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Goldman Sachs Wins Supreme Court Appeal in Securities Class Action

Paul, Weiss won an 8-1 victory at the U.S. Supreme Court representing the Goldman Sachs Group and former executives in a case that may have significant implications for plaintiffs’ ability to achieve class certification in putative securities class actions.

In the underlying complaint, the plaintiffs alleged that Goldman Sachs violated the securities laws by making a series of generic and aspirational statements, such as “our clients’ interests come first,” which impacted Goldman Sachs’ stock price. The district court certified the class, holding that Goldman Sachs had failed to rebut by a preponderance of the evidence the presumption of class-wide reliance endorsed by the Court in Basic v. Levinson. According to Basic, investors are presumed to rely on the market price of a company’s security, which in an efficient market reflects all of the company’s public statements, including misrepresentations. A split Second Circuit panel affirmed the district court, holding it was precluded from taking into account the generic nature of the misstatements at the class certification stage.

At the Supreme Court, we argued that, under Supreme Court precedent, a defendant is entitled to rebut the Basic presumption of class-wide reliance through any showing, even if the evidence rebutting reliance is highly relevant to merits inquiries. Therefore, the Second Circuit erred by refusing to consider the nature of the alleged misstatements because it overlapped with materiality.

In a decision written by Justice Amy Coney Barrett, the Court agreed, holding that the generic nature of an alleged misrepresentation is important evidence of impact on a security’s price that courts should consider at class certification. The Court vacated the Second Circuit’s decision and remanded for further proceedings.

Paul, Weiss was retained for the proceedings in the Supreme Court and worked alongside Goldman’s existing lawyers at Sullivan & Cromwell. The Paul, Weiss team included litigation partners Kannon Shanmugam, who argued the case in the Supreme Court, and Audra Soloway.

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