Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc., No. 22-484 (2d Cir. 2023)Annotate this Case
Shareholders of Defendant-Appellant Goldman Sachs Group, Inc. brought this class action lawsuit against Goldman and several of its former executives, claiming defendants committed securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b–5 promulgated thereunder by misrepresenting Goldman’s ability to manage conflicts of interest in its business practices. After a number of appeals and subsequent remand, including an appeal to the Supreme Court, the district court once again certified a shareholder class under Federal Rule of Civil Procedure 23(b)(3).
The Second Circuit reversed the district court’s class certification decision with instructions to decertify the class. The court held that the district court clearly erred in finding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence and, therefore, abused its discretion by certifying the shareholder class. The court explained that there is an insufficient link between the corrective disclosures and the alleged misrepresentations. Defendants have demonstrated, by a preponderance of the evidence, that the misrepresentations did not impact Goldman’s stock price and, by doing so, rebutted Basic’s presumption of reliance. Thus, the district court clearly erred in concluding otherwise and therefore abused its discretion in certifying the shareholder class.