Speaker 1: This is Bloomberg Law with June Brussel from Bloomberg Radio.
Speaker 1: This weekend, college sports fans will be watching the basketball
Speaker 1: court as the Final Four is played, But this week
Speaker 1: fans were watching another court, the Supreme Court, in what
Speaker 1: seemed like a toss up for the n C Double
Speaker 1: A in a case that could loosen its grip over
Speaker 1: college and mean greater compensation for student athletes. The n
Speaker 1: C Double A is trying to shield its rules from
Speaker 1: antitrust scrutiny and asking the jostice Is to overturn a
Speaker 1: ruling that would let member schools offer their athletes more
Speaker 1: in the way of education related compensation. Many of the
Speaker 1: jostices seemed sympathetic to the students here at johnstice Is
Speaker 1: Brett Kavanaugh, Clarence Thomas, and Samuel Alito. I mean you
Speaker 1: said earlier, Uh, this would allow the player is to
Speaker 1: receive six thousand dollars a year, as if that were
Speaker 1: some exorbitant amount when the TV contracts are in the billions. Well,
Speaker 1: it just strikes me as odd that the coaches salaries
Speaker 1: have ballooned and they're in the amateur ranks as are
Speaker 1: the players. So the argument is they are recruited, they're
Speaker 1: used up, and then they're cast aside without even a
Speaker 1: college degree. So they say, how can this be defended
Speaker 1: in the name of amateurism? But the Justice is also
Speaker 1: seemed worry of undermining the world of college sports as
Speaker 1: justice is Sonya Soto Mayor and Stephen Bryer expressed, how
Speaker 1: do we know that we're not just destroying the game
Speaker 1: as it exists? I worry a lot about judges getting
Speaker 1: into the business of deciding how amateur sports should be run.
Speaker 1: Joining me is Audrey Anderson, head of the higher education
Speaker 1: practice at Bassbar and Sims. Tell us about the issue here, Audrey,
Speaker 1: the issue before the Court is an antitrust ruling that
Speaker 1: the Ninth Circuit entered against the m C Double A
Speaker 1: that found some of the limits that the m C
Speaker 1: double A puts on the compensation that can be received
Speaker 1: by student athletes to be unlawful under the anti trust laws,
Speaker 1: and the n C double A is asking the Supreme
Speaker 1: Court to overrule that and find that the m C
Speaker 1: double A is allowed under the anti trust laws to
Speaker 1: limit all forms of compensation to student athletes. What kinds
Speaker 1: of compensation did the Ninth Circuit say, We're Okay, I
Speaker 1: mean we're not talking about actually paying salaries to student athletes,
Speaker 1: are we know what the Districcord and the Ninth Circuit
Speaker 1: held was that the m C double A could not
Speaker 1: limit educationally related benefit to be provided to student athletes
Speaker 1: that were non cash. They also ruled that the double
Speaker 1: A had to allow student athletes to receive up to
Speaker 1: fifty nine hundred dollars a year in cash or cash
Speaker 1: equivalent payments that were education or academic related. So there's
Speaker 1: a lot of talking about in the argument, and what's
Speaker 1: the N double as argument about this? The N double
Speaker 1: aise argument is that under the antitrust laws, they are
Speaker 1: what you would call a joint venture. The participants in
Speaker 1: their entity have to agree on things like the rules
Speaker 1: of the game, like how many players will be out
Speaker 1: there out on the field in order for them to
Speaker 1: provide their products college sports at all. And they say,
Speaker 1: one of the rules we have to have for us
Speaker 1: to provide the product of college sports is that the
Speaker 1: athletes will be amateurs. And for us that means that
Speaker 1: the students won't be paid anything. We get to define
Speaker 1: what amateurism is. What the m C double A really
Speaker 1: wants to get from this case is a change in
Speaker 1: the anti trust laws. They say it's not a change,
Speaker 1: but they want a clarification that under the anti trust laws,
Speaker 1: court should give very deferential review to any rule that
Speaker 1: the m C double A says is related to amateurism.
Speaker 1: Did most of the justices seem very sympathetic to the
Speaker 1: athletes position, some pointing out that college sports is a
Speaker 1: multibillion dollar business and the amount of money the coaches get.
