Harris v. Amgen, Inc.
| Decision Date | 30 October 2014 |
| Docket Number | No. 10–56014.,10–56014. |
| Citation | 788 F.3d 916 |
| 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 |
Stephen J. Fearon, Jr. and Garry T. Stevens, Jr., Squitieri & Fearon, LLP, New York, N.Y.; 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, N.Y.; and Thomas James McKenna, Gainey & McKenna, New York, N.Y., 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, N.Y., for Appellees.
On Remand From The United States Supreme Court. 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 October 30, 2014, and published at 770 F.3d 865, is hereby amended and replaced by the amended opinion filed concurrently with this order. With these amendments, Judge W. Fletcher has voted to deny the petition for rehearing en banc and Judges Farris and Korman so recommend.
The full court was advised of the petition for rehearing en banc. A judge requested a vote on whether to rehear the matter en banc. The matter failed to receive a majority of the votes of the nonrecused active judges in favor of en banc reconsideration. Fed. R.App. P. 35.
The petition for rehearing en banc is DENIED. No further petitions for rehearing or rehearing en banc will be entertained.
Judge W. Fletcher's concurrence in the denial of rehearing en banc and Judge Kozinski's dissent from the denial of rehearing en banc are filed concurrently with this order.
1
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, ––– U.S. ––––, 134 S.Ct. 2459, 189 L.Ed.2d 457 (2014).
I write only to correct three ways in which the dissent misrepresents what is in our opinion.
The dissent characterizes our opinion as holding that withdrawing a fund as an investment option is appropriate because, “as a general matter, ‘when the previously concealed material information about [a] company is eventually revealed ... the stock price will inevitably decline, almost certainly by more than the amount it would have declined as a result of merely withdrawing the [f]und as an investment option.’ ” Dissent at 926 (emphasis in original) (quoting Opinion at 938). Based on that characterization, the dissent claims that we ignore the Court's instruction in Fifth Third to consider whether there will be a net harm to plan participants resulting from withdrawal of a fund. The dissent contends that our reasoning is circular because, under the reasoning it ascribes to us, “withdrawing the fund will always be the better option, because any stock price decline it may precipitate will be deemed ‘inevitable.’ ” Dissent at 938. (emphasis in original).
Our opinion contains no such general, all-purpose holding. We addressed only the situation where “the previously concealed material information about the company is eventually revealed as required by the securities laws. ” Opinion at 938 (emphasis added). As we wrote in the opinion:
In a separate class action simultaneously pending before the same district judge, investors in Amgen common stock claimed violations of federal securities laws based on the same alleged facts as in the ERISA action now before us. In a careful thirty-five page order, the district court concluded that the investors had sufficiently alleged material misrepresentations and omissions, scienter, reliance, and resulting economic loss to state claims under Sections 10(b) and 20(a) of the 1934 Exchange Act. See 15 U.S.C. §§ 78j(b), 78t(a). The district court certified a class based on the facts alleged in the complaint. We affirmed the district court's class certification in Conn. Ret. Plans & Trust Funds v. Amgen, Inc., 660 F.3d 1170 (9th Cir.2011). The Supreme Court affirmed in Amgen, Inc. v. Conn. Ret. Plans & Trust Funds, ––– U.S. ––––, 133 S.Ct. 1184, 185 L.Ed.2d 308 (2013).
Opinion at 934. We therefore assumed, under Federal Rule of Civil Procedure 8(a) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), that there was material information that had been withheld in violation of the securities laws. Our analysis is based on that assumption.
Withdrawal of the fund as an investment option might indeed “do more harm than good to the fund,” Fifth Third, 134 S.Ct. at 2473, where the securities laws do not independently require disclosure. But where the securities laws do require disclosure of previously withheld material information, as in this case, the impact of the eventual disclosure of that information must be taken into account in assessing the net harm that will result from the withdrawal of the fund. In such a case, as we wrote in our opinion, it is plausible to conclude that the withdrawal of the fund will result in a net benefit, rather than a net harm, to plan participants.
The dissent contends that we impose on fiduciaries an obligation to act when they “only ... suspect” there has been a violation of the federal securities laws, and that under our opinion a fiduciary would have an obligation to act whenever there is “any arguable violation” of those laws. Dissent at 926 (emphasis in original). That is not what we wrote. Our opinion nowhere requires a fiduciary to act based on mere suspicion or arguable violation of the federal securities laws. Under well-established circuit precedent, “[a] violation [of ERISA's prudent person standard] may occur where a company's stock ... was artificially inflated during that time by an illegal scheme about which the fiduciaries knew or should have known, and then suddenly declined when the scheme was exposed.” In re Syncor ERISA Litig., 516 F.3d 1095, 1102 (9th Cir.2008) (emphasis added); see also 29 U.S.C. § 1105(a)(3) (). We wrote repeatedly and consistently that a fiduciary's obligation to act is triggered only when he or she “knew or should have known” of a violation of the securities laws.
For example, we wrote that the fiduciaries in this case were obliged to act only when they “knew or should have known that material information was being withheld from the public.” Opinion at 938 (emphasis added). We concluded that the plaintiffs in this case had shown that it was “plausible,” under Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), that at least some fiduciaries “knew or should have known that the Amgen Common Stock Fund was purchasing stock at an artificially inflated price due to material misrepresentations and omissions by company officers.” Opinion at 937 (emphasis added). And we held that, on remand, the defendants were entitled to argue “that their liability, or the extent of their liability, should depend upon the extent to which they knew, or should have known, that material information was being withheld from the public in violation of the federal securities laws.” Opinion at 939 (emphasis added). See also id. at 934, 935, 941, 942, 942.
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