1 00:00:03,200 --> 00:00:07,960 Speaker 1: This is Bloomberg Law with June Brussel from Bloomberg Radio. 2 00:00:14,080 --> 00:00:17,480 Speaker 1: This weekend, college sports fans will be watching the basketball 3 00:00:17,560 --> 00:00:20,640 Speaker 1: court as the Final Four is played, But this week 4 00:00:20,840 --> 00:00:24,639 Speaker 1: fans were watching another court, the Supreme Court, in what 5 00:00:24,800 --> 00:00:27,120 Speaker 1: seemed like a toss up for the n C Double 6 00:00:27,200 --> 00:00:29,880 Speaker 1: A in a case that could loosen its grip over 7 00:00:30,000 --> 00:00:34,360 Speaker 1: college and mean greater compensation for student athletes. The n 8 00:00:34,400 --> 00:00:36,839 Speaker 1: C Double A is trying to shield its rules from 9 00:00:36,920 --> 00:00:40,560 Speaker 1: antitrust scrutiny and asking the jostice Is to overturn a 10 00:00:40,680 --> 00:00:43,840 Speaker 1: ruling that would let member schools offer their athletes more 11 00:00:43,880 --> 00:00:47,400 Speaker 1: in the way of education related compensation. Many of the 12 00:00:47,479 --> 00:00:51,440 Speaker 1: jostices seemed sympathetic to the students here at johnstice Is 13 00:00:51,479 --> 00:00:55,520 Speaker 1: Brett Kavanaugh, Clarence Thomas, and Samuel Alito. I mean you 14 00:00:55,600 --> 00:01:00,520 Speaker 1: said earlier, Uh, this would allow the player is to 15 00:01:00,680 --> 00:01:03,720 Speaker 1: receive six thousand dollars a year, as if that were 16 00:01:03,760 --> 00:01:09,920 Speaker 1: some exorbitant amount when the TV contracts are in the billions. Well, 17 00:01:09,920 --> 00:01:14,559 Speaker 1: it just strikes me as odd that the coaches salaries 18 00:01:14,600 --> 00:01:18,280 Speaker 1: have ballooned and they're in the amateur ranks as are 19 00:01:18,360 --> 00:01:22,800 Speaker 1: the players. So the argument is they are recruited, they're 20 00:01:22,920 --> 00:01:25,840 Speaker 1: used up, and then they're cast aside without even a 21 00:01:25,880 --> 00:01:28,840 Speaker 1: college degree. So they say, how can this be defended 22 00:01:29,160 --> 00:01:32,919 Speaker 1: in the name of amateurism? But the Justice is also 23 00:01:33,040 --> 00:01:37,000 Speaker 1: seemed worry of undermining the world of college sports as 24 00:01:37,040 --> 00:01:40,880 Speaker 1: justice is Sonya Soto Mayor and Stephen Bryer expressed, how 25 00:01:40,880 --> 00:01:44,720 Speaker 1: do we know that we're not just destroying the game 26 00:01:45,280 --> 00:01:49,760 Speaker 1: as it exists? I worry a lot about judges getting 27 00:01:49,760 --> 00:01:55,400 Speaker 1: into the business of deciding how amateur sports should be run. 28 00:01:55,800 --> 00:01:58,560 Speaker 1: Joining me is Audrey Anderson, head of the higher education 29 00:01:58,640 --> 00:02:02,600 Speaker 1: practice at Bassbar and Sims. Tell us about the issue here, Audrey, 30 00:02:02,920 --> 00:02:08,560 Speaker 1: the issue before the Court is an antitrust ruling that 31 00:02:08,680 --> 00:02:11,560 Speaker 1: the Ninth Circuit entered against the m C Double A 32 00:02:11,800 --> 00:02:14,320 Speaker 1: that found some of the limits that the m C 33 00:02:14,440 --> 00:02:17,880 Speaker 1: double A puts on the compensation that can be received 34 00:02:17,880 --> 00:02:21,800 Speaker 1: by student athletes to be unlawful under the anti trust laws, 35 00:02:21,880 --> 00:02:23,880 Speaker 1: and the n C double A is asking the Supreme 36 00:02:23,919 --> 00:02:27,480 Speaker 1: Court to overrule that and find that the m C 37 00:02:27,560 --> 00:02:30,519 Speaker 1: double A is allowed under the anti trust laws to 38 00:02:31,200 --> 00:02:36,440 Speaker 1: limit all forms of compensation to student athletes. What kinds 39 00:02:36,480 --> 00:02:40,400 Speaker 1: of compensation did the Ninth Circuit say, We're Okay, I 40 00:02:40,440 --> 00:02:44,520 Speaker 1: mean we're not talking about actually paying salaries to student athletes, 41 00:02:44,560 --> 00:02:48,520 Speaker 1: are we know what the Districcord and the Ninth Circuit 42 00:02:48,919 --> 00:02:51,800 Speaker 1: held was that the m C double A could not 43 00:02:52,320 --> 00:02:58,840 Speaker 1: limit educationally related benefit to be provided to student athletes 44 00:02:59,160 --> 00:03:03,560 Speaker 1: that were non cash. They also ruled that the double 45 00:03:03,639 --> 00:03:08,040 Speaker 1: A had to allow student athletes to receive up to 46 00:03:08,560 --> 00:03:12,800 Speaker 1: fifty nine hundred dollars a year in cash or cash 47 00:03:12,840 --> 00:03:17,720 Speaker 1: equivalent payments that were education or academic related. So there's 48 00:03:17,720 --> 00:03:21,800 Speaker 1: a lot of talking about in the argument, and what's 49 00:03:21,840 --> 00:03:25,720 Speaker 1: the N double as argument about this? The N double 50 00:03:25,760 --> 00:03:31,320 Speaker 1: aise argument is that under the antitrust laws, they are 51 00:03:31,360 --> 00:03:36,320 Speaker 1: what you would call a joint venture. The participants in 52 00:03:36,800 --> 00:03:41,080 Speaker 1: their entity have to agree on things like the rules 53 00:03:41,080 --> 00:03:43,480 Speaker 1: of