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Speaker 1: This is Bloomberg Law with June Brussel from Bloomberg Radio.

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Speaker 1: There's been more than a decade of litigation, two trips

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Speaker 1: to the Second Circuit and one trip to the Supreme Court,

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Speaker 1: but the court is giving Goldman Sachs another chance to

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Speaker 1: stop a shareholder's securities fraud lawsuit. The question is whether

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Speaker 1: another trip to the Second Circuit will make a difference.

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Speaker 1: A decade ago, investors filed a class action lawsuit alleging

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Speaker 1: they were deceived to the tune of as much as

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Speaker 1: thirteen billion dollars by Goldman's repeated public assurances that it

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Speaker 1: was being vigilant about avoiding conflicts of interest. But Goldman

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Speaker 1: said those assurances were so generic they couldn't possibly have

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Speaker 1: been responsible for propping up the stock price. In the

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Speaker 1: majority opinion, Justice Amy Coney Barrett said both sides in

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Speaker 1: the case agreed that the generic nature of a misrepresentation

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Speaker 1: often will be important evidence of a lack of price impact,

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Speaker 1: echoing her statements during the oral arguments. So now we

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Speaker 1: are left you in this position where you've both moved

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Speaker 1: more closely together, and now we have to decide what

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Speaker 1: to do about the Second Circuit's opinion and because barred

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Speaker 1: rule that it was unclear whether the Second Circuit properly

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Speaker 1: considered the generic nature of Goldman's alleged misrepresentations, the Court

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Speaker 1: sent the case back to the Second Circuit to revisit

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Speaker 1: the issue. Joining me a securities litigator, Mark Rifkin, a

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Speaker 1: partner wolf Haldenstein, start by telling us what the issue

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Speaker 1: was in the case. Sure, So, the Supreme Court was

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Speaker 1: asked to decide two questions in the case. The first

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Speaker 1: question they were asked to answer is whether the court

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Speaker 1: should consider the generic nature of an alleged misstatement or

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Speaker 1: omission in deciding whether the presumption of reliance the basic

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Speaker 1: presumption of reliance has been revited. And then the second

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Speaker 1: question the Court was asked to decide is whether the

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Speaker 1: defendants bear the burden of proof were merely a burden

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Speaker 1: to produce evidence to rebut that presumption. What did the

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Speaker 1: court decide so on the first question, the Court said

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Speaker 1: that the dispute about whether the generic nature of a

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Speaker 1: misrepresentation is to be considered at the class certification stage,

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Speaker 1: that question evaporated because the plaintiff and the defendant agreed

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Speaker 1: that whether a statement is generic, it is a consideration

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Speaker 1: that the court should make at the class certification stage

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Speaker 1: because the more generic a statement is, the less likely

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Speaker 1: it is to have some price impact, and that is

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Speaker 1: relevant to class certification. So that was an outcome, although

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Speaker 1: it wasn't really much of a decision, because as the

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Speaker 1: court said, there wasn't much of a dispute at the

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Speaker 1: end of the day. And then on the second question,

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Speaker 1: the court said that the defendant does bear the burden

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Speaker 1: of proof, not merely the burdens of producing evidence in

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Speaker 1: order to try to rebut the basic presumption of reliance.

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Speaker 1: So both sides seemed to say that they were pleased

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Speaker 1: with the decision. Yes, well, I think that there's a

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Speaker 1: little bit of room for both sides to be pleased.

