(New York, NY / April 7, 2020) The U.S. Court of Appeals for the Second Circuit today affirmed the class certification in a lawsuit brought by shareholders of Goldman Sachs Group, Inc. over alleged misrepresentations it made to investors during the subprime mortgage crisis (In re Goldman Sachs Group, Inc. Securities Litigation (S.D.N.Y)).  This is the second time the matter has been brought up for appeal, and Goldman’s arguments were denied in their entirety.  As the Court held, “One wonders if the folks who bought Goldman shares, thinking that Goldman assiduously guarded against conflicts of interests in its dealings with those it advised on financial matters, would be concerned not only with the fines the SEC and DOJ had in mind once specific details of Goldman’s fiduciary failures came to light, but also with the financial implications to Goldman’s bottom line once those who took Goldman’s advice knew it was tainted and had cost them millions or billions of losses in worthless Goldman-endorsed investments.”

Thomas A. Dubbs, lead counsel on the case for the Firm, stated that “We are pleased with the Court ‘s thorough and comprehensive decision concerning the last major credit crisis securities case.  We look forward to trial.”

Goldman settled with the SEC for a landmark $550 million in July 2010.  Litigation involving Goldman investors has been ongoing since 2011.  The case centers on allegations that Goldman failed to disclose conflicts of interest with respect to its sale of the Abacus transaction and other collateralized debt obligations (“CDOs”), thereby artificially maintaining an inflated stock price.  Subsequent revelations of Goldman’s conflicts and related federal investigations into the company correctly devalued the stock, resulting in significant losses for investors.

The district court originally granted class certification in September 2015, but the Second Circuit reversed the decision in 2018, holding that the district court did not apply the appropriate standard for upholding “the Basic presumption, that the shareholders relied on Goldman’s allegedly material misstatements in choosing to purchase its stock at the market price.”  The district court ordered additional briefing and held an evidentiary hearing, and certified the class once more.  Again Goldman appealed, asserting that the district court abused its discretion by certifying the shareholder class.

Remarking on “the second time this securities class action has arrived at our doorstep,” Richard C. Wesley, sitting be designation, affirmed the lower court’s certification of the shareholder class.  The district court was found not to have abused its discretion, either on legal grounds or in its application of the Basic presumption.

As co-lead counsel, Labaton Keller Sucharow represents the lead plaintiffs in the matter, the Arkansas Teacher Retirement System, the West Virginia Investment Management Board, and the Plumbers and Pipefitters National Pension Fund.

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