the game, like how many players will be out 54 00:03:43,520 --> 00:03:46,240 Speaker 1: there out on the field in order for them to 55 00:03:46,320 --> 00:03:50,640 Speaker 1: provide their products college sports at all. And they say, 56 00:03:50,720 --> 00:03:52,960 Speaker 1: one of the rules we have to have for us 57 00:03:53,000 --> 00:03:56,240 Speaker 1: to provide the product of college sports is that the 58 00:03:56,280 --> 00:03:59,520 Speaker 1: athletes will be amateurs. And for us that means that 59 00:03:59,640 --> 00:04:03,000 Speaker 1: the students won't be paid anything. We get to define 60 00:04:03,120 --> 00:04:06,000 Speaker 1: what amateurism is. What the m C double A really 61 00:04:06,120 --> 00:04:08,640 Speaker 1: wants to get from this case is a change in 62 00:04:08,680 --> 00:04:11,400 Speaker 1: the anti trust laws. They say it's not a change, 63 00:04:11,400 --> 00:04:14,720 Speaker 1: but they want a clarification that under the anti trust laws, 64 00:04:15,080 --> 00:04:19,039 Speaker 1: court should give very deferential review to any rule that 65 00:04:19,080 --> 00:04:22,640 Speaker 1: the m C double A says is related to amateurism. 66 00:04:23,279 --> 00:04:26,720 Speaker 1: Did most of the justices seem very sympathetic to the 67 00:04:26,760 --> 00:04:30,640 Speaker 1: athletes position, some pointing out that college sports is a 68 00:04:30,720 --> 00:04:34,600 Speaker 1: multibillion dollar business and the amount of money the coaches get. 69 00:04:34,920 --> 00:04:38,080 Speaker 1: Absolutely there was a lot of sympathy for the athletes 70 00:04:38,520 --> 00:04:43,200 Speaker 1: and a lot of statements showing that the court thinks 71 00:04:43,320 --> 00:04:47,080 Speaker 1: that college athletics has changed a lot since the last 72 00:04:47,120 --> 00:04:50,159 Speaker 1: time the Court considered an antitrust case about the m 73 00:04:50,200 --> 00:04:52,479 Speaker 1: C double A, which is in the mid nineteen and 74 00:04:52,640 --> 00:04:56,480 Speaker 1: many members of the court noting that the large amounts 75 00:04:56,520 --> 00:04:59,760 Speaker 1: of money that's in college athletics now and that the 76 00:05:00,000 --> 00:05:04,160 Speaker 1: to be benefiting everybody except the student athletes is an 77 00:05:04,200 --> 00:05:07,120 Speaker 1: important difference for how they view the case under the 78 00:05:07,120 --> 00:05:10,599 Speaker 1: antitrust law. But some of the galstices did seem to 79 00:05:10,680 --> 00:05:14,520 Speaker 1: be buying into the n C double as position that 80 00:05:14,800 --> 00:05:19,800 Speaker 1: these payments would change the amateur nature of college sports. Again, 81 00:05:19,800 --> 00:05:23,560 Speaker 1: though they're talking about only six thousand dollars right. I 82 00:05:23,680 --> 00:05:26,360 Speaker 1: heard that concern to June, and I think that part 83 00:05:26,360 --> 00:05:29,440 Speaker 1: of it is that nobody really knows what will happen. 84 00:05:30,000 --> 00:05:33,520 Speaker 1: Part of it is will six thousand dollars a year 85 00:05:33,640 --> 00:05:36,640 Speaker 1: to student athletes who participate on some of these what 86 00:05:37,200 --> 00:05:40,240 Speaker 1: change the game? I think part of it is are 87 00:05:40,279 --> 00:05:45,320 Speaker 1: there some schools or conferences that will set up internships 88 00:05:45,400 --> 00:05:48,400 Speaker 1: that have large amounts of money attached to them. I 89 00:05:48,440 --> 00:05:50,360 Speaker 1: think part of it, though, two, is there's a lot 90 00:05:50,360 --> 00:05:53,320 Speaker 1: of concern about what will the next cases be If 91 00:05:53,360 --> 00:05:55,840 Speaker 1: this is okay and when say that this is a 92 00:05:56,000 --> 00:06:00,800 Speaker 1: legal rubric for reviewing rules around amateurism, well, what will 93 00:06:00,839 --> 00:06:03,839 Speaker 1: that allow the next set of wine is to challenge 94 00:06:04,040 --> 00:06:09,120 Speaker 1: and challenge successfully? And will that ruin college sports? And 95 00:06:09,320 --> 00:06:12,479 Speaker 1: we just don't know what will happen because you don't 96 00:06:12,480 --> 00:06:15,080 Speaker 1: know how the market will respond. And you know, those 97 00:06:15,160 --> 00:06:18,240 Speaker 1: conferences are still allowed to put in place whatever kind 98 00:06:18,240 --> 00:06:20,320 Speaker 1: of limit they would like to put in place, just 99 00:06:20,400 --> 00:06:22,279 Speaker 1: the m C double A can't put them in place. 100 00:06:22,560 --> 00:06:27,000 Speaker 1: And any individual school makes the decision about what they 101 00:06:27,000 --> 00:06:30,800 Speaker 1: are going to offer. It's not like this injunction required 102 00:06:31,080 --> 00:06:35,680 Speaker 1: any school to provide any particular benefit to its students. Athletes. 