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Speaker 1: But on the whole, I think this is this is

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Speaker 1: a bigger victory for the pointiffs side of these cases

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Speaker 1: than it is for the defendants side of these cases,

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Speaker 1: because the Bldman was asking for a decision that would

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Speaker 1: have substantially changed the way Rule twenty three is applied

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Speaker 1: in securities cases. So the pointiff gets the claim I

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Speaker 1: think the bigger victory because I think the plaintiffs faced

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Speaker 1: a higher risk going in. But as I expected, this

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Speaker 1: was largely a decision that upheld prior precedent, and the

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Speaker 1: Court said, we mean what we say when we say

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Speaker 1: that the presumption is valid, and this is how it's

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Speaker 1: going to be followed. So I think there's you know,

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Speaker 1: a little bit for everybody in the decision, but a bigger,

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Speaker 1: bigger victory for the pointiffs sent for the defendants. So

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Speaker 1: it goes back to the Second Circuit. Didn't the Second

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Speaker 1: Circuit already consider the generic nature of the misrepresentation? Well?

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Speaker 1: I think the Second Circuit did, and I think the

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Speaker 1: Second Circuit gave it more than sufficient consideration. And Justice

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Speaker 1: Sodomy are dissented from that part of the decision that

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Speaker 1: remanded back to the Second Circuit. But I guess in

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Speaker 1: an abundance of caution, the Supreme Court sent it back

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Speaker 1: to the Second Circuit for further consideration. And maybe that's

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Speaker 1: you know, something of a nod to Judge Sullivan, who

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Speaker 1: was the dissenting voice in in the Second Circuit on

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Speaker 1: what was in the Second Circuit a second appeal. So

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Speaker 1: this goes back now for reconsideration of the second appeal.

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Speaker 1: But I don't think the outcome is going to be

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Speaker 1: any different the second time around. On that. On that

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Speaker 1: second field, I think that the court has been satisfied

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Speaker 1: that the statements were specific enough in the context of

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Speaker 1: Goldman's overall presentation of its business, and I think that's

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Speaker 1: the relevant part here. The statements themselves, although they were

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Speaker 1: generally of a generic nature, they were specific enough in

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Speaker 1: the context of Goldman's business that they would be material

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Speaker 1: to investors who were considering buying Goldman stock. So Mark

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Speaker 1: In the Securities and Exchange Commission sued Goldman, accusing it

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Speaker 1: of creating and selling advocates without disclosing that the hedge

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Speaker 1: fund Pauls and In Company helped pick the underlying securities

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Speaker 1: and bet against the vehicle. Goldman later paid five million

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Speaker 1: dollars to settle with the SEC though it didn't admit

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Speaker 1: wrong doing. The firms that it made a mistake in

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Speaker 1: not disclosing the pulse and roll. Explain that to me,

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Speaker 1: how do you make a mistake but that's not wrongdoing? Well,

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Speaker 1: I think that's a compromise between the sec and Goldman.

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Speaker 1: I think Goldman was unprepared to admit that it really

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Speaker 1: violated any obligations, either to customers or two investors, because

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Speaker 1: it's so important to Goldman's business model, that customers can

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Speaker 1: trust it, that they had no choice but to insist

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Speaker 1: that it be characterized as nothing more than a mistake.

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Speaker 1: And that's why, by the way, I think that's why

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Speaker 1: the statements, even though they are generally generic kinds of statements,

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Speaker 1: are important in the context of Goldman's business. Goldman depends

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Speaker 1: upon its credibility and its integrity to do the business

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Speaker 1: it does. To be able to attract the clients attracts,

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Speaker 1: to get the kind of investors it gets. Goldman has

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Speaker 1: to have a pristine reputation, and so the statements about

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Speaker 1: its business and how it operates its business are in

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Speaker 1: fact material here. I don't think they're just throw away

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Speaker 1: lines in a public document. I think they're important. And

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Speaker 1: that's why Goldman. That's why Goldman couldn't admit to any

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Speaker 1: real wrongdoing in settling with the sec. So if this

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Speaker 1: goes to trial, will will the jury here about the settlement.

