On March 29, 2021, the United States Supreme Court heard oral argument in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System, which we have discussed in prior updates.  The case raises two questions in the context of class certification in a Section 10(b) case:  (i) whether a court can take into account the generic nature of alleged misstatements in a securities fraud class action in assessing whether they had any impact on the price of the stock, and (ii) who bears the burden of persuasion concerning reliance on the alleged misstatements, after a plaintiff has invoked the presumption of classwide reliance (under the Supreme Court's decision in Basic Inc. v. Levinson) and the defendant has come forward with evidence to rebut that presumption.  At oral argument, a number of Justices focused primarily on the first question and sought to confirm what was before the Court on that issue.  The plaintiffs conceded that the generic nature of the statement is relevant evidence to price impact which can be considered at the class certification stage, but argued that the Second Circuit applied the correct standard and that its opinion should be affirmed.  Defendants made clear that the Second Circuit had erred and urged the Court to clarify the applicable standard and reverse.  The Government participated in oral argument as amicus curiae, observing that, as to the first question, “the only lingering disagreement appears to be whether the generic nature of a misstatement must be introduced solely through expert evidence” and that there is “no sound reason to impose that kind of artificial limit.”  On the second and clearly disputed question of who bears the burden of persuasion concerning reliance after the evidence has come in, only a few Justices asked questions about the bases for the parties' and the Government's positions and the implications of holding that plaintiff or defendant bears the burden.

Originally Published by Shearman & Sterling, April 2021

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