103 00:06:36,560 --> 00:06:38,800 Speaker 1: Can you read where the court might come out in 104 00:06:38,800 --> 00:06:43,040 Speaker 1: this case? I thought that there was a fair amount 105 00:06:43,080 --> 00:06:46,000 Speaker 1: of sympathy to the athletes situations, But I also heard 106 00:06:46,040 --> 00:06:47,720 Speaker 1: a fair amount of sympathy to some of the m 107 00:06:47,760 --> 00:06:50,839 Speaker 1: C double as practical arguments. I came out of this 108 00:06:51,000 --> 00:06:54,440 Speaker 1: June not really knowing exactly where the court was going 109 00:06:54,520 --> 00:06:58,400 Speaker 1: to come out. I did not hear much sympathy for 110 00:06:58,640 --> 00:07:02,520 Speaker 1: the m C double A home run argument of give 111 00:07:02,560 --> 00:07:06,040 Speaker 1: the m C double a very deferential review for anything 112 00:07:06,200 --> 00:07:11,000 Speaker 1: it determines to be amateurism related. I did, however, hear 113 00:07:11,040 --> 00:07:15,800 Speaker 1: the Court having a lot of concerns about putting in 114 00:07:15,880 --> 00:07:20,320 Speaker 1: place or approving any kind of rule that would allow 115 00:07:20,480 --> 00:07:24,320 Speaker 1: courts to be micromanaging the rules of the m C 116 00:07:24,440 --> 00:07:28,680 Speaker 1: double A or allowing student athletes to be bringing the 117 00:07:28,800 --> 00:07:32,360 Speaker 1: m C double A into court for endless rounds of litigation. 118 00:07:32,640 --> 00:07:36,080 Speaker 1: So I think the court's very concerned about that. Is 119 00:07:36,080 --> 00:07:39,360 Speaker 1: there any middle ground for the court here? The Court 120 00:07:39,480 --> 00:07:43,239 Speaker 1: is definitely trying to find some kind of middle ground, 121 00:07:43,760 --> 00:07:47,280 Speaker 1: And I don't know how much of middle ground there 122 00:07:47,480 --> 00:07:51,760 Speaker 1: is in terms of this particular injunction, right, But you 123 00:07:51,840 --> 00:07:54,160 Speaker 1: heard Brier trying to get at that when he was 124 00:07:54,280 --> 00:07:58,360 Speaker 1: asking Seth Waxman, you know, now, tell me just what 125 00:07:58,600 --> 00:08:01,160 Speaker 1: is it about this injunction and tell me the line 126 00:08:01,960 --> 00:08:05,200 Speaker 1: and words in the injunction that you don't like. He 127 00:08:05,320 --> 00:08:07,000 Speaker 1: was trying to find a middle ground. I think the 128 00:08:07,040 --> 00:08:09,200 Speaker 1: middle ground that the court is trying to look for 129 00:08:10,240 --> 00:08:14,600 Speaker 1: is how can we come up with some method of 130 00:08:14,680 --> 00:08:21,240 Speaker 1: reviewing the double A rule that make sure that the 131 00:08:21,640 --> 00:08:26,400 Speaker 1: double A can't exploit the athletes while not making the 132 00:08:26,480 --> 00:08:30,720 Speaker 1: courts the micromanager of the double A and what happened 133 00:08:30,760 --> 00:08:36,080 Speaker 1: the last time? Just explain what happened the ruling? Then, Well, 134 00:08:36,160 --> 00:08:41,080 Speaker 1: in four UM, the court said that you had to 135 00:08:41,160 --> 00:08:45,720 Speaker 1: apply the Well, the court said that the um different 136 00:08:45,800 --> 00:08:47,880 Speaker 1: that the n C Double A couldn't set rules about 137 00:08:47,960 --> 00:08:51,319 Speaker 1: how much money the different conferences could get for selling 138 00:08:51,840 --> 00:08:56,400 Speaker 1: for selling the TV rights to their broadcast. And then 139 00:08:56,400 --> 00:09:00,840 Speaker 1: the answerable said that that it would be horrible if 140 00:09:00,880 --> 00:09:06,200 Speaker 1: the different conferences and schools were competing for selling TV rights. Well, 141 00:09:06,240 --> 00:09:09,520 Speaker 1: they all do that now. And as they were talking 142 00:09:09,520 --> 00:09:11,920 Speaker 1: about in the court today, you know, now there used 143 00:09:11,960 --> 00:09:15,040 Speaker 1: to be a rule that coaches or assistant coaches could 144 00:09:15,080 --> 00:09:17,120 Speaker 1: only be paid a certain amount. That was an n 145 00:09:17,280 --> 00:09:20,400 Speaker 1: double A rule. That was struck damity any trust laws. 146 00:09:21,280 --> 00:09:24,000 Speaker 1: There's a push in Congress, and there are laws in 147 00:09:24,080 --> 00:09:28,240 Speaker 1: some states like Florida that that are pushing the double A. 148 00:09:28,360 --> 00:09:32,280 Speaker 1: Perhaps Yeah, the there's a law that's going to go 149 00:09:32,320 --> 00:09:35,040 Speaker 1: into effect in Florida and California's past. The law that 150 00:09:35,720 --> 00:09:39,560 Speaker 1: says that UM, nobody the n C double A and 151 00:09:39,640 --> 00:09:43,080 Speaker 1: no school can limit the right of a student athlete 152 00:09:43,120 --> 00:09:46,439 Speaker 1: to sell the rights to their name, image and likeness. 153 00:09:48,160 --> 00:09:55,520 Speaker 1: So UM that means that UH, students athletes have to 154 00:09:55,559 --> 00:10:03,240 Speaker 1: be able to UM get UH deals, to sponsor products, 155 00:10:03,280 --> 00:10:09,640 Speaker 1: to sell advertising rights to a YouTube channel, UM, things 156 00:10:09,679 --> 00:10:15,480 Speaker 1: like that. So that that and that's going to change, 157 00:10:16,200 --> 00:10:21,160 Speaker 1: um the extent to which some student athletes can get money. 