Speaker 1: Absolutely there was a lot of sympathy for the athletes
Speaker 1: and a lot of statements showing that the court thinks
Speaker 1: that college athletics has changed a lot since the last
Speaker 1: time the Court considered an antitrust case about the m
Speaker 1: C double A, which is in the mid nineteen and
Speaker 1: many members of the court noting that the large amounts
Speaker 1: of money that's in college athletics now and that the
Speaker 1: to be benefiting everybody except the student athletes is an
Speaker 1: important difference for how they view the case under the
Speaker 1: antitrust law. But some of the galstices did seem to
Speaker 1: be buying into the n C double as position that
Speaker 1: these payments would change the amateur nature of college sports. Again,
Speaker 1: though they're talking about only six thousand dollars right. I
Speaker 1: heard that concern to June, and I think that part
Speaker 1: of it is that nobody really knows what will happen.
Speaker 1: Part of it is will six thousand dollars a year
Speaker 1: to student athletes who participate on some of these what
Speaker 1: change the game? I think part of it is are
Speaker 1: there some schools or conferences that will set up internships
Speaker 1: that have large amounts of money attached to them. I
Speaker 1: think part of it, though, two, is there's a lot
Speaker 1: of concern about what will the next cases be If
Speaker 1: this is okay and when say that this is a
Speaker 1: legal rubric for reviewing rules around amateurism, well, what will
Speaker 1: that allow the next set of wine is to challenge
Speaker 1: and challenge successfully? And will that ruin college sports? And
Speaker 1: we just don't know what will happen because you don't
Speaker 1: know how the market will respond. And you know, those
Speaker 1: conferences are still allowed to put in place whatever kind
Speaker 1: of limit they would like to put in place, just
Speaker 1: the m C double A can't put them in place.
Speaker 1: And any individual school makes the decision about what they
Speaker 1: are going to offer. It's not like this injunction required
Speaker 1: any school to provide any particular benefit to its students. Athletes.
Speaker 1: Can you read where the court might come out in
Speaker 1: this case? I thought that there was a fair amount
Speaker 1: of sympathy to the athletes situations, But I also heard
Speaker 1: a fair amount of sympathy to some of the m
Speaker 1: C double as practical arguments. I came out of this
Speaker 1: June not really knowing exactly where the court was going
Speaker 1: to come out. I did not hear much sympathy for
Speaker 1: the m C double A home run argument of give
Speaker 1: the m C double a very deferential review for anything
Speaker 1: it determines to be amateurism related. I did, however, hear
Speaker 1: the Court having a lot of concerns about putting in
Speaker 1: place or approving any kind of rule that would allow
Speaker 1: courts to be micromanaging the rules of the m C
Speaker 1: double A or allowing student athletes to be bringing the
Speaker 1: m C double A into court for endless rounds of litigation.
Speaker 1: So I think the court's very concerned about that. Is
Speaker 1: there any middle ground for the court here? The Court
Speaker 1: is definitely trying to find some kind of middle ground,
Speaker 1: And I don't know how much of middle ground there
Speaker 1: is in terms of this particular injunction, right, But you
Speaker 1: heard Brier trying to get at that when he was
Speaker 1: asking Seth Waxman, you know, now, tell me just what
Speaker 1: is it about this injunction and tell me the line
Speaker 1: and words in the injunction that you don't like. He
Speaker 1: was trying to find a middle ground. I think the
Speaker 1: middle ground that the court is trying to look for
Speaker 1: is how can we come up with some method of
Speaker 1: reviewing the double A rule that make sure that the
Speaker 1: double A can't exploit the athletes while not making the
Speaker 1: courts the micromanager of the double A and what happened
Speaker 1: the last time? Just explain what happened the ruling? Then, Well,
Speaker 1: in four UM, the court said that you had to
Speaker 1: apply the Well, the court said that the um different
Speaker 1: that the n C Double A couldn't set rules about
Speaker 1: how much money the different conferences could get for selling
Speaker 1: for selling the TV rights to their broadcast. And then
Speaker 1: the answerable said that that it would be horrible if
Speaker 1: the different conferences and schools were competing for selling TV rights. Well,
Speaker 1: they all do that now. And as they were talking
Speaker 1: about in the court today, you know, now there used
Speaker 1: to be a rule that coaches or assistant coaches could
Speaker 1: only be paid a certain amount. That was an n
Speaker 1: double A rule. That was struck damity any trust laws.
