SCOTUS Decision in Goldman Sachs: Class Certification in Securities-Fraud Cases

Today the Supreme Court issued its decision in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System. Justice Barrett writes the opinion, which is unanimous as to some parts and a majority opinion as to the rest. Here’s the full breakdown:

BARRETT, J., delivered the opinion of the Court, in which ROBERTS, C. J., and BREYER, KAGAN, and KAVANAUGH, JJ., joined in full; in which THOMAS, ALITO, and GORSUCH, JJ., joined as to Parts I and II–A; and in which SOTOMAYOR, J., joined as to Parts I, II–A–1, and II–B. SOTOMAYOR, J., filed an opinion concurring in part and dissenting in part. GORSUCH, J., filed an opinion concurring in part and dissenting in part, in which THOMAS and ALITO, JJ., joined.

The case involves a securities-fraud class action against Goldman Sachs. The district court certified the class and the Second Circuit affirmed class certification. Here’s how Justice Barrett summarizes the decision:

In this Court, Goldman argues that the Second Circuit erred twice: first, by holding that the generic nature of its alleged misrepresentations is irrelevant to the price impact inquiry; and second, by assigning Goldman the burden of persuasion to prove a lack of price impact.

On the first question, the parties now agree, as do we, that the generic nature of a misrepresentation often is important evidence of price impact that courts should consider at class certification. Because we conclude that the Second Circuit may not have properly considered the generic nature of Goldman’s alleged misrepresentations, we vacate and remand for the Court of Appeals to reassess the District Court’s price impact determination. On the second question, we agree with the Second Circuit that our precedents require defendants to bear the burden of persuasion to prove a lack of price impact by a preponderance of the evidence. We emphasize, though, that the burden of persuasion should rarely be outcome determinative.