158 00:10:21,160 --> 00:10:26,400 Speaker 1: Now those moneys are from third parties, not from the 159 00:10:26,520 --> 00:10:31,319 Speaker 1: schools themselves. UM. And so the MT double are going 160 00:10:31,360 --> 00:10:35,120 Speaker 1: to change its rules about allowing student athletes to get 161 00:10:35,160 --> 00:10:37,120 Speaker 1: those kind of moneys. Right now they're not allowed to. 162 00:10:37,840 --> 00:10:39,920 Speaker 1: So that the m C double as that they were 163 00:10:39,960 --> 00:10:44,160 Speaker 1: going to change their rules, and then they stopped that 164 00:10:44,240 --> 00:10:48,960 Speaker 1: process because the Department of Justice sent them a letter saying, 165 00:10:49,120 --> 00:10:51,839 Speaker 1: the new rules that you think you're going to put 166 00:10:51,880 --> 00:10:56,840 Speaker 1: into place, They may have some antitrust problems. It seems 167 00:10:56,840 --> 00:10:59,240 Speaker 1: like it's a matter of time if you have laws 168 00:10:59,240 --> 00:11:01,120 Speaker 1: like this in californ Orny, in Florida, that it's a 169 00:11:01,120 --> 00:11:05,319 Speaker 1: matter of time. You know, little by little professionalism is 170 00:11:05,360 --> 00:11:10,240 Speaker 1: going to creep into college sports. Well, the m C 171 00:11:10,360 --> 00:11:13,280 Speaker 1: double A has other legal arrows in its quiver, so 172 00:11:13,360 --> 00:11:19,280 Speaker 1: it has said UM in other court proceedings that um, 173 00:11:19,320 --> 00:11:22,120 Speaker 1: if those state laws go into effect, they plan to 174 00:11:22,360 --> 00:11:27,280 Speaker 1: challenge those laws under a different under the Commerce Clause 175 00:11:27,320 --> 00:11:30,200 Speaker 1: of the Constitution. So they may try to get quick 176 00:11:30,240 --> 00:11:33,679 Speaker 1: injunctions against some of those laws and tie them up 177 00:11:33,800 --> 00:11:37,680 Speaker 1: in litigation for a matter of time. But that's why 178 00:11:37,679 --> 00:11:39,720 Speaker 1: it's so important for the MT double A to be 179 00:11:39,840 --> 00:11:43,960 Speaker 1: doing um lobbying at the federal level to get the 180 00:11:44,080 --> 00:11:48,280 Speaker 1: US Congress to pass some kind of a law that 181 00:11:48,360 --> 00:11:52,440 Speaker 1: would settle all of this. Thanks Audrey, that's Audrey Anderson 182 00:11:52,480 --> 00:11:58,320 Speaker 1: of Bassparian Sims, Bullman SAX was at the Subreme Court 183 00:11:58,400 --> 00:12:00,280 Speaker 1: and it was billed as a case that could deal 184 00:12:00,320 --> 00:12:04,520 Speaker 1: a sweeping blow to class action securities fraud lawsuits, but 185 00:12:04,600 --> 00:12:07,720 Speaker 1: the case kind of fizzled out in oral arguments. A 186 00:12:07,800 --> 00:12:11,800 Speaker 1: decade ago, investors filed a class action lawsuit a legend. 187 00:12:11,800 --> 00:12:13,880 Speaker 1: They were deceived to the tune of as much as 188 00:12:13,960 --> 00:12:18,560 Speaker 1: thirteen billion dollars by Goldman's repeated public assurances that it 189 00:12:18,640 --> 00:12:22,200 Speaker 1: was being vigilant about avoiding conflicts of interest. But Goldman 190 00:12:22,280 --> 00:12:25,880 Speaker 1: said those assurances were so generic they couldn't possibly have 191 00:12:25,920 --> 00:12:29,400 Speaker 1: been responsible for propping up the stock price. Many of 192 00:12:29,400 --> 00:12:32,000 Speaker 1: the getice is said the issues had narrowed as the 193 00:12:32,080 --> 00:12:34,880 Speaker 1: case bounced up and down the court system, and that 194 00:12:35,000 --> 00:12:37,920 Speaker 1: both sides now seemed to agree on the legal standard. 195 00:12:38,160 --> 00:12:41,040 Speaker 1: Here are justice is Amy Coney Barrett and Stephen Bryer. 196 00:12:41,360 --> 00:12:43,600 Speaker 1: So now we are left, you know, in this position 197 00:12:43,760 --> 00:12:47,040 Speaker 1: where you've both moved more closely together, and now we 198 00:12:47,080 --> 00:12:49,560 Speaker 1: have to decide what to do about the Second Circuit's opinion. 199 00:12:50,960 --> 00:12:53,440 Speaker 1: This seems like an area that the more that I 200 00:12:53,480 --> 00:12:56,839 Speaker 1: read about it, the less that we write, the better. 201 00:12:57,280 --> 00:13:00,240 Speaker 1: Joining me is Mark Rifkin, a partner at wolf Holland's Seen. 202 00:13:00,800 --> 00:13:04,880 Speaker 1: Mark explained the issue over these statements, which included promises 203 00:13:05,000 --> 00:13:09,400 Speaker 1: that Goldman had extensive procedures and controls designed to identify 204 00:13:09,440 --> 00:13:12,760 Speaker 1: and address conflicts of interest. So the plaintiffs say that 205 00:13:12,800 --> 00:13:17,360 Speaker 1: those statements, which the parties characterized as generalized statements. But 206 00:13:17,400 --> 00:13:20,640 Speaker 1: to me, they're actually pretty specific. They're not related to 207 00:13:20,679 --> 00:13:24,880 Speaker 1: any direct line of business of Goldman Sacks, but they're 208 00:13:24,880 --> 00:13:28,240 Speaker 1: more generalized, and so in that sense, their generic statements. 