“Without the ability to rebut class-wide reliance at the class-certification stage, most securities class-action defendants would have no choice but to settle.”
—Cory Andrews, WLF General Counsel & Vice President of Litigation

(Washington, DC)—The U.S. Supreme Court today vacated a decision of the U.S. Court of Appeals for the Second Circuit in an important securities class action. The decision was a victory for Washington Legal Foundation, which filed an amicus brief in the case. WLF’s amicus brief was prepared with the pro bono assistance of Lyle Roberts and Daniel Sachs at Shearman & Sterling LLP.

Under the Supreme Court’s decision in Basic Inc. v. Levinson, a defendant can rebut the presumption of class-wide reliance in a securities class action by showing that an alleged misrepresentation did not actually affect the stock’s market price. The Supreme Court has also made clear, in Halliburton Co. v. Erica P. John Fund, that a defendant is entitled to rebut the Basic presumption at the class-certification stage. Today’s decision vindicates those holdings.

The Supreme Court vacated the Second Circuit’s decision barring the defendant from rebutting price impact by pointing to the generic nature of the alleged misstatements (e.g., Goldman Sachs’s aspirational mission statement). As WLF contended in its amicus brief, the Second Circuit’s view would undermine Congress’s intent to limit the proliferation of meritless securities class actions.