Speaker 1: There's a push in Congress, and there are laws in
Speaker 1: some states like Florida that that are pushing the double A.
Speaker 1: Perhaps Yeah, the there's a law that's going to go
Speaker 1: into effect in Florida and California's past. The law that
Speaker 1: says that UM, nobody the n C double A and
Speaker 1: no school can limit the right of a student athlete
Speaker 1: to sell the rights to their name, image and likeness.
Speaker 1: So UM that means that UH, students athletes have to
Speaker 1: be able to UM get UH deals, to sponsor products,
Speaker 1: to sell advertising rights to a YouTube channel, UM, things
Speaker 1: like that. So that that and that's going to change,
Speaker 1: um the extent to which some student athletes can get money.
Speaker 1: Now those moneys are from third parties, not from the
Speaker 1: schools themselves. UM. And so the MT double are going
Speaker 1: to change its rules about allowing student athletes to get
Speaker 1: those kind of moneys. Right now they're not allowed to.
Speaker 1: So that the m C double as that they were
Speaker 1: going to change their rules, and then they stopped that
Speaker 1: process because the Department of Justice sent them a letter saying,
Speaker 1: the new rules that you think you're going to put
Speaker 1: into place, They may have some antitrust problems. It seems
Speaker 1: like it's a matter of time if you have laws
Speaker 1: like this in californ Orny, in Florida, that it's a
Speaker 1: matter of time. You know, little by little professionalism is
Speaker 1: going to creep into college sports. Well, the m C
Speaker 1: double A has other legal arrows in its quiver, so
Speaker 1: it has said UM in other court proceedings that um,
Speaker 1: if those state laws go into effect, they plan to
Speaker 1: challenge those laws under a different under the Commerce Clause
Speaker 1: of the Constitution. So they may try to get quick
Speaker 1: injunctions against some of those laws and tie them up
Speaker 1: in litigation for a matter of time. But that's why
Speaker 1: it's so important for the MT double A to be
Speaker 1: doing um lobbying at the federal level to get the
Speaker 1: US Congress to pass some kind of a law that
Speaker 1: would settle all of this. Thanks Audrey, that's Audrey Anderson
Speaker 1: of Bassparian Sims, Bullman SAX was at the Subreme Court
Speaker 1: and it was billed as a case that could deal
Speaker 1: a sweeping blow to class action securities fraud lawsuits, but
Speaker 1: the case kind of fizzled out in oral arguments. A
Speaker 1: decade ago, investors filed a class action lawsuit a legend.
Speaker 1: They were deceived to the tune of as much as
Speaker 1: thirteen billion dollars by Goldman's repeated public assurances that it
Speaker 1: was being vigilant about avoiding conflicts of interest. But Goldman
Speaker 1: said those assurances were so generic they couldn't possibly have
Speaker 1: been responsible for propping up the stock price. Many of
Speaker 1: the getice is said the issues had narrowed as the
Speaker 1: case bounced up and down the court system, and that
Speaker 1: both sides now seemed to agree on the legal standard.
Speaker 1: Here are justice is Amy Coney Barrett and Stephen Bryer.
Speaker 1: So now we are left, you know, in this position
Speaker 1: where you've both moved more closely together, and now we
Speaker 1: have to decide what to do about the Second Circuit's opinion.
Speaker 1: This seems like an area that the more that I
Speaker 1: read about it, the less that we write, the better.
Speaker 1: Joining me is Mark Rifkin, a partner at wolf Holland's Seen.
Speaker 1: Mark explained the issue over these statements, which included promises
Speaker 1: that Goldman had extensive procedures and controls designed to identify
Speaker 1: and address conflicts of interest. So the plaintiffs say that
Speaker 1: those statements, which the parties characterized as generalized statements. But
Speaker 1: to me, they're actually pretty specific. They're not related to
Speaker 1: any direct line of business of Goldman Sacks, but they're
Speaker 1: more generalized, and so in that sense, their generic statements.