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Speaker 1: I think the jury has a right to hear about

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Speaker 1: the prosecution and the settlements. Yes, and and Goldman will

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Speaker 1: argue because they didn't admit any wrongdoing that there probative

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Speaker 1: value is outweighed by the risk of prejudice. Us, but

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Speaker 1: ultimately a judge is going to decide whether that's true

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Speaker 1: or not. And I think that I think that it

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Speaker 1: would be um important for jurors to know that Goldman

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Speaker 1: was accused of the wrongdoing and ultimately settled those claims,

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Speaker 1: but leave it to Goldman to say, well, we settled

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Speaker 1: because it was cheaper than fighting, and let the jury

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Speaker 1: decide whether that's a credible explanation or not. I'm generally

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Speaker 1: in the view that you know, jurors are entitled to

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Speaker 1: make those kinds of decisions, and it is unusual that

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Speaker 1: Goldman admitted that it made a quote mistake. Well, more

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Speaker 1: and more we're finding that that there's pressure on the

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Speaker 1: part of regulators to um to insist on an admission

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Speaker 1: of wrongdoing, and and for Goldman to admit a mistake, yes,

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Speaker 1: I think it's pretty extraordinary. But remember this was something

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Speaker 1: that Goldman really couldn't afford to lose. There's no way

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Speaker 1: they could have run that risk. It would have been

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Speaker 1: a bet the farm kind of a case for government

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Speaker 1: to fight. And and I think they had to do

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Speaker 1: what they did in order to be able to continue

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Speaker 1: to operate the way they do. And and that's that's why.

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Speaker 1: I think the statements they made that are an issue

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Speaker 1: in in the case the Supreme Court decided, are so

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Speaker 1: vitally important to investors. What about the partial descent of

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Speaker 1: justice score such joined by Clarence Thomas and Samuel Alito. Yeah,

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Speaker 1: I think that. I think that they're swimming upstream. I

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Speaker 1: think the the Court, the majority decision Um Justice Paris

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Speaker 1: majority decision is is spot on. And when when the

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Speaker 1: Court said in Basic and in Haliburton too, that the

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Speaker 1: defendant may rebut the presumption of reliance by showing that

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Speaker 1: the misrepresentation did not affect the public price for the stock,

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Speaker 1: That's not merely a burden of production. That's a burden

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Speaker 1: of proof. And I think, uh, Justice course, with Justice

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Speaker 1: Thomas and Justice Alito joining in the dissent, I think

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Speaker 1: they're looking to change the precedent and I don't think

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Speaker 1: the Supreme Court is ready to do that. And June,

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Speaker 1: you know, I've said for many years, and even as

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Speaker 1: this Supreme Court becomes progressively more conservative on more and

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Speaker 1: more issues, they have consistently maintained a very neutral approach

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Speaker 1: two class certification questions, and this is another example of that.

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Speaker 1: I think the I think the Courts decision on that

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Speaker 1: second question that the burden of proof is on the defendant,

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Speaker 1: not merely the burden of production is a it's a

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Speaker 1: middle of the road UH decision that continues to apply

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Speaker 1: the law of the way the Court has for many,

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Speaker 1: many many years. And and Justice score such wanted to

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Speaker 1: move that UH, move that outcome to a different UH

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Speaker 1: through a different playing field, and and the majority said no.

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Speaker 1: And so this court, despite being labeled a business friendly court,

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Speaker 1: has has been not so business friendly and class certification cases.

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Speaker 1: I think that that's correct. I think this Court has

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Speaker 1: been neutral in class certification decisions for many, many many years.

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Speaker 1: And I think that that trend has been um prevalent,

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Speaker 1: even as the Court has has moved to the right

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Speaker 1: on a number of issues, not just business writing issues,

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Speaker 1: but all sorts of issues. This is an area where

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Speaker 1: the Court sees and recognizes the the utility of of

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Speaker 1: class certification and and is not going too radically change

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Speaker 1: the balance of power between plaintiffs and defendants under Rule

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Speaker 1: twenty three in in business oriented cases. And and so

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Speaker 1: this is this is one in a long line of

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Speaker 1: cases that I think are are neutral in their approach

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Speaker 1: to rule and class certification. And so this was a

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Speaker 1: nod also too, two starry, decisive observing precedent. That's exactly right.

