Partners Lyle Roberts (Washington, D.C.-Litigation), Mark D. Lanpher (Washington, D.C.-Litigation), counsel George Anhang (Washington, D.C.-Litigation), associate Billy Marsh (Dallas-Litigation), and associate Fatou Waggeh (New York-Litigation) prepared an amicus brief on behalf of the Washington Legal Foundation (WLF) filed on January 5, 2022, asking the U.S. Court of Appeals for the Second Circuit to review the application of recent U.S. Supreme Court precedent for securities class actions. The amicus brief was filed in support of a petition for interlocutory review of the district court’s decision to grant class certification in In Re Goldman Sachs Group, Inc. Securities Litigation.

The district court certified a class on remand of the case after the Supreme Court issued its opinion last term in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System, 141 S. Ct. 1951 (2021). In Goldman, the Court reaffirmed that class certification is inappropriate in a securities fraud class action if an alleged misrepresentation had no impact on the price of the security. The Court further stated that an inference of price impact “starts to break down when there is a mismatch between the contents of the misrepresentation and the corrective disclosure.” The district court interpreted this “mismatch” test to require only a finding that the purported corrective disclosures generally “implicate” the same subject matter as the alleged misrepresentations.

The WLF brief argues that the Supreme Court could not have meant for the “mismatch” test to be applied in this way for two reasons. First, the brief argues that by endorsing a very loose connection between the types of generic, front-end statements at issue and the purported back-end corrective disclosures, the district court’s decision renders the “mismatch” test virtually meaningless. Second, the brief argues that the district court’s decision defeats the underlying legal principles and public policy considerations underlying the “mismatch” test. WLF urged the Second Circuit to review the district court’s decision given its potential impact on generic statements of aspiration, commitment, and risk made by many public companies.

WLF is a nonprofit public-interest law firm and policy center with supporters in the U.S. Founded in 1977, WLF promotes and defends free enterprise, individual rights, limited government and the rule of law.

The Team