Southern District Of New York Rules That Defendant Failed To Rebut Basic Presumption Of Reliance And Grants Motion For Class Certification For Third Time

• Published date: 27 December 2021
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Securities
• Law Firm: Shearman & Sterling LLP
• Author: Shearman & Sterling LLP

On December 8, 2021, Judge Paul A. Crotty of the United States District Court for Southern District of New York granted a motion for class certification in a securities fraud class action against a global financial institution (the "Company") under the Securities Exchange Act of 1934. In re Goldman Sachs Group, Inc. Sec. Litig., No. 10-3461 (PAC) (Dec. 8, 2021). This is the third time the District Court has granted plaintiffs' motion for class certification in this case, following several decisions by the Second Circuit and the Supreme Court.

Most recently, the District Court's second class certification order was the subject of Supreme Court review. In June 2021, in a decision covered here, the Supreme Court vacated and remanded the Second Circuit's decision upholding the district court's certification of a class because there was "sufficient doubt" as to whether the Second Circuit had considered the generic nature of the Company's misrepresentations. Specifically, the Supreme Court held that, in the context of class certification in a case involving claims under Section 10(b) of the Exchange Act: (i) the generic nature of a misrepresentation is important evidence of price impact that courts should consider at the class certification stage, regardless of whether that evidence overlaps with materiality and any other merits issue, and (ii) defendants bear the burden of persuasion to prove a lack of price impact by a preponderance of the evidence in order to rebut the presumption of reliance established under the Supreme Court's decision in Basic Inc. v. Levinson. In a decision covered here, the Second Circuit noted that the District Court's class certification decision did not discuss either the generic nature of the alleged misrepresentations in its evaluation of the evidence relevant to price impact, or the parties' expert and rebuttal reports that focused on the generic nature of the alleged statements. The Second Circuit therefore remanded the case to the District Court, holding that the parties' arguments "raise fact-intensive issues better evaluated by the district court in the first instance."

On December 8, 2021, following remand from the Second Circuit, the District Court held that, even under the "clarified guidance" from the Supreme Court, defendants failed to rebut the Basic presumption of classwide reliance by a preponderance of the evidence. The District Court found that the evidence indicated that the alleged misstatements had some impact on...