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Speaker 1: And and that's why I think UM justice course such

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Speaker 1: could not could not gather enough support for UM for

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Speaker 1: for his position at least in the descent to change

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Speaker 1: the the approach on U on the on the burden

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Speaker 1: approoved to rebut the presumption. I think this is This

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Speaker 1: is story decisive right up and down the line from

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Speaker 1: the first question to the second question. I think the

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Speaker 1: Court has simply continued to apply the law of the

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Speaker 1: same way it has for decades. Thanks for being the

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Speaker 1: Bloomberg on Shell. Mark that securities litigator Mark Rifkin a

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Speaker 1: partner Wolf Haldenstein. In a splinter decision, the Supreme Court

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Speaker 1: left intact a board that has invalidated more than two

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Speaker 1: thousand patents resolving constitutional issues by giving a presidentially appointed

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Speaker 1: official more power to overturn the board's decisions. Joining me

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Speaker 1: is Harold Crant, a professor at the Chicago Kent College

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Speaker 1: of Law. He'll tell us what the Court's decision turned on.

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Speaker 1: The case turned on how much authority do administrative judges have?

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Speaker 1: In other cases? The Court is held at a ministry

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Speaker 1: judges exercise authority, but they should be considered inferior officers

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Speaker 1: because they don't have binding final authority. And what made

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Speaker 1: this case sort of in between was that these judges

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Speaker 1: do have binding final authority and decisions, but they're subject

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Speaker 1: to an array of regulatory controls by the Director of

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Speaker 1: the Patent Trademark Office. So the case kind of fell

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Speaker 1: in between some of the prior president and it turned

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Speaker 1: on how clear of a line needs to be drawn

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Speaker 1: between the president and his appointment authority and individuals exercising

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Speaker 1: significant authority in the executive branch, and Chief Justice Roberts

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Speaker 1: relied upon originalist thinking and his view of the unitary

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Speaker 1: presidency to say that because there's final decision making authority

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Speaker 1: in these judges, they have to be subject to presidential

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Speaker 1: appointment in order to square what's going on with the

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Speaker 1: idea of a unitary executive. And I think that clearly

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Speaker 1: shows that in Chief Justice Robert's mind, it's important to

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Speaker 1: have strong executive branch controls by the president, which suggested

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Speaker 1: maybe we're going to see that the Court will outlaw

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Speaker 1: these so termed independent agencies, which has been in existence

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Speaker 1: for hundreds of years. Independent agencies are defined by having

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Speaker 1: ahead who is protected from the plinary removal authority of

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Speaker 1: the president. And so we're seeing a lot of cases

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Speaker 1: which sort of questions when the president has to have

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Speaker 1: plinary removal authority over individuals in the executive branch. And

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Speaker 1: Chief Justice Roberts has been quite clear here that he's

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Speaker 1: non minimalist with respect to that kind of issue of

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Speaker 1: presidential control. And I think his decision and art Threx

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Speaker 1: is consistent with his prior decisions that president has to

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Speaker 1: have removal authority and appointment authority over any of her

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Speaker 1: most individuals, exercising considerable authority in the executive branch. The

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Speaker 1: Chief was very creative in the remedy. He constructed tell

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Speaker 1: us about that the majority crafts a unique remedy and

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Speaker 1: says that instead of having to sort of change the

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Speaker 1: structure of administrative patent judges, the Court will had take

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Speaker 1: the initiative of changing the statute so that the Director

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Speaker 1: of the Patent Trademark Office can now review the administrative

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Speaker 1: handjective decisions before they can become final. And some of

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Speaker 1: the justices criticized the Chief of being so adventurous in

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Speaker 1: rewriting a statute and actually being a kind of judicial

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Speaker 1: maximalist in deciding the Court had the power to remix

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Speaker 1: various elements of the statute together in order to sustain

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Speaker 1: its constitutionality. Justice Thomas and dissent Um would have just

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Speaker 1: said that there was nothing constitutionally infirm about the structure whatsoever.

