UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Thurgood Marshall U.S. Courthouse 40 Foley Square, New York, NY 10007 Telephone: 212-857-8500 MOTION INFORMATION STATEMENT Docket Number(s): _1_5---=-===-------------- _______ _,C=a""pt:::io:::n'-'-[=us:.:e-"'sh:::o::.rt:....:tlc:..:. .tl:.:el..._ _______ _ Motion ror: Petition for Permission to Appeal Pursuant to Fed. R. Civ. P. 23(f) Set forth below precise, complete statement ofreliefsought: Petition for permission to appeal order granting class certification pursuant to Fed. R. Civ. P. 23(f). In re Goldman Sachs Group, Inc. Securities Litigation The Goldman Sachs Group, Inc., et al. OPPOSING PARTY: Arkansas Teachers Retirement System, et al. UPiaintiff ./ Defendant [{]Appellant/Petitioner Appellee/Respondent MOVING ATTORNEY: Richard H. Klapper OPPOSING ATTORNEY: Thomas A. Dubbs I Spencer A. Burkholz [name of attorney, with finn, address, phone number and e-mail] Sullivan & Cromwell LLP Labaton Sucharow LLP I Robbins Geller Rudman & Dowd LLP 125 Broad Street, New York, NY 10004-2498 140 Broadway, 34th Floor, NawYork, NY 1ooos/esswastBroadway, suita1900, san D1ego, CA92101 [email protected]; (212) 558-4000 [email protected]; (212)-907-0700 1 [email protected]; (619) 231-1058 court-Judge/Agencyappealedfrom: The Honorable Paul A. Crotty, U.S. District Court, Southern District of New York Please check appropriate boxes: Has counsel (required by Local Rule 27. 1) : l.{J YesUNo (explain): ____________ _ position on motion: U Unopposed [{]opposed Qon 't Know Does opposing counsel intend to file a response: [{]Yes []No Don't Know FOR EMERGENCY MOTIONS, MOTIONS FOR STAYS AND INJUNCTIONS PENDING APPEAL: Dves BNo Oves No Has request for relief been made below? Has this relief been previously sought in this Court? Requested return date and explanation of emergency: _______ _ ls oral argument on motion requested? [{]Yes 0 No (requests for oral argument will not necessarily be granted) Has argument date of appeal been set? 0 Yes [{]No If yes, enter date:. _____________________ _ Service by: DcM/ECF [{]Other [Attach proof of service] Form T-1080 (rev. 12-13) Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page1 of 29
29
Embed
In re Goldman Sachs Group, Inc. Securities Litigation ...blogs.reuters.com/alison-frankel/files/2015/10/goldmanCDO-interlocmotion.pdfDefendants-Petitioners The Goldman Sachs Group,
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT Thurgood Marshall U.S. Courthouse 40 Foley Square, New York, NY 10007 Telephone: 212-857-8500
court-Judge/Agencyappealedfrom: The Honorable Paul A. Crotty, U.S. District Court, Southern District of New York
Please check appropriate boxes:
Has mo~noti~opposing counsel (required by Local Rule 27.1): l.{J YesUNo (explain): ____________ _
Opposin~unsel's position on motion:
U Unopposed [{]opposed Qon 't Know
Does opposing counsel intend to file a response:
[{]Yes []No Don't Know
FOR EMERGENCY MOTIONS, MOTIONS FOR STAYS AND INJUNCTIONS PENDING APPEAL:
Dves BNo Oves No
Has request for relief been made below? Has this relief been previously sought in this Court? Requested return date and explanation of emergency: _______ _
ls oral argument on motion requested? [{]Yes 0 No (requests for oral argument will not necessarily be granted)
Has argument date of appeal been set? 0 Yes [{]No If yes, enter date:. _____________________ _
Service by: DcM/ECF [{]Other [Attach proof of service]
Form T-1080 (rev. 12-13)
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page1 of 29
15-______IN THE
United States Court of AppealsFOR THE SECOND CIRCUIT
IN RE GOLDMAN SACHS GROUP, INC. SECURITIES LITIGATION
FROM AN ORDER GRANTING CERTIFICATION OF CLASS ENTERED ON SEPTEMBER 24, 2015
BY THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
MASTER FILE NO. 1:10 CIV. 03461 (PAC)
THE HONORABLE PAUL A. CROTTY
PETITION OF DEFENDANTS FOR PERMISSION TO APPEAL
PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 23(f )
October 8, 2015
d
RICHARD H. KLAPPER
THEODORE EDELMAN
ROBERT J. GIUFFRA, JR.