Speaker 1: But the plaintiffs say that when Goldman Sacks got into
Speaker 1: trouble because of trading in securities that were adverse to
Speaker 1: the interests of their clients, they failed to disclose that
Speaker 1: information to the public. That information eventually became public knowledge
Speaker 1: when a complaint was filed against Goldman for that and
Speaker 1: that action, that disclosure had no effect on the price
Speaker 1: of the stock, because the plaintiffs say that Goldman had
Speaker 1: issued these reassuring generalized statement which maintained the price of
Speaker 1: the stock in the marketplace, and they say that was
Speaker 1: false inness leading. Because low and behold, when the bad
Speaker 1: news comes out and Goldman is exposed, the allegations are exposed,
Speaker 1: and the extent of the problem is exposed, the price
Speaker 1: of the stock dropped, and that stock drop on the
Speaker 1: disclosure lad the stock price to trade at the price
Speaker 1: that the plaintiff say it should have traded at all. Along,
Speaker 1: Goldman did not admit wrongdoing, and it's five million dollars
Speaker 1: settlement with the sec but it did say it made
Speaker 1: a mistake in failing to disclose, which is unusual for
Speaker 1: a settlement. Correct, And I think you need to look
Speaker 1: at the nature of the underlying allegation is that Goldman
Speaker 1: was engaged in conduct that was inconsistent with the interests
Speaker 1: of not its stockholders, but its clients. And that's Goldman's
Speaker 1: life blood, that they put the interests of their clients first,
Speaker 1: that what they do is of the benefit of the clients.
Speaker 1: And that's why I think that those statements, although they
Speaker 1: were general statements, are actually pretty important to Goldman customers.
Speaker 1: And if you're an investor in Goldman Sacks as a stockholder,
Speaker 1: that means they should be pretty important to you. So
Speaker 1: I think these statements turned out to be very material.
Speaker 1: And that's the real rub of the issue is were
Speaker 1: these statements important to the market And do the plaintiffs
Speaker 1: have the right to rely on a presumption of reliance
Speaker 1: based on the importance the materiality of the statements. But
Speaker 1: if they do, can Goldman rebut that presumption by some
Speaker 1: other evidence. That's really the heart of the issue that
Speaker 1: was argued in the Supreme Court. This is an appeal
Speaker 1: of a Second Circuit decision what did the second Circuit decide?
Speaker 1: So the Second Circuit affirmed the District Court's decision granting
Speaker 1: class certification, and this was actually the second time class
Speaker 1: certification had been in the Second Circuit. The district courts
Speaker 1: certified the class. Originally, the Second Circuit remanded that decision
Speaker 1: and directed the court to reconsider certain parts of the decision.
Speaker 1: The District Court did that certified the class again. The
Speaker 1: case was appealed to the Second Circuit, and the Second
Speaker 1: Circuit affirmed the district courts decision granting class certification, finding
Speaker 1: that the defendants could not rebut the presumption of reliance
Speaker 1: that the plaintiffs were entitled to invoke under um under
Speaker 1: basic versus Levins, And that's the issue that then went
Speaker 1: up to the Supreme Court. What were the justices concerned about? Well,
Speaker 1: I think the courts concerned with two issues. Number One,
Speaker 1: the way the presumption works centers around the materiality of
Speaker 1: the statements in question. Essentially, what the presumption says is
Speaker 1: that if you trade in an orderly and efficient market,
Speaker 1: and the information that the plaintiff alleges is either misrepresented
Speaker 1: or omitted from the market, and it's important information. It's
Speaker 1: information that a reasonable shareholder would want to know, so
Speaker 1: it's material, and you don't need to rely on anything
Speaker 1: other than the integrity of the market price in order
Speaker 1: to be able to stay to claim under the securities laws.