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Speaker 1: Bus he looked at all the duties exercised by the

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Speaker 1: indistrative pan judges instead, you know, taken as a whole,

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Speaker 1: we should be able to consider these individuals as inferior officers,

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Speaker 1: meaning that they exercise significant authority under the laws of

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Speaker 1: United States. Um, But they're not so powerful and so

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Speaker 1: influential that the President must have appointment authority over them.

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Speaker 1: How often does the Supreme Court rewrite statutes? Yeah, the

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Speaker 1: Supreme Court has to rewrite statutes to certain extent. Under

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Speaker 1: separability analysis, the Court asks, if one perfection of an

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Speaker 1: act is struck down because it's unconstitutional, can the remainder

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Speaker 1: of the statute survives? And in terms of doctrine, the

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Speaker 1: Court asked, what would Congress prefer to strike down the

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Speaker 1: entire statute or to keep the part of the statute

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Speaker 1: that was not struck down, and that's known as separability analysis.

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Speaker 1: But in this case, the Court decided that Congress would

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Speaker 1: have wanted, in essence, the statute to be left as

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Speaker 1: it is, but by taking another part of the statute

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Speaker 1: and changing it, even though that was never challenged before

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Speaker 1: the court. So, in essence, the Court took away some

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Speaker 1: authority different authority from the administrative patent judges to ensure

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Speaker 1: that they could be considered inferior officers and therefore that

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Speaker 1: the structure of the statute would be a pell So

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Speaker 1: it's a very sort of creative use of the several

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Speaker 1: billion analysis in order to uphold um the constitutional status

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Speaker 1: of these administrative patent judges. And that was the creative

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Speaker 1: remedy forged by the Chief Justice. But it is a

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Speaker 1: change from the typical severe billion analysis that we see. Well,

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Speaker 1: there are no hardening coalitions on the court in that perspective,

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Speaker 1: I think the Supreme Court has taken a step towards

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Speaker 1: establishing some continuous independent reputation. I mean, the right is

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Speaker 1: being a little upset with each other, and indeed the

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Speaker 1: at the two ends, it's it's a Leado is leased.

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Speaker 1: Often in the majority justice Leado and Justice kavanas most

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Speaker 1: often in the majority so far, and we had even

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Speaker 1: the last couple of days were Justice Thomas writes a

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Speaker 1: liberal dissent, chastising Chief Justice Robbert's opinion is being overly

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Speaker 1: formalistic in finding that the administrative patent judges had to

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Speaker 1: be classified as a pier or your offices or rather

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Speaker 1: justice to something of a surprise and more functionalist approach,

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Speaker 1: and said, in light of all these factors and how

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Speaker 1: powerful these judges are, um, we should think of them

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Speaker 1: as being inferior officers. Therefore, have no problem with the

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Speaker 1: appointment's clause in terms of how they are appointed, and

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Speaker 1: that would have satisfied the entire case. Justice Thomas is

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Speaker 1: out flanking even some of the liberals on the Court. Um.

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Speaker 1: At the same time, Justice Thomas did write the majority

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Speaker 1: opinion and the that's these case, which had to do

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Speaker 1: with the scope of the alien toward statute. In that

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Speaker 1: case you had a more conservative view um than the

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Speaker 1: rest of the court. But those are just two examples

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Speaker 1: of how fractured the Court has been. Justice Alito has

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Speaker 1: chided the majority in descent both in the Obama Your

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Speaker 1: Foster Care case for not taking the opportunity to strike

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Speaker 1: more boldly on behalf of conservative interests in one case

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Speaker 1: striking down Obamacare and the other case sort of establishing

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Speaker 1: a firmer rights religion in the Foster Care case. So

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Speaker 1: he's sort of being in temperate saying, hey, this is

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Speaker 1: our time, we have to move forward, and his allies

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Speaker 1: on on the right are not taking the queue and

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Speaker 1: having taken more incrementalist decisions. And so far Justice Barrett

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Speaker 1: has been more as an ally of Chief Justice Roberts incrementalism,

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Speaker 1: as we saw in the Foster Care case, by the

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Speaker 1: Philadelphia UM as we saw in the Obamacare case. And

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Speaker 1: so there's no stable coalitions. We all see a very

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Speaker 1: marked shift to right for the court. M Rather, it's

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Speaker 1: really been a more sort of modestly conservative court to date.