209 00:13:28,240 --> 00:13:32,080 Speaker 1: But the plaintiffs say that when Goldman Sacks got into 210 00:13:32,080 --> 00:13:36,320 Speaker 1: trouble because of trading in securities that were adverse to 211 00:13:36,360 --> 00:13:39,760 Speaker 1: the interests of their clients, they failed to disclose that 212 00:13:39,800 --> 00:13:44,760 Speaker 1: information to the public. That information eventually became public knowledge 213 00:13:44,960 --> 00:13:49,360 Speaker 1: when a complaint was filed against Goldman for that and 214 00:13:49,760 --> 00:13:52,840 Speaker 1: that action, that disclosure had no effect on the price 215 00:13:52,840 --> 00:13:56,760 Speaker 1: of the stock, because the plaintiffs say that Goldman had 216 00:13:56,800 --> 00:14:02,480 Speaker 1: issued these reassuring generalized statement which maintained the price of 217 00:14:02,520 --> 00:14:05,640 Speaker 1: the stock in the marketplace, and they say that was 218 00:14:05,720 --> 00:14:09,040 Speaker 1: false inness leading. Because low and behold, when the bad 219 00:14:09,080 --> 00:14:13,600 Speaker 1: news comes out and Goldman is exposed, the allegations are exposed, 220 00:14:13,640 --> 00:14:16,600 Speaker 1: and the extent of the problem is exposed, the price 221 00:14:16,600 --> 00:14:21,040 Speaker 1: of the stock dropped, and that stock drop on the 222 00:14:21,080 --> 00:14:25,160 Speaker 1: disclosure lad the stock price to trade at the price 223 00:14:25,200 --> 00:14:27,880 Speaker 1: that the plaintiff say it should have traded at all. Along, 224 00:14:28,560 --> 00:14:32,320 Speaker 1: Goldman did not admit wrongdoing, and it's five million dollars 225 00:14:32,360 --> 00:14:35,280 Speaker 1: settlement with the sec but it did say it made 226 00:14:35,280 --> 00:14:38,520 Speaker 1: a mistake in failing to disclose, which is unusual for 227 00:14:38,560 --> 00:14:42,160 Speaker 1: a settlement. Correct, And I think you need to look 228 00:14:42,200 --> 00:14:45,640 Speaker 1: at the nature of the underlying allegation is that Goldman 229 00:14:45,760 --> 00:14:49,800 Speaker 1: was engaged in conduct that was inconsistent with the interests 230 00:14:49,840 --> 00:14:54,400 Speaker 1: of not its stockholders, but its clients. And that's Goldman's 231 00:14:54,440 --> 00:14:58,440 Speaker 1: life blood, that they put the interests of their clients first, 232 00:14:58,680 --> 00:15:01,160 Speaker 1: that what they do is of the benefit of the clients. 233 00:15:01,160 --> 00:15:03,600 Speaker 1: And that's why I think that those statements, although they 234 00:15:03,600 --> 00:15:08,200 Speaker 1: were general statements, are actually pretty important to Goldman customers. 235 00:15:08,640 --> 00:15:11,960 Speaker 1: And if you're an investor in Goldman Sacks as a stockholder, 236 00:15:12,120 --> 00:15:14,200 Speaker 1: that means they should be pretty important to you. So 237 00:15:14,280 --> 00:15:17,800 Speaker 1: I think these statements turned out to be very material. 238 00:15:18,280 --> 00:15:21,440 Speaker 1: And that's the real rub of the issue is were 239 00:15:21,560 --> 00:15:26,120 Speaker 1: these statements important to the market And do the plaintiffs 240 00:15:26,120 --> 00:15:30,400 Speaker 1: have the right to rely on a presumption of reliance 241 00:15:30,440 --> 00:15:33,800 Speaker 1: based on the importance the materiality of the statements. But 242 00:15:34,160 --> 00:15:37,760 Speaker 1: if they do, can Goldman rebut that presumption by some 243 00:15:37,840 --> 00:15:40,880 Speaker 1: other evidence. That's really the heart of the issue that 244 00:15:41,160 --> 00:15:43,800 Speaker 1: was argued in the Supreme Court. This is an appeal 245 00:15:43,800 --> 00:15:47,200 Speaker 1: of a Second Circuit decision what did the second Circuit decide? 246 00:15:47,960 --> 00:15:54,440 Speaker 1: So the Second Circuit affirmed the District Court's decision granting 247 00:15:54,560 --> 00:15:58,040 Speaker 1: class certification, and this was actually the second time class 248 00:15:58,080 --> 00:16:02,480 Speaker 1: certification had been in the Second Circuit. The district courts 249 00:16:02,520 --> 00:16:08,080 Speaker 1: certified the class. Originally, the Second Circuit remanded that decision 250 00:16:08,080 --> 00:16:11,280 Speaker 1: and directed the court to reconsider certain parts of the decision. 251 00:16:12,080 --> 00:16:16,560 Speaker 1: The District Court did that certified the class again. The 252 00:16:16,800 --> 00:16:20,840 Speaker 1: case was appealed to the Second Circuit, and the Second 253 00:16:20,840 --> 00:16:27,800 Speaker 1: Circuit affirmed the district courts decision granting class certification, finding 254 00:16:27,920 --> 00:16:34,040 Speaker 1: that the defendants could not rebut the presumption of reliance 255 00:16:34,160 --> 00:16:38,640 Speaker 1: that the plaintiffs were entitled to invoke under um under 256 00:16:38,640 --> 00:16:41,760 Speaker 1: basic versus Levins, And that's the issue that then went 257 00:16:41,800 --> 00:16:46,120 Speaker 1: up to the Supreme Court. What were the justices concerned about? Well, 258 00:16:46,160 --> 00:16:49,600 Speaker 1: I think the courts concerned with two issues. Number One, 259 00:16:49,920 --> 00:16:53,320 Speaker 1: the way the presumption works centers around the materiality of 260 00:16:53,360 --> 00:16:56,800 Speaker 1: the statements in question. Essentially, what the presumption says is 261 00:16:56,880 --> 