Amicus Briefs

Goldman Sachs v. Arkansas Teacher Retirement System

Status Amicus Brief

Practice area Securities Litigation & Investor Protection

Court Supreme Court of the United States

Case number 20-222


On March 3, 2021, Cohen Milstein, on behalf of the North American Securities Administrators Association as Amici Curiae, submitted an amicus brief to the Supreme Court of the United States in support of respondents in Goldman Sachs Group, Inc., et al. v. Arkansas Teacher Retirement System, et al., No. 20-222.

Read the amicus brief.


The North American Securities Administrators Association, Inc. (“NASAA”) is the non-profit association devoted to protecting investors from fraud and abuse in the offer and sale of securities.

NASAA and its members have an interest in this matter because this case could have important implications for the integrity and viability of private antifraud actions brought under the federal securities law and, potentially, under state securities laws as well. Meritorious private securities fraud suits, particularly class actions, are crucial to ensuring compliance with the securities laws. Such suits are an essential supplement to the criminal, civil, and administrative enforcement actions pursued by NASAA’s U.S. members and federal regulators for the benefit of all investors. NASAA submits this brief to support the continued vitality of the class action mechanism for seeking redress for harmed investors.

Summary of Argument

Petitioners argue that the court of appeals erred by holding that Petitioners had the burden of persuasion to rebut the Basic presumption, and by supposedly preventing Petitioners from “point[ing] to the generic nature of the alleged misstatements” in that endeavor. They seek fundamental changes to the operation of the Basic presumption that would practically eliminate defendants’ burden, and would do so precisely in the sorts of cases where the presumption matters most. Modifying the operation of the Basic presumption in the manner proposed by Petitioners is contrary to the remedial purposes of the federal securities laws, contravenes the continually expressed support of Congress and the Court for private class actions, would significantly undermine the ability of innocent investors to recover their losses, and would inevitably result in a loss of confidence in the U.S. markets.

As the Court recently affirmed in Lorenzo v. SEC, 139 S. Ct. 1094 (2019), the securities laws are intentionally robust and are designed to provide redress for all forms of securities fraud. Id. at 1104 (“Congress intended to root out all manner of fraud in the securities industry”). Private securities class actions are crucial to ensuring compliance with the securities laws and promoting investor confidence in the markets. They provide critical remedies to harmed investors and address the collective action problems and financial and informational disadvantages facing individual investors in litigation against corporate defendants. Private class actions are also a necessary and important supplement to government enforcement because state and federal regulators do not have sufficient resources to detect, investigate, prosecute, and remedy all securities law violations. It is in part for these reasons that courts should continue to apply the Basic presumption when a plaintiff establishes through economic evidence that the market was efficient unless the defendants can prove that there was no price impact.

Furthermore, false statements or omissions which artificially boost a stock’s price or maintain existing price inflation, are both instances of fraud. It does not matter whether the fraudulent statements “initially introduce” inflation into a defendant’s stock price, or instead “wrongfully prolong” the presence of that inflation. FindWhat Inv’r Grp. v., 658 F.3d 1282, 1316 (11th Cir. 2011). The latter situation is simply a “mirror image” of the former, but “in black ink, rather than red.” Schleicher v. Wendt, 618 F.3d 679, 683 (7th Cir. 2010). In either case, investors are harmed when the truth underlying the misrepresentation or omission comes to light. Accordingly, there is no reason to treat “theories of ‘inflation maintenance’ and ‘inflation introduction’” as “separate legal categories.” In re Vivendi, S.A. Securities Litigation, 838 F.3d 223, 259 (2d Cir. 2016).

In addition, the court of appeals below correctly observed that the presumption “would be of little value if defendants could overcome it by simply producing some evidence of a lack of price impact,” Pet. App. 75a (internal quotation marks omitted). Accordingly, the Court should continue to maintain the framework it established in Basic and reaffirmed recently in Halliburton II.

Finally, although evidence about the content and context of alleged misstatements, including characterizations purporting to show their so-called “general” or “generic” nature, may be relevant to whether there was price impact, such evidence is not conclusive. Judges thus should not be permitted to rely exclusively on such self-serving characterizations to “intuit” whether the alleged misstatements could or could not have had any price impact. Rather, it is essential that courts engage in fulsome analyses of the evidentiary record in order to determine the actual effect of the alleged fraud on the stock’s price.

Indeed, as the Court has recognized, “market efficiency is not a yes-or-no proposition,” and therefore “a public, material misrepresentation might not affect a stock’s price even in a generally efficient market.” Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 279 (2014) (“Halliburton II”). The inverse is also equally true; namely, that alleged misstatements that could be characterized or appear in a vacuum to be “general” or “generic” may impact price.