DAVID M.J. REIN
BENJAMIN R. WALKER
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, New York 10004
(212) 558-4000
Attorneys for Defendants-Petitioners
The Goldman Sachs Group, Inc.,
Lloyd C. Blankfein, David A.Viniar
and Gary D. Cohn
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page2 of 29
CERTIFICATION PURSUANT TO F.R.A.P. 26.1
Pursuant to Federal Rule of Appellate Procedure 26.1, as to the petitioners
listed below, the identity of their respective parent corporations, and of any
publicly held company that owns 10 percent or more of the identified party’s stock,
are as follows:
The Goldman Sachs Group, Inc.
None.
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page3 of 29
adversely only after the market learned of government lawsuits and investigations.
(A-440-54, 574-95, 1077-80.) In response, Plaintiffs submitted no price impact
evidence whatsoever, but only the speculative, circular theory “that the
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page19 of 29
-13-
misstatements simply served to maintain an already inflated stock price,” and that
“on the corrective disclosure dates, information revealing the misstatements to the
market was released, and the stock price dropped.” (A-11-12.)
The District Court’s Class Certification Order. After denying Defendants’
requests for an evidentiary hearing or oral argument (A-1069), the District Court
issued an opinion containing only four pages of legal analysis. (See A-10-14.)
After again declining to follow this Court’s precedents on the actionability of the
challenged statements (A-12 n.5), the District Court created a “conclusive
evidence” standard for rebutting the Basic presumption of reliance (A-12-13), and
then dismissed as “insignificant” and declined to “consider” Defendants’
unrebutted evidence demonstrating the absence of any price impact. (A-11.) The
District Court also rejected Defendants’ attack on Plaintiffs’ failure to present the
type of damages model required by Comcast, shifting to Defendants the burden of
proving that it would be “impossible” for Plaintiffs to construct a damages model
consistent with their liability theory. (A-14.)
ARGUMENT
This Court should grant a Rule 23(f) petition where, as here, (1) “the
certification order will effectively terminate the litigation and there has been a
substantial showing that the district court’s decision is questionable,” or (2) “the
certification order implicates a legal question about which there is a compelling
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page20 of 29
-14-
need for immediate resolution.” Hevesi, 366 F.3d at 76.
I. THIS COURT SHOULD REVIEW THE DISTRICT COURT’S
ERRONEOUS CERTIFICATION OF A CLASS WHERE
DEFENDANTS’ GENERAL, ASPIRATIONAL STATEMENTS HAD
NO STOCK PRICE IMPACT.
This action never should have proceeded past the pleading stage in light of
this Court’s repeated holdings that statements that are “too general to cause a
reasonable investor to rely upon them” are immaterial as a matter of law. UBS,
752 F.3d at 182-83. Those holdings should have led the District Court to deny
class certification, because Defendants’ general, aspirational statements challenged
here could not have impacted Goldman Sachs’ stock price as a matter of law, and
Plaintiffs thus cannot invoke the Basic presumption of classwide reliance. It
cannot be that the same type of general, aspirational statements that this Court has
repeatedly held were not actionable in cases involving other financial firms are
actionable, have price impact and permit the certification of a class seeking billions
in damages in this case.5
5 Nothing in Amgen Inc. v. Conn. Ret. Plans & Trust Funds, which held only that
“proof” of materiality as a factual matter is not required at the class certification
stage, 133 S. Ct. 1184, 1191 (2013), would prevent this Court from holding,
consistent with its six decisions, that no reasonable investor would have relied on
Defendants’ challenged general, aspirational statements as a matter of law, and,
therefore, that the District Court erred in certifying a class premised on application
of the Basic presumption to those statements.
