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 lawsuits: direct evidence that they were relying on the contested statement. This also allowed investors to avoid the requirement of class actions: proof that their claims had enough in common to partner with one another.
Sopan Joshi, a federal government attorney, said it was possible that generic statements might well have relevance in the case discussed Monday, an argument that had been reiterated in the pleadings filed by the pension funds and their supporters.
“Goldman Sachs looked at many financial instruments where conflict was critical both to the company and to 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 an impact on prices. “
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 be done 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.