herz, LLP, San Diego, CA, Mark C. Rifkin (argued), Wolf Haldenstein Adler Freeman & Herz, LLP, New York, New York; and Thomas James McKenna, Gainey & McKenna, New York, New York, for Appellants.

Emily Seymour Costin, Sheppard Mullin Richter & Hampton, LLP, Washington, D.C.; Steven Oliver Kramer and Jonathan David Moss, Sheppard Mullin Richter & Hampton, LLP, Los Angeles, CA; Jonathan Rose, Alston & Bird, LLP, Washington, D.C.; John Nadolenco, Mayer Brown, LLP, Los Angeles, CA; Brian David Netter, Mayer Brown, LLP, Washington, D.C.; and Robert P. Davis (argued), Mayer Brown, LLP, New York, New York, for Appellees.

Appeal from the United States District Court for the Central District of California, Philip S. Gutierrez, District Judge, Presiding. D.C. No. 2:07–cv–05442–PSG–PLA.

Before: JEROME FARRIS and WILLIAM A. FLETCHER, Circuit Judges, and EDWARD R. KORMAN, Senior District Judge.^*

ORDER

The opinion filed on June 4, 2013, and published at 717 F.3d 1042 (9th Cir.2013), is withdrawn and replaced by the attached opinion.

With the filing of the new opinion, the panel has voted unanimously to deny the petition for rehearing. Judge Fletcher has voted to deny the petition for rehearing en banc, and Judges Farris and Korman so recommend.

The full court has been advised of the petition for rehearing en banc and no judge of the court has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.

The petition for rehearing and the petition for rehearing en banc, filed June 18, 2013, are DENIED.

OPINION

W. FLETCHER, Circuit Judge:

Plaintiffs, current and former employees of Amgen, Inc. (“Amgen”) and its subsidiary Amgen Manufacturing, Limited (“AML”), participated in two employer-sponsored pension plans, the Amgen Retirement and Savings Plan (the “Amgen Plan”) and the Retirement and Savings Plan for Amgen Manufacturing, Limited (the “AML Plan”) (collectively, “the Plans”). The Plans were employee stock-ownership plans that qualified as “eligible individual account plans” (“EIAPs”) under 29 U.S.C. § 1107(d)(3)(A). All of the plaintiffs' EIAPs included holdings in the Amgen Common Stock Fund, one of the investments available to plan participants. The Amgen Common Stock Fund held only Amgen common stock.

After the value of Amgen common stock fell, plaintiffs filed an ERISA class action against Amgen, AML, Amgen's board of directors, and the Fiduciary Committees of the Plans (collectively, “defendants”), alleging that defendants breached their fiduciary duties under ERISA. The district court dismissed Amgen as a defendant from the suit on the ground that it was not a fiduciary. It dismissed the complaint against the other defendants, who were fiduciaries, after applying the “presumption of prudence” articulated in Quan v. Computer Sciences Corp., 623 F.3d 870 (9th Cir.2010). Alternatively, even assuming the absence of the presumption, it dismissed on the ground that defendants did not violate their fiduciary duties.

We reverse. We conclude that the presumption of prudence does not apply, and that, in the absence of the presumption, plaintiffs have sufficiently alleged violation of the defendants' fiduciary duties. We further conclude that Amgen is an adequately alleged fiduciary of the Amgen Plan.

I. Background

The following narrative is taken from the complaint and documents that provide uncontested facts. On a motion to dismiss, we assume the allegations of the complaint to be true. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007).

Amgen is a global biotechnology company that develops and markets pharmaceutical drugs. AML, a wholly owned subsidiary of Amgen, operates a manufacturing facility in Puerto Rico. To provide retirement benefits to their employees, Amgen set up the Amgen Plan on April 1, 1985. AML set up the AML Plan in 2002 and it became effective on January 1, 2006.

The Plans are covered by the Employee Retirement Income Security Act (“ERISA”). Both qualify as “individual account plans.” See29 U.S.C. § 1002(34). Plan participants contribute a portion of their pre-tax compensation to individual investment accounts. They receive benefits based solely upon their contributions, adjusted for any gains and losses in assets held by the Plans. Participants may contribute up to thirty percent of their pre-tax compensation. They may select from a number of investment funds offered by the Plans. One of those is the Amgen Common Stock Fund, which holds only Amgen stock. Amgen stock constituted the largest single asset of both Plans in 2004 and 2005.

