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1. EDITION 11
Weekly October 5, 2012
Amgen:
A Supreme Court
Case With Immense
Business Impact
How American Airlines Can Get Back
on Track
Avoiding Food Label Litigation
What’s Next in the Boardroom:
Greg Little on Criminal & Civil
Litigation and Investigations
SEC Rulemaking on Conflict Minerals
& the JOBS Act
LEVICK in the News

2. Amgen:
It’s one of those historic Supreme Court cases that,
while it may inspire a great deal less public interest
than Obamacare or Citizens United, will nonetheless
have a long-reaching impact on American business.
Importantly, it should also inspire new vigilance
A Supreme Court
among business leaders even if, in Amgen Inc. v.
Connecticut Retirement Plans and Trust Funds, the nine
Case With Immense
judges deliver a totally pro-defense ruling.
Business Impact Here are the facts. The Connecticut Retirement
Plans & Trust Funds brought an action against
Amgen involving misrepresentations that the
resentations therefore could not have affected
the stock price. As one commentator wryly
observed, “not all lies are important: You can
Richard S. Levick, Esq. pharmaceutical giant purportedly made to fudge your weight if [HUD] is considering you
Originally Published on Forbes.com the FDA regarding the safety of two products. for a janitor’s position, but not if NASA is fit-
(Those products stimulate production of red ting you for a space suit.”
blood cells and reduce the need for blood
And on Wednesday, for what it’s worth, Amgen
transfusions.) Connecticut Retirement Plans &
shares reached an all-time high.
Trust Funds specifically alleged that the com-
pany then misrepresented those FDA meetings The key principle that Amgen relied on was that
to shareholders. The plaintiff moved to cer- the plaintiff must prove at the class certification
tify a class of persons who purchased Amgen stage that the misrepresentations were materi-
stock between April 22, 2004 and May 10, 2007, al. But Amgen lost in district court, certification
when two of the FDA meetings occurred. was granted, and the Ninth Circuit agreed.
Amgen opposed certification, arguing that the Common perceptions might deem materiality
misrepresentations had no impact on share a matter for juries to decide. In fact, however,
price. At the district court level, the company “the Supreme Court has said in Wal-Mart that
asserted that the truth fully entered the market a plaintiff seeking class certification must ‘af-
anyway via FDA announcements as well as firmatively demonstrate’ his or her compliance
analyst reports disclosing all material infor- with the requisites for class certification under
mation regarding the safety of the drugs in Rule 23” of the Federal Rules of Civil Proce-
question. In other words, the alleged misrep- dure, as Paul Ferrillo advises. “Simply put, the

