Robbins Geller Rudman & Dowd LLP , Labaton Sucharow, LLP, Lovell Stewart Halebian Jacobson LLP, Zamansky & Associates, L.L.C. , Wolf Popper LLP, Brodsky & Smith, L.L.C. , Gardy & Notis, LLP, Carbone & Blaydes, PLLC, Bernstein Litowitz Berger & Grossmann LLP, and Kessler Topaz Meltzer & Check, Llp acted on behalf of the class. Sullivan & Cromwell LLP assisted the defendants. Pomerantz LLP had submitted the sole amicus brief on the issue.
On June 21, 2021, the United States Supreme Court, in a 6-3 decision, issued an opinion rejecting defendants’ attempt to overturn the district court’s certification of a class, and to shift the burden of persuasion on price impact to plaintiffs at class certification. The Court instead remanded the case to the United States Court of Appeals for the Second Circuit to review the district court’s consideration of all evidence, including the nature of the alleged false statements. At issue in the case is whether statements made by defendants had a “price impact” on Goldman Sachs & Co.’s (“Goldman”) share prices because those allegedly false statements involved a key aspect of Goldman’s success – namely, its reputation for integrity and its purportedly robust conflict-of-interests controls, both of which helped Goldman’s shares trade at a premium to those of its peers.
The complaint alleges that Goldman, along with the individual defendants, violated the anti-fraud provisions of the Securities Exchange Act of 1934 by issuing allegedly false statements that Goldman was acting in the best interests of its clients and had conflict policies in place. Instead of hewing to those controls and acting in the best interest of its clients, Goldman is alleged to have instead structured and sold mortgage-backed securities to its clients knowing they would fail. At the same time, Goldman and a favored client made billions betting against these same securities.
Plaintiffs alleged that defendants’ false statements and omissions about Goldman’s conflict-management practices artificially maintained the trading price of Goldman stock above the price it would have traded had the market had known the truth about Goldman’s conflict-management practices. The artificial inflation eventually dissipated, and Goldman’s stock price fell significantly, when the SEC filed a complaint detailing Goldman’s alleged misconduct.
After the Second Circuit upheld a district court’s certification of a class of investors, the case made its way to the Supreme Court where defendants argued that (i) the Second Circuit refused to even consider the generic nature of their alleged misrepresentations as evidence of price impact, and (ii) that the Second Circuit further erred in requiring defendants, rather than plaintiffs, to bear the burden of persuasion on price impact at the class-certification stage. Goldman also requested that the Court reverse the trial court’s certification of the class and end the case as a class action.
In a victory for investors, the Supreme Court ruled in plaintiffs’ favor on the second question, holding that in keeping with prior precedent, defendants do bear the ultimate burden of persuasion as to price impact. The Court also refused to overturn the trial court’s certification decision. However, because it was unclear from the record whether the Second Circuit had properly considered the generic nature of Goldman’s alleged misrepresentations in reviewing the issue of price impact, the Supreme Court vacated the Second Circuit’s judgment and remanded for the latter court’s determination as to that discrete question.
The Class was represented by Spencer A. Burkholz (Picture), Danielle Suzanne Myers, David Avi Rosenfeld, Robert R. Henssler, Jr., Samuel Howard Rudman, Darren J. Robbins, Jonah H. Goldstein, Eric I. Niehaus, Catherine J. Kowalewski and David C. Walton of Robbins Geller Rudman & Dowd; Fred Taylor Isquith, Christopher Lovell and Victor E. Stewart of Lovell Stewart Halebian Jacobson; Jacob Zamansky of Zamansky & Associates; James Abram Harrod, III of Wolf Popper; Evan J. Smith of Brodsky & Smith; Jeffrey A Dubbin, Thomas A. Dubbs, James W. Johnson, Lawrence Alan Sucharow, and Irina Vasilchenko of Labaton Sucharow, LLP; Mark W. Carbone of Carbone & Blaydes; James Stuart Notis and Charles A. Germershausen of Gardy & Notis; Gerald H. Silk of Bernstein Litowitz Berger & Grossmann; Sean M. Handler of Kessler Topaz Meltzer & Check.
The Defendants were assisted by David Maxwell Rein, Richard Howard Klapper, Christopher James Dunne, Theodore Edelman, Jacob Eden Cohen, Benjamin Robert Walker, Robert Joseph Giuffra, Jr. of Sullivan & Cromwell.
Involved fees earner: Gerald Silk – Bernstein Litowitz Berger and Grossmann LLP; Evan Smith – Brodsky & Smith LLC; Mark Carbone – Carbone & Blaydes, PLLC; Mark Gardy – Gardy & Notis LLP; James Notis – Gardy & Notis LLP; Sean Handler – Kessler Topaz Meltzer & Check; Lawrence Sucharow – Labaton & Sucharow; Jeffrey Dubbin – Labaton & Sucharow; Thomas Dubbs – Labaton & Sucharow; Louis Gottlieb – Labaton & Sucharow; James Johnson – Labaton & Sucharow; Michael Rogers – Labaton & Sucharow; Irina Vasilchenko – Labaton & Sucharow; Fred Isquith – Lovell Stewart Halebian Jacobson LLP; Christopher Lovell – Lovell Stewart Halebian Jacobson LLP; Victor Stewart – Lovell Stewart Halebian Jacobson LLP; Robert Henssler Jr. – Robbins Geller Rudman & Dowd; Spencer Burkholz – Robbins Geller Rudman & Dowd; Brian Cochran – Robbins Geller Rudman & Dowd; Jonah Goldstein – Robbins Geller Rudman & Dowd; Danielle Myers – Robbins Geller Rudman & Dowd; Eric Niehaus – Robbins Geller Rudman & Dowd; Samuel Rudman – Robbins Geller Rudman & Dowd; Jacob Cohen – Sullivan & Cromwell; Christopher Dunne – Sullivan & Cromwell; Theodore Edelman – Sullivan & Cromwell; Robert Giuffra Jr. – Sullivan & Cromwell; Richard Klapper – Sullivan & Cromwell; David Rein – Sullivan & Cromwell; Benjamin Walker – Sullivan & Cromwell; James Harrod III – Wolf Popper LLP; Marian Rosner – Wolf Popper LLP; Edward Glenn Jr – Zamansky LLC; Jacob Zamansky – Zamansky LLC;
Law Firms: Bernstein Litowitz Berger and Grossmann LLP; Brodsky & Smith LLC; Carbone & Blaydes, PLLC; Gardy & Notis LLP; Kessler Topaz Meltzer & Check; Labaton & Sucharow; Lovell Stewart Halebian Jacobson LLP; Robbins Geller Rudman & Dowd; Sullivan & Cromwell; Wolf Popper LLP; Zamansky LLC;
Clients: Afshani Ehsan ; Arkansas Teachers Retirement System; Blankfein Lloyd; Bochner Tikva; David Viniar; Draft Thomas; Elizondo Pablo; Gary Cohn; Gold Louis; Goldman Sachs; Metzler Investment GmbH; Montana Board of Investments; Plumbers and Pipefitters National Pension Fund; Richman Ilene; Sampension; Sorkin Howard; Tikva Bochner; West Virginia Investment Management Board;