## Facts

- Goldman Sachs and certain executives were sued in a putative shareholder class action alleging securities fraud under § 10(b) and Rule 10b-5.
- From about 2006–2010, Goldman made public statements about managing conflicts of interest and prioritizing clients, including claims about “extensive procedures and controls” and that “clients’ interests always come first.”
- During the same period, Goldman structured and sold complex CDO transactions, including Abacus 2007-AC1, which plaintiffs alleged involved undisclosed conflicts of interest.
- Government enforcement actions and media reports later revealed alleged conflicts tied to particular transactions.
- After these disclosures, Goldman’s stock price fell; plaintiffs claimed earlier generic statements maintained artificial inflation in the stock price (“inflation-maintenance”) and that the later revelations caused classwide losses.
- Plaintiffs sought class certification under Rule 23(b)(3), invoking the fraud-on-the-market presumption of reliance.
- The district court certified the class; after an initial remand requiring application of a preponderance standard on rebuttal, the district court again certified the class and the Second Circuit affirmed.
- The Supreme Court granted review on whether statement genericness is relevant to price impact at class certification and who bears the burden of persuasion on price impact rebuttal.

## Issues

1. At class certification in a fraud-on-the-market case, may defendants rebut the presumption of classwide reliance by using the generic nature of alleged misstatements as evidence of no price impact?
2. At class certification, do defendants seeking to rebut the presumption bear only a burden of production, or the ultimate burden of persuasion, on lack of price impact?

## Decision

- The Court vacated the judgment and remanded.
- The Court held unanimously that the generic nature of alleged misrepresentations is often probative of price impact and must be considered at class certification.
- By a 6–3 vote, the Court held defendants bear the burden of persuasion to prove lack of price impact by a preponderance of the evidence at class certification.
- The Court directed the lower courts to reassess price impact while accounting for the generic nature of Goldman’s statements, including any mismatch between general statements and specific later disclosures.

## Legal Principles

- In an efficient market, plaintiffs may invoke a rebuttable presumption of reliance if the alleged misstatements were public, the market was efficient, and the purchase occurred between the misstatement and the corrective disclosure.
- Defendants may rebut the presumption by proving the alleged misrepresentation did not affect the stock’s market price (no price impact).
- Courts at class certification must consider all probative evidence bearing on price impact, including the generality or specificity of the challenged statements and their fit with subsequent corrective disclosures.
- Although evidence relevant to price impact may overlap with materiality evidence, courts should treat materiality as a merits issue and price impact as a Rule 23 predominance inquiry.
- Defendants bear the burden of persuasion, by a preponderance of the evidence, to establish lack of price impact when attempting to rebut the presumption at class certification.

## Conclusion

The Court required lower courts to consider whether highly generic corporate statements are unlikely to have maintained stock-price inflation when later price drops followed specific disclosures, and it assigned defendants the ultimate burden to prove no price impact by a preponderance of the evidence when rebutting the fraud-on-the-market presumption at class certification.


Goldman Sachs Grp., Inc. v. Ark. Tchrs. Ret. Sys., 594 U.S. 113 (2021)