3. Weekly
“
case law says that the plaintiff has to prove Guide, a primer on recent securities fraud case
that the misstatement was material,” adds Fer- law written for both businesspeople and legal ...not all lies are important: You can fudge your
rillo, a counsel at Weil, Gotshal & Manges LLP. practitioners. “In fact, there’s a significant split
weight if [HUD] is considering you for a janitor’s
in the circuit courts that might have been the
Likewise at issue is Amgen’s right to rebut such
driver for the Supreme Court to agree to hear position, but not if NASA is fitting you for a space suit.”
proof if and when it must ultimately be present-
the case.”
ed. A Solomonic outcome is not inconceivable
should the plaintiffs be required at day’s end to In addition to the separate approach taken by
prove materiality but, once they’ve done so, the the Third Circuit, “the Second Circuit, directly
For business, the worst-case scenario is, that this best case doesn’t carry its own longer-
defense cannot then challenge that proof. Or contrary to the Ninth Circuit, requires a plain-
obviously, that SCOTUS will affirm plaintiff’s term risks for business as well. Here the issue
the opposite is also possible: a SCOTUS ruling tiff to prove materiality at the time of class
position entirely, an all-the-more daunting involves more than legal procedure. It speaks
that plaintiffs do not have to prove materiality certification in order to gain the benefit of ‘the
outcome considering how few avenues there broadly to investor confidence and public trust
but defendants can, as Robert Carangelo puts it, fraud on the market presumption,’ and [it]
currently exist to challenge class certifications in what a company says to its stakeholders, and
“rebut the presumption that a company’s disclo- allows a defendant to rebut such proof with
in an environment where a company’s expo- to how fully transparent those communications
sure was material to investors. contrary evidence.” (The fraud on the market
sure in a single case can total billions. Such a are—beyond what the law requires.
theory, enunciated by the Supreme Court in
“Such an approach is already taken in the decision by the Supreme Court will deprive
the landmark Basic Inc. v. Levinson, requires The very existence of this decisive case be-
Third Circuit,” adds Carangelo, a partner at businesses of a significant legal recourse, open-
that a defendant’s material misrepresentation speaks need for such enhanced vigilance and
Weil, Gotshal who, with Ferrillo and associ- ing the floodgates for an ever greater number
regarding a security traded in an open market a corporate will to openly and fully impart bad
ates David J. Schwartz and Matthew Altemeier, of class actions.
was relied on by investors who then suffered a news. The danger for companies of a totally
have authored the seventh edition of The 10b-5
loss as a result.) The rest is predictable: to avoid the untenable pro-Amgen outcome is that they might become
expense of defending these multiple class ac- just a wee bit more confident that, if push
tions, corporations will settle earlier and for comes to shove, they’re shielded by procedural
higher amounts. The plaintiffs will have im- rules or otherwise effective legal strategies.
mense new leverage and, in turn, another bur-
All lies may not be equally “important” and
den will be imposed on an already-beleaguered
some may indeed be totally immaterial. But it’s
economy as large companies do whatever they
a bad habit to get into. L
must do to shoulder the additional cost.
Richard S. Levick, Esq., President and CEO of LEVICK,
The best case is equally obvious: the Supreme represents countries and companies in the highest-stakes
Court reverses entirely and finds that a plaintiff global communications matters—from the Wall Street
must prove materiality to gain the further bene- crisis and the Gulf oil spill to Guantanamo Bay and the
Catholic Church.
fit of the fraud on the market presumption. The
leverage then switches back to the defendant.
However, if the worst-case scenario is awfully
bad under any circumstances, I’m not so sure

4. Weekly
How American Airlines Avoiding Food Label
can Get Back on Track Litigation Martin Hahn
Gene Grabowski
LEVICK Executive Vice President Gene Grabowski discusses the problems currently confronting Martin Hahn, a Partner in the law firm of Hogan Lovells US LLP, continues our examination of
American Airlines and outlines what the carrier can do to regain passenger confidence. class action lawsuits filed against food and beverage companies alleged to have misled consumers
with questionable labeling.

5. What’s Next in the
Boardroom:
Greg Lit tle on Criminal & Civil
Litigation and Investigations
Richard S. Levick, Esq.
Originally Published on LEVICK Daily

