A split three-judge panel of the appeals court said its decision was based on a presumption based on a 1988 Supreme Court ruling, Basic v. Levinson, was based on the statements. Instead, they could rely on the assumption that all of the key publicly available information about a company is reflected in its share price.
The theory allowed investors to skip a step that is required in ordinary fraud cases: direct evidence that they were relying on the contested statement. This also allowed investors to avoid a class action lawsuit: evidence that their claims had enough in common to be bandied together.
Sopan Joshi, a federal government attorney, said it was possible that generic statements might well be significant in the case discussed Monday, an argument that had been reiterated in the pleadings filed by the pension funds and their supporters.
“Goldman Sachs dealt with many financial instruments where conflict was extremely important to both the company and the” reputational advantage it enjoyed over its competitors and peers and the industry in general, “he said.” In this case even very general statements about conflicts actually have a price effect. “
Mr Joshi, who did not speak for both sides, added that the government had not given an opinion on whether this analysis was correct and asked the judges to order the appeals court to deal with it.
While all three attorneys agreed that the courts could examine whether general statements could affect stock prices, they differed in what should happen in the case, Goldman Sachs Group v Arkansas Teacher Retirement System, No. 20-222.
Mr. Shanmugam, Goldman’s attorney, said the court should overturn the appeals court’s decision confirming the class. Pension Fund attorney Mr. Goldstein said the judges should uphold the verdict; and Mr. Joshi, the government attorney, said the court should overturn the appeal court’s decision and order it to reconsider the case.
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