Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System

141 S.Ct. 1951 (2021)

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Nature of the Case

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Facts

Ps allege that D maintained an artificially inflated stock price by making generic statements about its ability to manage conflicts-for example, “We have extensive procedures and controls that are designed to identify and address conflicts of interest.” Ps say that D’s generic statements were false or misleading in light of several undisclosed conflicts of interest and that once the truth about D’s conflicts came out, D’s stock price dropped and shareholders suffered losses. Ps sought to certify a class of D shareholders by invoking the presumption endorsed by this Court in Basic Inc. v. Levinson. That presumption is premised on the theory that investors rely on the market price of a company’s security, which in an efficient market incorporates all of the company’s public misrepresentations. D sought to defeat class certification by rebutting the Basic presumption through evidence that its alleged misrepresentations had no impact on its stock price. The court ruled that D had failed to carry its burden of proving a lack of price impact. The Court certified the class, and the Second Circuit affirmed. Ds appealed. The Second Circuit authorized a Rule 23(f) appeal and vacated the class-certification order. The Second Circuit held that D, as the defendant, bears the burden of persuasion to prove a lack of price impact by a preponderance of the evidence. But it concluded that the District Court erred by holding D to a higher burden of proof and by refusing to consider some of D’s price impact evidence. On remand, the Court certified the class again, finding that Goldman’s expert testimony failed to establish by a preponderance of the evidence that its alleged misrepresentations had no price impact. The Second Circuit again authorized a Rule 23(f) appeal and this time affirmed in a divided decision. It held that the District Court’s price impact determination was not an abuse of discretion. The Supreme Court granted certiorari. Ds argues that the holding that the generic nature of its alleged misrepresentations is irrelevant to the price impact inquiry is in error as well as assigning D the burden of persuasion to prove a lack of price impact.