Speaker 1: And that's the presumption of reliance that you're entitled to
Speaker 1: under the Supreme Court's Basic versus Levins and decision. But
Speaker 1: it's just the presumption. And so the defendant then has
Speaker 1: the opportunity to come back and rebut that presumption by showing,
Speaker 1: for example, that the statements that the plaintiffs claim are
Speaker 1: actionable were not material as a matter of law, or
Speaker 1: did not have an impact on the price of the stock,
Speaker 1: or perhaps in the case of an individual pointiff, he
Speaker 1: or she would never have relied upon those statements had
Speaker 1: he or she known them, and it didn't matter to
Speaker 1: the pointiff whether the price was efficient or inefficient. I
Speaker 1: can't imagine an individual attack like that on particular plaintiff,
Speaker 1: but a defendant is always able to try to prove
Speaker 1: that the information that was allegedly misrepresented was not material,
Speaker 1: and that's exactly what Goldman Sachs tried to do here.
Speaker 1: And Judge Croudy in the District Court concluded that Goldman's
Speaker 1: experts did not adequately rebut the presumption of reliance and
Speaker 1: so certified the class. That's the very narrow holding that
Speaker 1: went up to the Supreme Court. Jealtic is from both
Speaker 1: sides of the ideological spectrum said that as the case evolved,
Speaker 1: the party's positions moved more towards the middle. Yes, and
Speaker 1: that's certainly the case in the district court. Goldman argued
Speaker 1: that the court was not entitled to consider those statements
Speaker 1: at all, because Goldman took the position that they were
Speaker 1: completely immaterial as a matter of law. They were so
Speaker 1: generalized and so vague that they were meaningless to individual investors,
Speaker 1: and Goldman lost that position in the record on emotion
Speaker 1: to dismiss the court found that the statements were specific
Speaker 1: enough and related to Goldman's business in such an important
Speaker 1: way that they were material for purposes of stating a
Speaker 1: cause of action. So now roll forward, and the question is, well, okay,
Speaker 1: what can Goldman Sachs say about those statements to rebut
Speaker 1: the presumption of reliance? And so now they have to
Speaker 1: say something different, not that you can't consider them, but
Speaker 1: that you have to consider the vagueness of them. And
Speaker 1: so the argument sort of shifted in its focus, and
Speaker 1: Goldman says, well, okay, if they may be actionable, but
Speaker 1: our experts say they were so meaningless that they didn't
Speaker 1: move the needle in the marketplace. And the pointiff said, no,
Speaker 1: that's not true. Your experts haven't shown that the disclosures
Speaker 1: didn't have an effect on price when the real truth
Speaker 1: about Goldman's alleged misconduct came to light. And so that
Speaker 1: was the issue that was decided on class certification. And
Speaker 1: that's why the parties had to change their positions because
Speaker 1: the context changed. So what's the court's likely decision here?
Speaker 1: I think where where the court is likely to come
Speaker 1: out here is to say that there was no error
Speaker 1: that needs to be addressed. The District Court properly followed
Speaker 1: the second Circuits mandate from the first appeal, properly evaluated
Speaker 1: not just the plaintiffs position, and the presumption of reliance
Speaker 1: that the parties concede applied to the motion for class certification.
Speaker 1: And if I understand the record correctly, Goldman Sachs admitted
Speaker 1: that the plaintiffs had introduced enough evidence on the motion
Speaker 1: for class certification to invoke the presumption, but that they
Speaker 1: then had the opportunity to rebut it with this expert testimony,
Speaker 1: and they offered expert testimony that the District Court found
Speaker 1: did not rise to the level necessary to rebut the presumption.
Speaker 1: And I think where the Supreme Court comes out here
Speaker 1: in the easiest path is to say that it's for
Speaker 1: the district Court to evaluate the evidence that's presented. The
Speaker 1: District Court did that. The District Court rendered a decision
Speaker 1: that the Second Circuit evaluated under the appropriate standards, and
Speaker 1: the Second Circuit affirmed the District Court's decision. There's nothing
Speaker 1: for us to look at here. And so that's where
Speaker 1: I think Justice Brier was heading when he said, the
Speaker 1: less we write, the better we are. And that's the
Speaker 1: outcome that that says the least, which is this really
Speaker 1: is an appeal we should not be hearing or writing upon.
