Stock fraud class actions
Goldman Sachs Group v. Arkansas Teacher Retirement System
In brief
Judges may weigh how general Goldman’s statements were, but Goldman must prove—more likely than not—that they did not affect the stock price; the Court wiped out the Second Circuit’s ruling (vacated it) and sent the case back (remanded it), leaving class certification unresolved.
- Where it stands
- Decided
Decided 9-0 · June 21, 2021 · Opinion by Justice Barrett
- What it’s about
- Shareholders accused Goldman Sachs and several executives of misleading investors about conflicts of interest in a securities-fraud class action.
- Who it affects
- Lower courts should consider how general the alleged statements are when assessing whether they changed the stock price at class certification, even though materiality (whether a statement mattered enough to investors) is a later question.
Summary: written with AI from the case record.
What it's about
The Court decided that judges may consider how general the statements were when deciding whether shareholders may proceed together and that Goldman must prove, more likely than not, that the statements did not affect its stock price; it wiped out the Second Circuit’s ruling and sent the case back to that court (vacated and remanded), without deciding whether the class should be certified.
The case tests the Basic presumption, which lets investors presume that a public misstatement affected a stock’s market price instead of proving each investor acted because of it.
Question presented
1. Whether a defendant in a securities class action may rebut the presumption of classwide reliance recognized in Basic Inc. v. Levinson, 485 U.S. 224 (1988), by pointing to the generic nature of the alleged misstatements in showing that the statements had no impact on the price of the security, even though that evidence is also relevant to the substantive element of materiality. 2. Whether a defendant seeking to rebut the Basic presumption has only a burden of production or also the ultimate burden of persuasion.
What the Court decided
Holding
The generic nature of a misrepresentation often is important evidence of price impact that courts should consider at class certification, including in inflation-maintenance cases. That is true even though the same evidence may be relevant to materiality, an inquiry reserved for the merits phase of a securities-fraud class action. See Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 568 U. S. Defendants bear the burden of persuasion to prove a lack of price impact by a preponderance of the evidence at class certification. The Court has held that nothing in Federal Rule of Evidence 301 constrains the Court’s authority to change customary burdens of persuasion under a federal statute, see NLRB v. Transportation Management Corp., 462 U. S. 393, 404, n. 7, and the Court has exercised this authority to reassign the burden of persuasion to the defendant in other contexts. Goldman does not challenge the Court’s relevant precedents, but questions whether the Court exercised this authority in establishing the Basic framework pursuant to the securities laws. 955 F. 3d 254, vacated and remanded.
- Result
- Vacated
The vote
From the opinions
“There, the Court holds that the defendant, rather than the plaintiff, “bear[s] the burden of persuasion on price impact.””
What's next
The case returns to the Second Circuit for further proceedings under the Supreme Court’s instructions. That court must revisit class certification; whether the investors may proceed as a class remains unresolved.
Why it matters
The case’s return to the Second Circuit leaves whether these investors may proceed as a class unresolved.
Documents
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More questions
- What did the Supreme Court decide in Goldman Sachs about generic statements?
- The Court said judges may consider how general an alleged misstatement was when assessing whether it changed the stock price at class certification.
- Who had to prove the statements did not affect Goldman’s stock price?
- Goldman had the burden of persuasion (the duty to convince the judge) at class certification. It had to show, more likely than not, that the statements had no effect on its stock price.
- Did the Supreme Court decide whether the shareholders could proceed as a class?
- No. The Court wiped out the Second Circuit’s ruling (vacated it) and sent the case back (remanded it), leaving that question unresolved.
- What happens next in Goldman Sachs?
- The case returns to the Second Circuit. That court must reconsider class certification under the Supreme Court’s instructions.
- Can generic wording matter at class certification and in the later fraud question?
- Yes—judges may use generic wording to assess price impact (whether the statement changed the stock price). Materiality (whether it mattered enough to investors) is a separate later question.
Sources
Primary materials plus reporting. Best-effort analysis: this explainer relies on a mix of primary materials and trusted secondary sources. Official filings and opinions remain authoritative.