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Ark. Teacher Ret. Sys. v. Goldman Sachs Grp., Inc.

Ark. Teacher Ret. Sys. v. Goldman Sachs Grp., Inc.

United States Court of Appeals for the Second Circuit

August 11, 2021, Submitted; August 26, 2021, Decided

Docket No. 18-3667

Opinion

 [*139]  PER CURIAM:

Plaintiffs-Appellees (hereinafter, "Plaintiffs"), shareholders of Goldman Sachs Group, Inc., brought this class action lawsuit against Goldman Sachs and several of its former executives (collectively, "Goldman") [**3]  alleging that Goldman committed securities fraud by misrepresenting its conflict-of-interest policies and practices. The facts and procedural history, which we reference here only as necessary to explain our decision, are detailed in our previous opinions. See, e.g., Ark. Tchrs. Ret. Sys. v. Goldman Sachs Grp., Inc. ("ATRS I"), 879 F.3d 474, 478 (2d Cir. 2018).

 [*140]  BACKGROUND

In 2018,2 the United States District Court for the Southern District of New York (Crotty, J.) granted Plaintiffs' motion to certify a class of shareholders under Federal Rule of Civil Procedure 23(b)(3). See In re Goldman Sachs Grp., Inc. Sec. Litig., No. 10 CIV. 3461 (PAC), 2018 U.S. Dist. LEXIS 137414, 2018 WL 3854757, at *6 (S.D.N.Y. Aug. 14, 2018), aff'd sub nom. Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc., ("ATRS II"), 955 F.3d 254 (2d Cir. 2020), vacated and remanded, 141 S. Ct. 1951, 210 L. Ed. 2d 347 (2021). ] To recover damages, Plaintiffs "must prove, among other things, a material misrepresentation or omission by [Goldman] and [Plaintiffs'] reliance on that misrepresentation or omission." Goldman Sachs Grp., Inc. v. Ark. Tchr. Ret. Sys., 141 S. Ct. 1951, 1958, 210 L. Ed. 2d 347 (2021). Plaintiffs invoked the Basic presumption, a rebuttable presumption that all shareholders had relied on Goldman's public misrepresentations when they purchased its stock, premised on the theory that investors rely on all of a company's public misrepresentations when trading stock in an efficient market. See Basic Inc. v. Levinson, 485 U.S. 224, 246, 108 S. Ct. 978, 99 L. Ed. 2d 194 (1988). ] By allowing courts to infer reliance on a classwide basis, the Basic presumption helps plaintiffs in securities class actions to satisfy Rule 23(b)(3)'s requirement that "the questions of law or fact common to class members predominate [**4]  over any questions affecting only individual members." Fed. R. Civ. P. 23(b)(3).

As Goldman acknowledged, Plaintiffs met their burden of proving the elements of the Basic presumption required for class certification: that Goldman's alleged "misstatements were publicly known, [its] shares traded in an efficient market, and [Plaintiffs] purchased the shares at the market price after the misstatements were made but before the truth was revealed."3 ATRS I, 879 F.3d at 481, 484. ] However, the Basic presumption is not insuperable. A defendant may rebut the Basic presumption by making "[a]ny showing that severs the link between the alleged misrepresentation and either the price received (or paid) by the plaintiff, or his decision to trade at a fair market price." Basic, 485 U.S. at 248. If a defendant can establish that the alleged misrepresentation "did not actually affect the market price of the stock"--i.e., that it had no "price impact"--"then Basic's fundamental premise 'completely collapses, rendering class certification inappropriate.'" Goldman, 141 S. Ct. at 1959 (quoting Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 283-84, 134 S. Ct. 2398, 189 L. Ed. 2d 339 (2014)).

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11 F.4th 138 *; 2021 U.S. App. LEXIS 25701 **

ARKANSAS TEACHER RETIREMENT SYSTEM, WEST VIRGINIA INVESTMENT MANAGEMENT BOARD, PLUMBERS AND PIPEFITTERS PENSION GROUP, Plaintiffs-Appellees, v. GOLDMAN SACHS GROUP, INC., LLOYD C. BLANKFEIN, DAVID A. VINIAR, GARY D. COHN, Defendants-Appellants.1

Subsequent History: Later proceeding at In re Goldman Sachs Group, Inc. Sec. Litig., 2021 U.S. Dist. LEXIS 178804 (S.D.N.Y., Sept. 20, 2021)

Prior History: Plaintiffs-Appellees, shareholders of Goldman Sachs Group, Inc., brought this class action lawsuit against Goldman Sachs and several of its former executives (collectively, "Goldman") alleging that Goldman committed securities fraud by misrepresenting its conflicts-of-interest policies and practices. In 2015, the district court certified a class of shareholders under Federal Rule of Civil Procedure 23(b)(3) [**1] . We vacated and remanded, holding that the district court failed to apply the preponderance-of-the-evidence standard in deciding whether Goldman rebutted the "Basic presumption," which presumes that the shareholders relied on Goldman's public misrepresentations when they purchased its stock at market price. In 2018, the district court again certified the class, and we affirmed, rejecting Goldman's arguments that the district court failed to apply the correct legal standard or that it otherwise abused its discretion. The Supreme Court vacated and remanded because it was uncertain that we properly considered the generic nature of Goldman's alleged misrepresentations in reviewing the district court's decision. Because it is unclear whether the district court considered the generic nature of Goldman's alleged misrepresentations [**2]  in its evaluation of the evidence relevant to price impact and in light of the Supreme Court's clarifications of the legal standard, we VACATE the class certification order of the district court and REMAND for further proceedings consistent with this opinion.

In re Goldman Sachs Grp., Inc., 2018 U.S. Dist. LEXIS 137414, 2018 WL 3854757 (S.D.N.Y., Aug. 14, 2018)

CORE TERMS

generic, alleged misrepresentation, district court, class certification, misrepresentation, disclosures, corrective, inflation-maintenance, vacate, stock price, conflicts

Evidence, Burdens of Proof, Allocation, Securities Law, Remedies, Damages, Compensatory Damages, Civil Procedure, Class Actions, Prerequisites for Class Action, Commonality, Securities Exchange Act of 1934 Actions, Implied Private Rights of Action, Class Actions, Predominance, Maintainability, Special Proceedings, Certification of Classes, Appellate Review, Judicial Discretion, Appeals, Standards of Review, Abuse of Discretion, De Novo Review, Questions of Fact & Law, Relevance, Relevant Evidence, Governments, Courts, Authority to Adjudicate