Goldman Investors Want High Court to Reject Class Status Appeal

Goldman Sachs Group Inc. investors who won approval to sue as a class urged the U.S. Supreme Court on Wednesday not to take up a petition that could strip them of their status.

The investment bank in April lost its bid to overturn class certification in the suit alleging it misled investors about conflicts of interest related to certain collateralized debt obligation transactions. Goldman successfully convinced the U.S. Court of Appeals for the Second Circuit to stay the mandate while it pursued high court review.

Goldman argued that its alleged misstatements were generic and had no impact on its stock price, and the appellate court should have let it use that evidence to rebut a classwide presumption of reliance at the certification stage. “No court has ever accepted that position,” and there’s no circuit split necessitating review, the investors said in their brief opposing the bank’s petition for certiorari.

Investors don’t have to prove materiality at the class certification stage, the brief said. “While Goldman bends over backwards to avoid using the word ‘material,’ the Second Circuit properly saw through the synonyms.”

Despite the bank’s “breathless claims” that the appellate decision would lead to vexatious litigation and coerced settlements, it “points to no evidence that district courts routinely allow immaterial claims to proceed to class certification,” the class said.

There’s no true circuit split over whether defendants bear just the burden of production or also persuasion in rebutting the reliance presumption set out in the Supreme Court’s 1988 Basic Inc. v. Levinson decision, either, the investors said.

Goldman argued that the Eighth Circuit went with production, and the Second and Seventh with persuasion. But the Eighth Circuit production mention was actually “an off-hand comment on a question that no party raised and upon which nothing turned,” the class said.

Goldstein & Russell PC, Robbins Geller Rudman & Dowd LLP, and Labaton Sucharow LLP represent the class. Sullivan & Cromwell LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP represent Goldman.

The case is Goldman Sachs Grp. Inc. v. Ark. Teacher Ret. Sys., U.S., No. 20-222, brief in opposition filed 10/21/20.