00:17:00,320 Speaker 1: that if you trade in an orderly and efficient market, 262 00:17:00,920 --> 00:17:05,679 Speaker 1: and the information that the plaintiff alleges is either misrepresented 263 00:17:05,800 --> 00:17:09,600 Speaker 1: or omitted from the market, and it's important information. It's 264 00:17:09,600 --> 00:17:12,639 Speaker 1: information that a reasonable shareholder would want to know, so 265 00:17:12,720 --> 00:17:16,640 Speaker 1: it's material, and you don't need to rely on anything 266 00:17:16,680 --> 00:17:20,040 Speaker 1: other than the integrity of the market price in order 267 00:17:20,080 --> 00:17:22,920 Speaker 1: to be able to stay to claim under the securities laws. 268 00:17:22,960 --> 00:17:26,159 Speaker 1: And that's the presumption of reliance that you're entitled to 269 00:17:26,280 --> 00:17:29,320 Speaker 1: under the Supreme Court's Basic versus Levins and decision. But 270 00:17:29,440 --> 00:17:33,520 Speaker 1: it's just the presumption. And so the defendant then has 271 00:17:33,560 --> 00:17:38,000 Speaker 1: the opportunity to come back and rebut that presumption by showing, 272 00:17:38,040 --> 00:17:41,920 Speaker 1: for example, that the statements that the plaintiffs claim are 273 00:17:41,960 --> 00:17:45,199 Speaker 1: actionable were not material as a matter of law, or 274 00:17:45,280 --> 00:17:47,840 Speaker 1: did not have an impact on the price of the stock, 275 00:17:47,960 --> 00:17:50,840 Speaker 1: or perhaps in the case of an individual pointiff, he 276 00:17:51,119 --> 00:17:54,640 Speaker 1: or she would never have relied upon those statements had 277 00:17:54,680 --> 00:17:56,679 Speaker 1: he or she known them, and it didn't matter to 278 00:17:56,760 --> 00:18:00,040 Speaker 1: the pointiff whether the price was efficient or inefficient. I 279 00:18:00,040 --> 00:18:04,760 Speaker 1: can't imagine an individual attack like that on particular plaintiff, 280 00:18:04,880 --> 00:18:08,280 Speaker 1: but a defendant is always able to try to prove 281 00:18:08,600 --> 00:18:12,920 Speaker 1: that the information that was allegedly misrepresented was not material, 282 00:18:13,200 --> 00:18:16,120 Speaker 1: and that's exactly what Goldman Sachs tried to do here. 283 00:18:16,400 --> 00:18:21,600 Speaker 1: And Judge Croudy in the District Court concluded that Goldman's 284 00:18:21,640 --> 00:18:26,320 Speaker 1: experts did not adequately rebut the presumption of reliance and 285 00:18:26,400 --> 00:18:30,480 Speaker 1: so certified the class. That's the very narrow holding that 286 00:18:30,520 --> 00:18:33,359 Speaker 1: went up to the Supreme Court. Jealtic is from both 287 00:18:33,359 --> 00:18:37,480 Speaker 1: sides of the ideological spectrum said that as the case evolved, 288 00:18:37,760 --> 00:18:41,760 Speaker 1: the party's positions moved more towards the middle. Yes, and 289 00:18:41,800 --> 00:18:44,840 Speaker 1: that's certainly the case in the district court. Goldman argued 290 00:18:45,040 --> 00:18:48,560 Speaker 1: that the court was not entitled to consider those statements 291 00:18:48,560 --> 00:18:50,600 Speaker 1: at all, because Goldman took the position that they were 292 00:18:50,640 --> 00:18:53,119 Speaker 1: completely immaterial as a matter of law. They were so 293 00:18:53,320 --> 00:18:57,719 Speaker 1: generalized and so vague that they were meaningless to individual investors, 294 00:18:57,720 --> 00:19:00,960 Speaker 1: and Goldman lost that position in the record on emotion 295 00:19:01,000 --> 00:19:04,080 Speaker 1: to dismiss the court found that the statements were specific 296 00:19:04,240 --> 00:19:08,000 Speaker 1: enough and related to Goldman's business in such an important 297 00:19:08,000 --> 00:19:11,320 Speaker 1: way that they were material for purposes of stating a 298 00:19:11,400 --> 00:19:15,439 Speaker 1: cause of action. So now roll forward, and the question is, well, okay, 299 00:19:15,480 --> 00:19:19,720 Speaker 1: what can Goldman Sachs say about those statements to rebut 300 00:19:19,880 --> 00:19:23,680 Speaker 1: the presumption of reliance? And so now they have to 301 00:19:23,720 --> 00:19:27,080 Speaker 1: say something different, not that you can't consider them, but 302 00:19:27,240 --> 00:19:30,600 Speaker 1: that you have to consider the vagueness of them. And 303 00:19:30,680 --> 00:19:33,320 Speaker 1: so the argument sort of shifted in its focus, and 304 00:19:33,400 --> 00:19:35,720 Speaker 1: Goldman says, well, okay, if they may be actionable, but 305 00:19:36,040 --> 00:19:38,800 Speaker 1: our experts say they were so meaningless that they didn't 306 00:19:38,800 --> 00:19:42,080 Speaker 1: move the needle in the marketplace. And the pointiff said, no, 307 00:19:42,200 --> 00:19:46,600 Speaker 1: that's not true. Your experts haven't shown that the disclosures 308 00:19:46,640 --> 00:19:51,719 Speaker 1: didn't have an effect on price when the real truth 309 00:19:51,920 --> 00:19:56,920 Speaker 1: about Goldman's alleged misconduct came to light. And so that 310 00:19:57,000 --> 00:19:59,879 Speaker 1: was the issue that was decided on class certification. And 311 00:20:00,000 --> 00:20:02,480 