6. Weekly
Over the next several weeks, LEVICK Daily exceeding $1 million. The monetary awards duct leading to investor losses. By pursuing to whether your company is truly committed to
will share selected interviews from our are significant and can range from ten to negligence-based claims, the SEC will increase solving a perceived problem or perpetuating it.
recent NACD Directorship article entitled 30 percent of the total amount of sanctions the number of potential targets to include
If the investigation proceeds to the second
“What’s Next? The Top Issues of 2013 and recovered. The whistleblower bounty program those who had no intent to deceive investors
stage where the regulators and/or prosecutors
Beyond.” Today, we feature a discussion of has been described by the SEC as a “game but simply did not act in a reasonable man-
believe a problem exists, the company should
civil and criminal litigation and investiga- changer.” That description could prove to be ner. If a business decision results in significant
make an objective assessment as to whether
tions with Gregory Little, a Partner in the an understatement. At its peak, the SEC has shareholder loss, there may be a tendency to
that is the case and, if so, demonstrate why
New York office of White & Case. announced it was receiving 7-9 tips per day. view all actions and disclosures surrounding
that problem is an aberration in an otherwise
That number likely will increase dramatically that decision as unreasonable. The bottom line
Mr. Little is a trial lawyer who counsels strong compliance program. If the board con-
once payments have actually been made and is the SEC will potentially be bringing more
clients on successfully avoiding, resolving, cludes that the regulators and/or prosecutors
publicized. claims with a significantly reduced burden of
and winning litigation. He has broad commer- are wrong about whether the problem exists,
proof. This new focus will reinforce the need
cial litigation experience, with an emphasis on What trends stand out most to you in the the company should work closely with them to
for robust compliance programs.
SEC enforcement actions, securities litigation, area of SEC enforcement? explain why the conclusion is erroneous.
and product liability. In addition to leading How can boards of directors best serve a
Gregory Little: There are several trends that Finally, if the regulators/prosecutors are ap-
high-stakes corporate litigation strategy and company in the midst of a civil or criminal
stand out in the area of SEC enforcement that parently committed to moving forward with
serving as national coordinating counsel for investigation?
could directly impact directors. In the past an enforcement action, the company must be
Fortune 10 companies, Mr. Little has been lead
several years, the SEC has been involved in a Gregory Little: In most investigations, there prepared to show it is committed to winning in
trial counsel in over 45 trials in state and fed-
number of high-profile insider trading cases. are three distinct phases that require three court. Even if the company ultimately decides
eral courts nationwide.
Many of the allegations involved evidence distinct approaches. In the beginning stages of to resolve the dispute, the willingness and abil-
At the conclusion of the interview, you can of directors of public companies providing the investigation, every effort should be made to ity to pose a vigorous defense will enhance the
find LEVICK’s own communications best material nonpublic information to friends and demonstrate to investigators that the company negotiating posture of the company. L
practices appended. business associates. Insider trading cases, of intends to be part of the solution —not part of
This post is excerpted from Richard Levick’s recent NACD
course, have been around for years. However, the problem. Whether it is the SEC, the DOJ, or a Directorship feature “What’s Next? The Top Issues of 2013
How is Dodd-Frank implementation
recent cases have demonstrated that the SEC is state attorney general, regulators and prosecu- and Beyond.” To read the full article and learn more about
most dramatically affecting director the most significant issues impacting boardrooms today,
working more closely with the Department of tors are very quick to make a determination as
liability issues? click here.
Justice and taking full advantage of the DOJ’s
Gregory Little: There are many provisions in ability to bring criminal actions and seek en-
Dodd-Frank that impact director liability. The hanced investigatory powers like wiretaps and
provision that has the most potential impact informants. BEST COMMUNICATIONS PRACTICES:
is the SEC whistleblower bounty program.
At the other end of the spectrum, the SEC has
This program authorizes the SEC to pay mon-
also announced a willingness to pursue civil 1. New whistleblower rules have changed the game. Boards must ensure that all employees know every channel by which they can
etary awards to whistleblowers who provide report compliance issues internally, before they turn to the government.
cases in which defendants are accused of neg-
information that relates to violation of the
ligence only. Traditionally, the SEC pursued 2. Companies are naturally reticent to aggressively communicate on compliance. But the more they do, the more they condition the
federal securities laws and results in sanctions
individuals engaged in intentional miscon- marketplace, investors, and regulators to give them the benefit of the doubt should trouble arise.
3. When it becomes clear that an investigation will result in charges, boards must ensure that companies articulate their willingness to
aggressively defend against dubious allegations. At the very least, they strengthen their position at the bargaining table by doing so.

7. Powershif ts:
Weekly
Washington & Wall Street
SEC Rulemaking on Conflict
Minerals & the JOBS Act
NACD BoardVision
Tuesday, October 16th
8:00am–9:30am
At The Washington Post
1150 15th Street NW
The FCS presents “Powershifts: Washington & Wall
Street”—a breakfast discussion on pre-election
perspectives—what will change and what won’t.
This week’s edition of NACD BoardVision focuses on SEC rulemaking. Join Steve Kalan, associate
publisher of NACD Directorship, and Brian Breheny, partner at Skadden Arps, as they discuss the
conflict minerals rule, the JOBS Act, and resource extraction and disclosure.
Featuring Senior Executives from:
Citi, GE Capital, LEVICK, T. Rowe Price, The Washington Post
Financial Communications For more information and to purchase tickets
Litigation go to www.fcsinteractive.com
Corporate & Reputation
Public Affairs SPONSORED BY:
Crisis
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8. IN THE NEWS
Articles
Computerworld | Friday, October 5, 2012
Steve Jobs is missed, but Apple’s stronger now than a year ago, analysts say
The Arizona Republic | Thursday, October 4, 2012
Goodykoontz: Partisan politics drives coverage
Chicago Tribune | Tuesday, October 2, 2012
Labor strife at American Airlines has passengers wary of delays
The Los Angeles Times | Friday, October 1, 2012
Delays at American Airlines take a toll on the company, fliers
Video
The Age
Apple CEO apologises for Maps app
The Wall Street Journal
Digits Live: PR Crisis Lessons from
THE URGENCY
OF NOW.
Apple’s Map Apology