Arkansas Teacher Retirement System et al. v. Goldman Sachs Group Inc. et al.


The Second Circuit Court of Appeals instructed the district court to decertify the class in this long running securities class action litigation.

Retained by Sullivan & Cromwell

Defense counsel for Goldman Sachs and the individual defendants retained Cornerstone Research to support Paul Gompers of Harvard University, Stephen Choi of New York University, and Laura Starks of University of Texas at Austin to address price impact and other class certification issues in this long running securities class action. This case was heard once by the Supreme Court and three times by the Second Circuit Court of Appeals.

Defendants have demonstrated, by a preponderance of the evidence, that the misrepresentations did not impact Goldman’s stock price…

In its majority opinion, the Second Circuit panel concluded that “Defendants have demonstrated, by a preponderance of the evidence, that the misrepresentations did not impact Goldman’s stock price, and, by doing so, rebutted Basic’s presumption of reliance.” More specifically, the majority opinion concluded that “defendants managed to sever the link between back-end price drop and front-end misrepresentation.” The Second Circuit noted that defendants severed this link through “Dr. Starks’ analysis of 880 analyst reports published during the Class Period, none of which reference the conflicts disclosure” as well as through analysis of “the pre-disclosure reports identified by Dr. Gompers [which] do not expressly nor impliedly refer to the conflicts disclosure.”

In a concurring opinion, Judge Sullivan “credit[ed] Dr. Paul Gompers’s testimony demonstrating that ‘prior disclosures – as set forth in [thirty-six] separate news reports over as many months – had no impact on Goldman’s stock price.’” Judge Sullivan also credited “Dr. Stephen Choi’s testimony that ‘the stock drop following the corrective disclosures was attributable’ entirely to the ‘news that the SEC and DOJ were pursuing enforcement actions against Goldman.’” He concluded that “[t]he weight of the expert evidence, ‘coupled with’ ‘the generic quality of Goldman’s alleged misstatements,’ persuaded me that Goldman had succeeded in rebutting the presumption of reliance.”

For more information, contact Sara Gilley or Brian Fryd.

Case Experts

Paul A. Gompers

Eugene Holman Professor of Business Administration,
Harvard Business School,
Harvard University

Stephen Choi

Bernard Petrie Professor of Law and Business,
School of Law;
Director, Pollack Center for Law & Business;
New York University

Laura T. Starks

George Kozmetsky Centennial Distinguished University Chair and Professor of Finance,
McCombs School of Business,
University of Texas at Austin