Speaker 1: that's why the parties had to change their positions because 312 00:20:02,480 --> 00:20:06,320 Speaker 1: the context changed. So what's the court's likely decision here? 313 00:20:07,119 --> 00:20:09,520 Speaker 1: I think where where the court is likely to come 314 00:20:09,520 --> 00:20:13,240 Speaker 1: out here is to say that there was no error 315 00:20:13,760 --> 00:20:18,680 Speaker 1: that needs to be addressed. The District Court properly followed 316 00:20:18,680 --> 00:20:23,480 Speaker 1: the second Circuits mandate from the first appeal, properly evaluated 317 00:20:23,720 --> 00:20:27,159 Speaker 1: not just the plaintiffs position, and the presumption of reliance 318 00:20:27,280 --> 00:20:31,800 Speaker 1: that the parties concede applied to the motion for class certification. 319 00:20:32,040 --> 00:20:36,760 Speaker 1: And if I understand the record correctly, Goldman Sachs admitted 320 00:20:37,040 --> 00:20:41,080 Speaker 1: that the plaintiffs had introduced enough evidence on the motion 321 00:20:41,160 --> 00:20:46,119 Speaker 1: for class certification to invoke the presumption, but that they 322 00:20:46,200 --> 00:20:50,320 Speaker 1: then had the opportunity to rebut it with this expert testimony, 323 00:20:50,520 --> 00:20:54,679 Speaker 1: and they offered expert testimony that the District Court found 324 00:20:54,880 --> 00:20:59,879 Speaker 1: did not rise to the level necessary to rebut the presumption. 325 00:21:00,400 --> 00:21:02,679 Speaker 1: And I think where the Supreme Court comes out here 326 00:21:02,680 --> 00:21:05,919 Speaker 1: in the easiest path is to say that it's for 327 00:21:05,960 --> 00:21:09,960 Speaker 1: the district Court to evaluate the evidence that's presented. The 328 00:21:10,080 --> 00:21:13,880 Speaker 1: District Court did that. The District Court rendered a decision 329 00:21:13,920 --> 00:21:18,040 Speaker 1: that the Second Circuit evaluated under the appropriate standards, and 330 00:21:18,119 --> 00:21:23,240 Speaker 1: the Second Circuit affirmed the District Court's decision. There's nothing 331 00:21:23,320 --> 00:21:27,040 Speaker 1: for us to look at here. And so that's where 332 00:21:27,280 --> 00:21:30,040 Speaker 1: I think Justice Brier was heading when he said, the 333 00:21:30,119 --> 00:21:32,840 Speaker 1: less we write, the better we are. And that's the 334 00:21:32,920 --> 00:21:37,280 Speaker 1: outcome that that says the least, which is this really 335 00:21:37,359 --> 00:21:40,320 Speaker 1: is an appeal we should not be hearing or writing upon. 336 00:21:40,880 --> 00:21:43,280 Speaker 1: And so there was a suggestion that one outcome would 337 00:21:43,280 --> 00:21:48,160 Speaker 1: be that the court concludes that sarcery was improvidently granted, 338 00:21:48,440 --> 00:21:50,280 Speaker 1: and that happens from time to time in a case 339 00:21:50,320 --> 00:21:54,400 Speaker 1: like this. There was some concern going into this that 340 00:21:55,000 --> 00:21:58,680 Speaker 1: this is the first time that securities class action has 341 00:21:58,760 --> 00:22:02,639 Speaker 1: been heard by the Supreme Court since any of the 342 00:22:02,760 --> 00:22:06,880 Speaker 1: Trump appointees were on the court. Was there a conservative 343 00:22:07,119 --> 00:22:13,600 Speaker 1: liberal split in anyway? Well, the the only interesting part 344 00:22:13,720 --> 00:22:17,119 Speaker 1: to the argument from a political if you will, from 345 00:22:17,119 --> 00:22:21,240 Speaker 1: a political standpoint, at least in my mind, was Justice Thomas. 346 00:22:21,240 --> 00:22:24,280 Speaker 1: Of course, any time you hear Justice Thomas speak, it's 347 00:22:24,440 --> 00:22:28,320 Speaker 1: it's interesting because he asks questions so rarely, but now 348 00:22:28,960 --> 00:22:32,280 Speaker 1: in in the COVID landscape, he has asked questions, And 349 00:22:32,359 --> 00:22:35,879 Speaker 1: here he asked questions that suggested to me at least 350 00:22:35,960 --> 00:22:40,639 Speaker 1: that he was hoping that the Court might reconsider the 351 00:22:40,720 --> 00:22:44,399 Speaker 1: presumption of reliance after Basic versus Levinson. But other than that, 352 00:22:44,480 --> 00:22:47,320 Speaker 1: I think I think these are such narrow technical issues 353 00:22:47,400 --> 00:22:50,760 Speaker 1: that it's hard to say that the that the political 354 00:22:51,480 --> 00:22:56,399 Speaker 1: differences between the Trump appointees and the and the and 355 00:22:56,480 --> 00:23:00,720 Speaker 1: the more liberal justices on the court really will make 356 00:23:00,800 --> 00:23:03,959 Speaker 1: much difference. I mean, these are very narrow technical legal issues. 