Speaker 1: And so there was a suggestion that one outcome would
Speaker 1: be that the court concludes that sarcery was improvidently granted,
Speaker 1: and that happens from time to time in a case
Speaker 1: like this. There was some concern going into this that
Speaker 1: this is the first time that securities class action has
Speaker 1: been heard by the Supreme Court since any of the
Speaker 1: Trump appointees were on the court. Was there a conservative
Speaker 1: liberal split in anyway? Well, the the only interesting part
Speaker 1: to the argument from a political if you will, from
Speaker 1: a political standpoint, at least in my mind, was Justice Thomas.
Speaker 1: Of course, any time you hear Justice Thomas speak, it's
Speaker 1: it's interesting because he asks questions so rarely, but now
Speaker 1: in in the COVID landscape, he has asked questions, And
Speaker 1: here he asked questions that suggested to me at least
Speaker 1: that he was hoping that the Court might reconsider the
Speaker 1: presumption of reliance after Basic versus Levinson. But other than that,
Speaker 1: I think I think these are such narrow technical issues
Speaker 1: that it's hard to say that the that the political
Speaker 1: differences between the Trump appointees and the and the and
Speaker 1: the more liberal justices on the court really will make
Speaker 1: much difference. I mean, these are very narrow technical legal issues.
Speaker 1: We didn't even we haven't yet talked about the rule
Speaker 1: three oh one issue, which is who who bears the
Speaker 1: burden of proof versus the burden of production. But it's
Speaker 1: such a hyper technical and legal issue that I don't
Speaker 1: see the political spectrum really making a difference in the
Speaker 1: outcome here. This case has been on. Since what happens next?
Speaker 1: You have they had discovery yet? Well, sure, because this
Speaker 1: is this is a class ratification, so the plaintiffs have
Speaker 1: withstood emotion to dismiss. Then they did two rounds of
Speaker 1: class ratification because there was that second appeal in the case.
Speaker 1: If the Supreme Court affirms the Second Circuit's decision, which
Speaker 1: I'm fairly sure the Court will do, then it will
Speaker 1: go back to the second Circuit and be sent right
Speaker 1: back to the district Court for the remainder of the case.
Speaker 1: If the Court were to reverse or remand with instructions,
Speaker 1: then it would go back to the second Circuit and
Speaker 1: the Second Circuit might write again, or it might simply
Speaker 1: remand the case again to the district Court for a
Speaker 1: third bite at the apple. But I don't think that
Speaker 1: that's going to happen because I think that the prevailing view,
Speaker 1: at least from the questions that the court asked, I
Speaker 1: think the prevailing view seemed to be that this was
Speaker 1: a matter that the district Court has some discretion to consider,
Speaker 1: that the district Court exercised its discretion, And while any
Speaker 1: one justice of the Supreme Court might might differ in
Speaker 1: how the evidence was evaluated. I don't think that that
Speaker 1: rises to the level of a precedent sett in case
Speaker 1: that requires the Supreme Court to right a lengthy opinion,
Speaker 1: send it back and start all over again. I just
Speaker 1: don't see that happening here, because I think the record
Speaker 1: is actually a pretty pretty well developed one and a
Speaker 1: pretty good one for for the plaintiffs in this case
Speaker 1: to uh to prevail and simply proceed with their case.
Speaker 1: Does the decision in this case have any ramifications, any
Speaker 1: impact on class actions coming up, or are the facts
Speaker 1: so narrow and so specific that it doesn't well. I
Speaker 1: think that if the Court does what I expected to do,
Speaker 1: which is to write an opinion that simply affirms the
Speaker 1: Second Circuit's decision or just withdraws the grain of sarcenari,
Speaker 1: then it will have very little impact. If if they
Speaker 1: decide to write on rule three oh one, UM, it
Speaker 1: might have some impact in some cases, but I just
Speaker 1: don't see those issues being important enough for the Supreme
Speaker 1: Court to write on here. So I think it's likely
Speaker 1: that this case will have relatively little impact. But you
Speaker 1: never know. I'm I'm always surprised by what the Court does,
Speaker 1: or you know, frequently surprised, but I think here we're
Speaker 1: going to see uh, a fairly plain vanilla a firmans
Speaker 1: or maybe even a decision just withdrawing the Searcherrari. Thanks Mark.
Speaker 1: That's Mark Riskin of Wolf hollen Stein. And that's it
Speaker 1: for the edition of the Bloomberg Law Show. Remember you
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