Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System
594 U.S. 113
| SCOTUS | 2021Background
- Respondent shareholders (pension funds) sued Goldman Sachs and certain executives under §10(b)/Rule 10b‑5, alleging an "inflation‑maintenance" fraud theory: repeated generic public statements about conflicts kept Goldman’s stock price artificially high until corrective disclosures caused price drops and investor losses.
- Plaintiffs invoked the Basic fraud‑on‑the‑market presumption of classwide reliance (investors rely on market price that reflects public misstatements).
- Goldman sought to rebut Basic at class certification by presenting expert and other evidence that the alleged misstatements had no price impact (including their generic nature).
- The District Court certified the class after finding Goldman failed to prove lack of price impact; the Second Circuit initially vacated, then on remand affirmed in a split decision.
- The Supreme Court granted certiorari to resolve (1) whether the generic character of statements is relevant to the price‑impact inquiry at class certification and (2) which party bears the burden of persuasion on price impact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Relevance of the generic nature of misstatements to price impact at class certification | Generic vs. specific content can be considered but materiality belongs to the merits; courts may consider any evidence probative of price impact. | Generic statements cannot, as a matter of law, have price impact (or are at least powerful evidence of no price impact) and should defeat Basic at certification. | The generic nature is often important evidence of lack of price impact and courts must consider all record evidence relevant to price impact at certification—even if it overlaps with materiality; remanded to the Second Circuit to ensure it did so. |
| Burden of persuasion on price impact at class certification | Plaintiffs rely on Basic presumption; defendants must rebut but plaintiffs retain ultimate burden of proof on predominance. | Rule 301 and traditional presumptions mean defendants only bear burden of production; plaintiffs retain burden of persuasion on reliance/price impact. | Defendants bear the burden of persuasion to prove lack of price impact by a preponderance of the evidence at class certification (but that burden will be outcome‑determinative only in rare, equipoise cases). |
| Remedy / procedural outcome | N/A — plaintiffs sought class certification. | N/A — defendant sought to defeat certification. | Supreme Court vacated the Second Circuit judgment and remanded for reconsideration of price‑impact evidence (including genericity) consistent with the opinion; affirmed that defendants bear the persuasion burden. |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (established fraud‑on‑the‑market presumption of classwide reliance).
- Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258 (2014) (Halliburton II) (defendants may rebut Basic at certification by showing alleged misrepresentation did not affect market price; plaintiffs need not directly prove price impact to invoke presumption).
- Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 568 U.S. 455 (2013) (materiality is a merits issue and generally reserved for the merits stage, not Rule 23 predominance).
- Comcast Corp. v. Behrend, 569 U.S. 27 (2013) (district courts must ensure Rule 23 requirements are satisfied; courts may consider merits‑related evidence at certification when necessary).
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (limits on class certification and courts’ duty to engage with relevant merits‑overlapping evidence).
- NLRB v. Transportation Management Corp., 462 U.S. 393 (1983) (Rule 301 does not constrain courts’ authority to alter burdens of persuasion under federal statutes).
- St. Mary’s Honor Center v. Hicks, 509 U.S. 502 (1993) (explains operation of presumptions and burden‑shifting in civil cases).
- Teamsters v. United States, 431 U.S. 324 (1977) (example of reassigning burden of persuasion in civil context).
- Franks v. Bowman Transp. Co., 424 U.S. 747 (1976) (another example of burden reassignment).
- Waggoner v. Barclays PLC, 875 F.3d 79 (2d Cir. 2017) (interpreting Basic as imposing burden of persuasion on defendants to prove lack of price impact).