357 00:23:04,640 --> 00:23:08,640 Speaker 1: We didn't even we haven't yet talked about the rule 358 00:23:08,760 --> 00:23:12,520 Speaker 1: three oh one issue, which is who who bears the 359 00:23:12,520 --> 00:23:17,280 Speaker 1: burden of proof versus the burden of production. But it's 360 00:23:17,320 --> 00:23:20,080 Speaker 1: such a hyper technical and legal issue that I don't 361 00:23:20,119 --> 00:23:23,679 Speaker 1: see the political spectrum really making a difference in the 362 00:23:23,720 --> 00:23:30,520 Speaker 1: outcome here. This case has been on. Since what happens next? 363 00:23:30,800 --> 00:23:33,399 Speaker 1: You have they had discovery yet? Well, sure, because this 364 00:23:33,480 --> 00:23:36,760 Speaker 1: is this is a class ratification, so the plaintiffs have 365 00:23:37,200 --> 00:23:41,760 Speaker 1: withstood emotion to dismiss. Then they did two rounds of 366 00:23:41,760 --> 00:23:45,520 Speaker 1: class ratification because there was that second appeal in the case. 367 00:23:46,480 --> 00:23:51,280 Speaker 1: If the Supreme Court affirms the Second Circuit's decision, which 368 00:23:51,280 --> 00:23:54,400 Speaker 1: I'm fairly sure the Court will do, then it will 369 00:23:54,440 --> 00:23:56,920 Speaker 1: go back to the second Circuit and be sent right 370 00:23:56,960 --> 00:24:00,199 Speaker 1: back to the district Court for the remainder of the case. 371 00:24:00,880 --> 00:24:06,080 Speaker 1: If the Court were to reverse or remand with instructions, 372 00:24:06,359 --> 00:24:08,959 Speaker 1: then it would go back to the second Circuit and 373 00:24:09,040 --> 00:24:13,080 Speaker 1: the Second Circuit might write again, or it might simply 374 00:24:13,200 --> 00:24:15,480 Speaker 1: remand the case again to the district Court for a 375 00:24:15,640 --> 00:24:19,280 Speaker 1: third bite at the apple. But I don't think that 376 00:24:19,280 --> 00:24:23,760 Speaker 1: that's going to happen because I think that the prevailing view, 377 00:24:24,600 --> 00:24:27,720 Speaker 1: at least from the questions that the court asked, I 378 00:24:27,760 --> 00:24:31,480 Speaker 1: think the prevailing view seemed to be that this was 379 00:24:31,520 --> 00:24:35,240 Speaker 1: a matter that the district Court has some discretion to consider, 380 00:24:35,760 --> 00:24:40,240 Speaker 1: that the district Court exercised its discretion, And while any 381 00:24:40,280 --> 00:24:44,119 Speaker 1: one justice of the Supreme Court might might differ in 382 00:24:45,119 --> 00:24:49,840 Speaker 1: how the evidence was evaluated. I don't think that that 383 00:24:50,000 --> 00:24:53,680 Speaker 1: rises to the level of a precedent sett in case 384 00:24:53,720 --> 00:24:57,240 Speaker 1: that requires the Supreme Court to right a lengthy opinion, 385 00:24:57,359 --> 00:25:00,320 Speaker 1: send it back and start all over again. I just 386 00:25:00,359 --> 00:25:02,560 Speaker 1: don't see that happening here, because I think the record 387 00:25:03,119 --> 00:25:05,480 Speaker 1: is actually a pretty pretty well developed one and a 388 00:25:05,480 --> 00:25:09,240 Speaker 1: pretty good one for for the plaintiffs in this case 389 00:25:09,680 --> 00:25:14,040 Speaker 1: to uh to prevail and simply proceed with their case. 390 00:25:14,640 --> 00:25:19,040 Speaker 1: Does the decision in this case have any ramifications, any 391 00:25:19,080 --> 00:25:24,160 Speaker 1: impact on class actions coming up, or are the facts 392 00:25:24,160 --> 00:25:28,000 Speaker 1: so narrow and so specific that it doesn't well. I 393 00:25:28,440 --> 00:25:31,520 Speaker 1: think that if the Court does what I expected to do, 394 00:25:31,560 --> 00:25:35,600 Speaker 1: which is to write an opinion that simply affirms the 395 00:25:35,720 --> 00:25:39,879 Speaker 1: Second Circuit's decision or just withdraws the grain of sarcenari, 396 00:25:40,280 --> 00:25:42,880 Speaker 1: then it will have very little impact. If if they 397 00:25:42,920 --> 00:25:47,679 Speaker 1: decide to write on rule three oh one, UM, it 398 00:25:47,840 --> 00:25:51,840 Speaker 1: might have some impact in some cases, but I just 399 00:25:51,880 --> 00:25:55,119 Speaker 1: don't see those issues being important enough for the Supreme 400 00:25:55,119 --> 00:25:58,359 Speaker 1: Court to write on here. So I think it's likely 401 00:25:59,000 --> 00:26:04,520 Speaker 1: that this case will have relatively little impact. But you 402 00:26:04,560 --> 00:26:08,600 Speaker 1: never know. I'm I'm always surprised by what the Court does, 403 00:26:08,840 --> 00:26:12,440 Speaker 1: or you know, frequently surprised, but I think here we're 404 00:26:12,480 --> 00:26:16,040 Speaker 1: going to see uh, a fairly plain vanilla a firmans 405 00:26:16,119 --> 00:26:21,440 Speaker 1: or maybe even a decision just withdrawing the Searcherrari. Thanks Mark. 406 00:26:21,760 --> 00:26:25,040 Speaker 1: That's Mark Riskin of Wolf hollen Stein. And that's it 407 00:26:25,080 --> 00:26:27,600 Speaker 1: for the edition of the Bloomberg Law Show. Remember you 408 00:26:27,600 --> 00:26:29,760 Speaker 1: can always at the latest legal news on our Bloomberg 409 00:26:29,800 --> 00:26:33,200 Speaker 1: Lawn podcast. You can find them on Apple Podcasts, Spotify, 410 00:26:33,320 --> 00:26:38,280 Speaker 1: and at www dot Bloomberg dot com slash podcast Slash Law. 411 00:26:38,840 --> 00:26:41,720 Speaker 1: I'm June Grass. Thanks so much for listening, and please 412 00:26:41,720 --> 00:26:43,760 Speaker 1: tune into The Bloomberg Law Show every week now at 413 00:26:43,800 --> 00:26:46,359 Speaker 1: ten pm Eastern, right here on Bloomberg Radio.