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page21 of 29
-15-
II. THIS COURT SHOULD REVIEW THE DISTRICT COURT’S
IMPROPER EVIDENTIARY STANDARD FOR REBUTTING THE
BASIC PRESUMPTION.
Defendants can defeat class certification by rebutting the Basic presumption
“through direct as well as indirect price impact evidence.” Halliburton II, 134 S.
Ct. at 2417. “Any showing that severs the link between the alleged
misrepresentation and either the price received (or paid) by the plaintiff” is
“sufficient.” Basic, 485 U.S. at 248 (emphasis added). Rather than apply the
Supreme Court’s standard, the District Court created a new standard, putting the
burden on Defendants to “demonstrate a complete absence of price impact” with
“conclusive evidence that no link exists” (A-13), effectively requiring Defendants
to disprove any possibility of price impact.
Basic and Halliburton II do not go so far. As Basic recognized, Fed. R.
Evid. 301 governs “allocating the burdens of proof between parties” when
presumptions apply. 485 U.S. at 245. Under Rule 301, “the party against whom a
presumption is directed has the burden of producing evidence to rebut the
presumption. But this rule does not shift the burden of persuasion, which remains
on the party who had it originally.” Fed. R. Evid. 301. This Court has equated the
showing under Rule 301 to rebut a presumption with the burden to defeat summary
judgment, explaining that “proffered evidence is ‘sufficient’ to rebut a presumption
as long as the evidence could support a reasonable jury finding of ‘the
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page22 of 29
-16-
nonexistence of the presumed fact.’” ITC Ltd. v. Punchgini, Inc., 482 F.3d 135,
149 (2d Cir. 2007) (citation omitted).6 Once Defendants demonstrated that the
challenged statements had no price impact, the burden shifted to Plaintiffs to come
forward with contrary evidence. The District Court erred in failing to require
Plaintiffs to do so.
The implications of this ruling are significant not only for this case, but for
all similar class actions in this Circuit, where the most significant securities class
actions are litigated. The Court should grant certification to clarify and standardize
the evidentiary showing required to rebut the Basic presumption under Halliburton
II.
III. THE DISTRICT COURT ERRONEOUSLY DISREGARDED
DEFENDANTS’ UNREBUTTED EVIDENCE SHOWING THAT
THEIR CHALLENGED STATEMENTS HAD NO PRICE IMPACT.
Defendants presented unrebutted expert evidence, as permitted by
Halliburton II, demonstrating that the challenged statements had no impact on
Goldman Sachs’ stock price either when they were made or on Plaintiffs’ four
purported “corrective disclosure” dates. (See supra at pp. 12-13.) The District
Court committed two significant errors in not considering that evidence.
6 One district court did not apply Rule 301, but that ruling relied on the Halliburton
II concurrence as well as an understanding, not advocated by Defendants here, that
under Rule 301 a plaintiff “would not be afforded an opportunity to … produc[e]
its own reputable expert to challenge [defendant’s].” Erica P. John Fund, Inc. v.
Halliburton Co., 2015 WL 4522863, at *7 (N.D. Tex. July 25, 2015).
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page23 of 29
-17-
First, as contemplated by Halliburton II, Defendants demonstrated that none
of Defendants’ challenged statements caused any increase in the price of Goldman
Sachs’ stock on any of the 18 days when the statements were made. (A-424-32,
1072.) The District Court improperly dismissed this evidence as “insignificant.”
