SIFMA asked the Second Circuit to vacate a District Court Order granting class certification to plaintiffs who alleged that defendants violated federal securities laws by making false and misleading statements regarding the sale of collateralized debt obligations. In re Goldman Sachs Grp., Inc. Sec. Litig., No. 10-cv-3461, 2015 WL 5613150*1 (S.D.N.Y. Sept. 24, 2015), appeal pending, No. 16-250 (2d Cir.).
In its amicus curiae brief, SIFMA cautioned that weakening class certification requirements subjects companies to "abusive class actions" and the potential for "blackmail settlements." SIFMA urged the Second Circuit to "preserve the careful limits" that the Supreme Court and Second Circuit placed on class certification motions in order to maintain the balance between enforcing the law in appropriate cases and weeding out non-meritorious claims.
SIFMA argued that the District Court failed to apply such careful limits by circumventing the reliance requirement established in Basic Inc. v. Levinson, 485 U.S. 224 (1988), which intended to "ensure that there is a proper connection between a defendant's misrepresentation and a plaintiff's injury."
SIFMA further emphasized that the District Court "eviscerated" the predominance requirement in Rule 23 by certifying a class even though plaintiffs failed to provide a "non-arbitrary class-wide method of measuring damages" resulting solely from the alleged misstatements. Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). Rather, SIFMA noted, the District Court certified plaintiff's damages model that measured the price decline that was attributable to an entire mixture of news in the alleged corrective disclosure, including news from events that were not violative of securities laws. This model was certified based on a promise to provide an adequate damages model in the future.
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