Goldman presses 2nd circ to put teeth in supreme court class certification ruling As both Goldstein and Shanmugam said on Wednesday, the securities bar is anxious to find out. It’s going to be interesting to see whether the 2nd Circuit tries to craft a narrow class certification ruling that hews closely to the facts of the Goldman case or whether it provides a broader interpretation of the Supreme Court’s directives. The SEC settlement, he said, didn't prove the falsity of those warnings. Shanmugam reminded the panel that Goldman’s conflict warning only said that the bank had a system for averting conflicts not that the system was infallible or that the bank was not engaged in conflicted transactions. The SEC settlement, Goldstein said, told the market that it was right to have worried about Goldman’s conflicts – which, Goldstein said, is enough of a match between the false statement and the corrective disclosure to justify class certification. The bank's depiction of its conflict-checking system was important to a market that was concerned about Goldman's multi-faceted business model, the shareholder lawyer said. Goldstein insisted that the SEC case proved the falsity of Goldman's claim that it carefully monitored for conflicts. As long as shareholders can show any impact at all from corrective disclosures, Wesley said, they can be certified as a class. Even shareholder lawyer Goldstein conceded that the latter were generic but said they added context.) Wesley also reminded Shanmugam that defendants bear the burden of showing that their alleged misstatements had no price impact. (The judge drew a contrast between Goldman's conflict warnings and the bank’s alleged misrepresentations about its business principles. (The 2nd Circuit has previously held that companies are not obligated to disclose investigations of wrongdoing or mismanagement.)īut Wesley suggested that Goldman’s statements about its conflict management system offered specific assurances, not mere pablum. Sullivan seemed to agree with Shanmugam’s argument that the appeals court risks establishing “an affirmative disclosure regime” that would force companies to over-disclose to avoid liability for generic statements. Shanmugam urged the appeals court to “zero in on the corrective disclosure.” “That is the great hazard this case presents,” he said. Under that standard, Shanmugam said, shareholders will be able to point to non-specific corporate statements to win class certification whenever a corporation’s share price drops. District Judge Paul Crotty, applied too lenient a test when he held that corrective disclosures must simply “implicate” the allegedly false statement. Shanmugam told the 2nd Circuit on Wednesday that the trial judge, U.S. If the alleged misrepresentation is generic but the corrective disclosure is specific, the Supreme Court said, “it is less likely that the specific disclosure actually corrected the generic misrepresentation.”īroadly speaking, Goldman has insisted since the Supreme Court ruling that the revelation of its SEC settlement did not match shareholder allegations that its conflict warnings were false. The justices' key directive, at least as it has emerged in the Goldman case, was that trial courts weighing class certification should consider the "match" between an allegedly false statement and the corrective disclosure. The Supreme Court’s 2021 decision, as you probably recall, gave trial judges leeway to consider the generic nature of alleged misrepresentations in considering the price impact of such statements in the class certification process. Its experts have disputed the purported impact of those statements on Goldman’s share price, instead arguing that the market reacted to the news of the SEC settlement, not to the supposed revelation of the falsity of the bank’s anodyne statements about its business practices. Goldman has argued for the last 12 years that its allegedly false statements were so generic and non-specific that no investor could have relied upon them.
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