This litigation arises out of a controversy concerning Amgen drugs used for the treatment of anemia. Anemia is a condition in which blood is deficient in red blood cells or hemoglobin. Causes of anemia include an iron-deficient diet, excessive bleeding, certain cancers and cancer treatments, and kidney or liver failure. In the early 1980s, Amgen scientists discovered how to make artificial erythropoietin, a protein formed in the kidneys that stimulates erythropoiesis, the formation of red blood cells. After this discovery, Amgen commercialized the manufacture of a class of drugs known as erythropoiesis-stimulating agents (“ESAs”) to treat anemia.

In 1989, the Federal Drug Administration (“FDA”) approved Amgen's first commercial ESA, epoetin alfa, for the treatment of anemia associated with chronic kidney failure. Amgen marketed epoetin alfa for approved uses under the brand name EPOGEN (“Epogen”), and licensed patents to Johnson & Johnson (“J & J”) to develop additional marketable uses. J & J obtained FDA approval between 1991 and 1996 to market epoetin alfa under the brand name PROCRIT (“Procrit”) for anemia associated with chemotherapy and HIV therapies, for chronic kidney diseases, and for pre-surgery support of anemic patients.J & J had exclusive marketing rights for Procrit under its licensing agreement with Amgen.

Sometime before 2001, Amgen developed a new ESA, darbepoetin alfa, whose sales by Amgen were not restricted by J & J's exclusive marketing rights for Procrit. Darbepoetin alfa, marketed as Aranesp, lasts longer in the bloodstream than epoetin alfa. The FDA approved Aranesp for treatment of anemia associated with chronic kidney failure and cancer chemotherapy. Aranesp has taken significant market share from J & J's Procrit. At the time the complaint was filed, Aranesp “control[led] half the market” for non-dialysis ESA. Sales of EPOGEN and Aranesp have been “core to [Amgen's] survival and success,” making up roughly half of Amgen's $14.3 billion in revenue in 2006.

In the late 1990s and early 2000s, several clinical trials raised safety concerns regarding the use of ESAs for particular anemic populations. In 1998, the Normal Hematocrit Study tested the efficacy of ESAs on anemia patients with pre-existing heart disease. The study was terminated because the test group experienced statistically significant higher rates of blood clotting. In 2003 and early 2004, two trials—ENHANCE and BEST—tested ESAs on cancer patients in Europe. The ENHANCE trial showed shorter progression-free survival and shorter overall survival of head and neck cancer patients for the ESA group than the placebo group. The BEST trial was terminated after four months because breast cancer patients in the group taking epoetin alfa had a higher rate of death than those in the placebo group.

ENHANCE and BEST did not test the safety of ESAs for the specific uses and doses for which they had been approved in the United States. In March 2004, the FDA published notice in the Federal Register that the Oncology Drug Advisory Committee (“ODAC”), an FDA-sponsored group of oncology experts, would convene in May 2004 to discuss safety concerns about Aranesp. In April, before the ODAC meeting, an Amgen spokesperson stated during a conference call with investors, analysts, and plan participants that “the focus [of the ODAC meeting] was not on Aranesp” and that “the safety for Aranesp has been comparable to placebo.”

During its two-day meeting with ODAC, the FDA urged Amgen to conduct further clinical trials to test the safety of ESAs for uses that had already been approved by the FDA. Amgen made a presentation at the meeting outlining what it called the “Amgen Pharmacovigilance Program,” consisting of five ongoing or planned clinical trials testing Aranesp “in different tumor treatment settings.” Amgen's Vice President for Oncology Clinical Development described the Amgen program as the “responsible and credible approach to definitively resolv[e] the questions raise[d]” by the FDA.

One of the trials under Amgen's program was the Danish Head and Neck Cancer Group (DAHANCA) 10 Trial. The DAHANCA 10 Trial tested whether high doses of Aranesp could help shrink tumors in patients receiving radiation therapy...