(A-11.)7
Second, the District Court recognized that “there was no movement in
Goldman’s stock price” when press reports alleged “on 34 separate dates prior to
April 16, 2010”—the first alleged corrective disclosure date—that “Goldman had
acted against clients’ interests.” (A-11.) This unrebutted evidence demonstrated
conclusively that on Plaintiffs’ “corrective disclosure” dates the market reacted
negatively to the overhang and uncertainty arising from government enforcement
actions, not to some supposed recognition that Goldman Sachs’ alleged conflicts in
connection with four CDOs had rendered false Defendants’ aspirational statements
about the Firm’s business principles and conflicts controls.8 Had Plaintiffs’
7 See In re Moody’s Corp. Sec. Litig., 274 F.R.D. 480, 493 (S.D.N.Y. 2011) (where
“there [wa]s no date on which any alleged misrepresentation caused a statistically
significant increase in the price,” defendants successfully “severed the link
between the misrepresentation and the price”). 8 Plaintiffs offered no plausible explanation for why Goldman Sachs experienced
no statistically significant price decline on April 26, 2010—the only “corrective
disclosure” date with no news of enforcement activity—but did decline on April
30, 2010, when a newspaper reported rumors of a DOJ investigation but did not
reveal any new alleged facts about Goldman Sachs’ conduct. (A-1076-77.)
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page24 of 29
-18-
liability theory been correct, the price of Goldman Sachs’ stock should have
declined when the allegations were disseminated on those 34 earlier dates well
before the four “corrective disclosure” dates alleged here.9
In expressly refusing to “consider” Defendants’ unrebutted showing of no
price impact, the District Court, citing only Plaintiffs’ brief in support, improperly
held that this evidence constituted a “‘truth on the market’ defense” that “speaks to
the statements’ materiality and not price impact.” (A-11.) As the Supreme Court
expressly recognized in Halliburton II, notwithstanding any factual overlap
between price impact and materiality, “defendants must be afforded an opportunity
before class certification to defeat the presumption through evidence that an
alleged misrepresentation did not actually affect the market price of the stock.”
134 S. Ct. at 2417; see also In re IPO Sec. Litig., 471 F.3d 24, 41 (2d Cir. 2006)
(courts must make “definitive assessment of Rule 23 requirements,
notwithstanding their overlap with merits issues”). The District Court plainly erred
in not allowing Defendants to do so here.10
9 In Halliburton, on remand from the Supreme Court, the district court denied class
certification where, as here, “the information alleged by the [plaintiff] to be
corrective was both already disclosed and caused no statistically significant price
reaction.” 2015 WL 4522863, at *20 (emphasis in original). 10
The District Court also attempted to dismiss Defendants’ evidence as
purportedly revealing “different forms and degrees of misstatements” than those
revealed on the four “corrective disclosure” dates. (A-11-12.) But as Dr. Gompers
demonstrated, virtually all of the factual allegations concerning the CDO conflicts
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page25 of 29
-19-
IV. THE DISTRICT COURT ALSO ERRONEOUSLY CERTIFIED A
CLASS, EVEN THOUGH PLAINTIFFS’ DAMAGES
METHODOLOGY ADMITTEDLY DOES NOT MEASURE
DAMAGES FLOWING ONLY FROM THEIR THEORY OF INJURY.
This Court also should review the District Court’s clear misapplication of
the Supreme Court’s decision in Comcast. As the District Court recognized (but
then ignored), under Comcast Plaintiffs must show “at the class certification stage
. . . that their damages model actually measures damages that result from the
class’s theory of injury.” (A-13 (emphasis added; quoting Roach v. T.L. Cannon
Corp., 778 F.3d 401, 407 (2d Cir. 2015)); see also Comcast, 133 S. Ct. at 1433.
