SAN FRANCISCO (Legal Newsline) - An appeals court has ruled that the plaintiffs in a class action lawsuit against Amgen Inc. sufficiently alleged violation of Amgen's fiduciary duties.
In an earlier opinion, the U.S. Court of Appeals for the Ninth Circuit reversed the district court’s dismissal of the complaint.
"Applying Quan, we held that the presumption of prudence did not apply," the Oct. 30 opinion states. "We held, further, that, in the absence of the presumption, plaintiffs had sufficiently alleged violation of the defendants’ fiduciary duties."
Circuit judges Jerome Farris and William A. Fletcher and Senior District Judge Edward R. Korman made up a unanimous majority, with Fletcher authoring the opinion
The court also held that Amgen was an adequately-alleged fiduciary of the Amgen Plan.
The defendants petitioned for a writ of certiorari and the U.S. Supreme Court deferred ruling on the petition while it considered Fifth Third Bancorp v. Dudenhoeffer, another Employee Retirement Income Security Act case in which the presumption of prudence was at issue.
"Overruling Quan and similar decisions by our sister circuits, the Supreme Court held in Fifth Third that there was no presumption of prudence for ESOP fiduciaries beyond the statutory exemption from the otherwise applicable duty to diversify," the opinion states. "After deciding Fifth Third, the court granted certiorari, and vacated and remanded for reconsideration in light of its decision.
On reconsideration in light of Fifth Third, the court, again, reversed the district court’s dismissal.
Steve Harris, Dennis F. Ramos, Donald Hanks, Jorge Torres and Albert Cappa are current and former employees of Amgen and its subsidiary Amgen Manufacturing. They participated in two employer-sponsored pension plans, the Amgen Retirement and Savings Plan and the Retirement and Savings Plan for Amgen Manufacturing.
The plans were employee stock-ownership plans that qualified as "eligible individual account plans" and all of the plaintiffs’ EIAPs included holdings in the Amgen common stock fund, one of the investments available to plan participants.
After the value of Amgen common stock fell, the plaintiffs filed a class action under the ERISA against Amgen, AML, Amgen’s board of directors and the Fiduciary Committees of the Plans, alleging that the defendants breached their fiduciary duties under ERISA.
The district court dismissed the complaint against Amgen on the ground that Amgen 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.
"Alternatively, even assuming the absence of the presumption, the district court dismissed the complaint on the ground that defendants had not violated their fiduciary duties," the opinion states.
The class action lawsuit was initially filed on Aug. 20, 2007. It was appealed to the Ninth Circuit on Feb. 28, 2008, and remanded back to federal court the first time on July 14, 2009.
In June 2010, the class action was again dismissed and appealed to the Ninth Circuit. The petition for rehearing was denied, the defendants petitioned for a writ of certiorari and the U.S. Supreme Court deferred ruling on the petition while it considered Fifth Third Bancorp v. Dudenhoeffer.
"The Supreme Court held in Fifth Third that there is no presumption of prudence for employee stock ownership plan fiduciaries beyond the statutory exemption from the otherwise applicable duty to diversify," the opinion states. "The panel held, therefore, that the plaintiffs were not required to satisfy the criteria of Quan v. Computer Sci. Corp....in order to show that no presumption of prudence applied."
The panel held that the plaintiffs stated a claim that the defendants acted imprudently, and thereby 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.
The panel held that the plaintiffs sufficiently alleged that the defendants violated their duty of loyalty and care by failing to provide material information to plan participants about investment of the Amgen common stock fund.
The panel held that the defendants’ preparation and distribution of summary plan distributions, including their incorporation of Amgen’s SEC filings by reference, were acts performed in their fiduciary capacity.
The panel also reversed the dismissal of derivative claims, as well as a claim that the defendants caused the plans directly or indirectly to sell or exchange property with a party-in-interest.
Because the Amgen plan contained no clear delegation of executive authority, the panel reversed the district court’s dismissal of Amgen from the case as a non-fiduciary. The panel remanded for further proceedings consistent with its opinion.
The plaintiffs are represented by Stephen J. Fearon Jr. and Garry T. Stevens Jr. of Squitieri & Fearon LLP; Stephen M. Fishback and Daniel L. Keller of Keller, Fishback & Jackson LLP; Francis M. Gregorek, Betsy C. Manifold, Rachele R. Rickert and Mark C. Rifkin of Wolf Haldenstein Adler Freeman & Herz LLP; and Thomas James McKenna, Gainey & McKenna.
The defendants are represented by Emily Seymour Costin, Steven Oliver Kramer and Jonathan David Moss of Sheppard Mullin Richter & Hampton; Jonathan Rose of Alston & Bird; and John Nadolenco, David Netter and Robert P. Davis of Mayer Brown LLP.
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, Dennis M. Fenton; Richard Nanula; the Fiduciary Committee; Amgen Global Benefits Committee; Amgen Fiduciary Committee were all named as defendants in the suit.
U.S. Court of Appeals for the Ninth Circuit case number: 10-56014
From Legal Newsline: Kyla Asbury can be reached at firstname.lastname@example.org.