After 13 years of litigation, three trips to a federal appeals court and one ballyhooed U.S. Supreme Court case, Goldman Sachs has finally given the securities defense bar a way to squelch shareholder class actions based on non-specific corporate statements.
, Goldman Sachs has finally given the securities defense bar a way to squelch shareholder class actions based on non-specific corporate statements.that Goldman shareholders cannot be certified as a class to pursue claims that the bank misrepresented its commitment to avoiding conflicts of interest during the subprime mortgage craze that led to the 2008 financial crisis.
The Supreme Court agreed with Goldman that lower courts may consider the generic nature of alleged misrepresentations in weighing class certification. But – more consequentially, as it turns out -- Justice Amy Berman Jackson also said that trial courts should be wary about inferring price impact when there is a “mismatch” between generic alleged misrepresentations and specific disclosures that cause the company’s share price to drop.
In Thursday's decision, the 2nd Circuit stopped short of requiring a “precise match” between alleged misrepresentations and subsequent corrective disclosures. But Judges Richard Wesley and Denny Chin said the Supreme Court’s Goldman decision, along with 2nd Circuit precedent in other cases alleging that corporate misrepresentations kept share prices artificially high, mandates a narrow gap between alleged misstatements and revelations of corporate misconduct.
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