Defendants’ expert demonstrated that the conclusory damages methodology
of Plaintiffs’ expert does not disaggregate the stock price declines supposedly
had been prominently and extensively reported to the public—with no impact on
the Firm’s stock price—long before the corrective disclosure dates. (A-432-40,
543-55, 1078-79.) For example, virtually all of the factual allegations contained in
the SEC’s complaint concerning the ABACUS CDO were the focus of extensive
media coverage, including in a best-selling book published in November 2009.
(A-550-54, 1078-79.) Similarly, the factual allegations concerning the Hudson
CDO were reported in a New York Times front-page article months before the
“truth” purportedly was revealed. (A-551, 1078-79.) This is not, as Plaintiffs
claim, a “truth on the market defense.” Dr. Gompers did not conclude that the
prior conflict allegations revealed the “truth” and thus “dissipated” the supposed
inflationary effects of Defendants’ statements about Goldman Sachs’ business
principles and conflict controls. See Ganino v. Citizens Utilities Co., 228 F.3d
154, 167-68 (2d Cir. 2000) (describing “truth on the market” defense). Instead, he
concluded that the lack of investor reaction to prior disclosures of alleged Goldman
Sachs conflicts shows that the Firm’s stock price was not “inflated” by any
general, aspirational statements about its efforts to comply with its business
principles and conflicts controls.
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page26 of 29
-20-
caused by Plaintiffs’ current theory of classwide injury—premised on Defendants’
general statements about Goldman Sachs’ business principles and conflicts
controls—from other causes, including the disclosures about government lawsuits
and investigations and Plaintiffs’ now-dismissed claim premised on Defendants’
failure to disclose Goldman Sachs’ receipt of an SEC Wells notice relating to the
ABACUS transaction. (A-465-68, 1080.) The District Court erred by accepting
Plaintiffs’ vague assurance that their expert “will be able to [develop a damages
model that] account[s] for any so-called inflation” resulting from “Plaintiff’s
theory of liability,” and improperly shifted the burden to Defendants to show “that
disaggregation would be impossible to determine.”11
(A-13-14 (emphasis added).)
CONCLUSION
For the foregoing reasons, Defendants respectfully request that the Court
grant this Petition.
11
In Comcast, the Supreme Court expressly rejected the District Court’s reasoning
that the failure of Plaintiffs’ purported methodology to measure damages flowing
only from their theory of liability “would not defeat the class’s predominance
because it would affect all class members in the same manner.” (A-14.) “Under
that logic, at the class-certification stage any method of measurement is acceptable
so long as it can be applied classwide, no matter how arbitrary the measurements
may be.” Comcast, 133 S. Ct. at 1433.
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page27 of 29
Dated: October 8, 2015 New York, New York
Respectfully submitted,
1.~.~!~ Theodore Edelman Robert J. Giuffra, Jr. David M.J. Rein Benjamin R. Walker SULLIVAN & CROMWELL LLP 125 Broad Street New York, New York 10004-2498 (212) 558-4000
Attorneys for Defendants-Petitioners The Goldman Sachs Group, Inc., Lloyd C. Blankfein, David A. Viniar and Gary D. Cohn
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page28 of 29
CERTIFICATE OF SERVICE
I hereby certify that on this 8th day of October 2015, I caused true and
accurate copies of the foregoing Petition of Defendants for Permission to Appeal
Pursuant to Federal Rule of Civil Procedure 23(f) and accompanying Appendix
and Motion Information Statement to be served by e-mail, as well as by FedEx,
upon the following counsel:
Thomas A. Dubbs LABATON SUCHAROW LLP 140 Broadway, 34th Floor New York, NY 10005
Spencer Burkholz ROBBINS GELLER RUDMAN & DOWD LLP 655 West Broadway, Suite 1900 San Diego, CA 92101
Co-Lead Counsel for Plaintiffs-Respondents
Jacob E. Cohen
Case 15-3179, Document 1-1, 10/09/2015, 1616315, Page29 of 29