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Speaker 1: We have you ever seen Justice Thomas sort of swing

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Speaker 1: back and forth this way? UM. I was very surprised

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Speaker 1: at his decision today in Artitects, UM, and I think

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Speaker 1: others will be as well. And but he's always taken

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Speaker 1: somewhat of a union you. He doesn't uh necessarily followed

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Speaker 1: the teachings of others or the meanings of others, and

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Speaker 1: not right to the doctrinaire over the formalistic with respect

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Speaker 1: to the deployment clause, and he was felt free to

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Speaker 1: articulate his views despite what his colleagues sent. During the

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Speaker 1: confirmation hearings for the new justices the last three there

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Speaker 1: was a lot of talk about originalism textualism. Do you

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Speaker 1: see those three following that they are? They are all

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Speaker 1: following originalism. There was a great deal of of invocations

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Speaker 1: of the Framers in the most recent decisions. So they

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Speaker 1: don't agree on what lessons to draw from the Framers,

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Speaker 1: and they don't agree when they should rely upon the

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Speaker 1: Framers as opposed to, for instance, the plain language of

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Speaker 1: the statute. So those differences amongst the sort of conservative justices,

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Speaker 1: in combination with Chief Justice roberts assistance on a kind

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Speaker 1: of slower uh minimalist approach, has meant so far we

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Speaker 1: don't have a united right word shift to the court.

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Speaker 1: And I'll be interesting to see in the coming term

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Speaker 1: whether that will hold. But that's certainly been very noticeable

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Speaker 1: so far. Let's turn to a decision last week where

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Speaker 1: the Court gave companies a broader shield against lawsuits by

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Speaker 1: victims of overseas atrocities and rejected accusations that Nestlee and

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Speaker 1: Cargill were complicit in the use of child slavery on

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Speaker 1: Ivory Coast cocoa farms. So the justices took the case

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Speaker 1: in order to examine whether the Alien Towards Statute could

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Speaker 1: apply to a corporate defendant as opposed to an individual.

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Speaker 1: In The theory was that corporate defendants weren't very prevalent

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Speaker 1: back of so that Congress may have intended only to

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Speaker 1: include individuals as defendants within the scope of the Act.

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Speaker 1: But they changed their minds after oral argument, and the

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Speaker 1: court decided eight to one on a different theory. The

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Speaker 1: court held instead that the plaintiffs had not shown a

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Speaker 1: sufficient nexus to the acts complained of to the United States,

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Speaker 1: and in that case, there are Molly citizens who allegedly

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Speaker 1: were called into slavery to work in for Nestle and

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Speaker 1: Cargo and other sort of food manufacturers in Ivory Coast,

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Speaker 1: and they sued Cargo and US Corporation and the U

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Speaker 1: S subsidiary of Nestles in the United States, arguing that

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Speaker 1: aiding and embetting childhood slavery should be recognized as a

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Speaker 1: international torch in violation of the law of nations. Therefore

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Speaker 1: subject to suit under the Alien Toward Statute. The Court, however,

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Speaker 1: held at least eight of the justices held that there

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Speaker 1: had to be more conducts than just sort of having

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Speaker 1: a place of business in the United States like Cargo

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Speaker 1: and Nestles did more than just general corporate presence, more

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Speaker 1: than just corporate affairs, that the actual planning or carrying

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Speaker 1: out of the duties had to take place in the

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Speaker 1: United States as well. So, practically speaking, the Court has

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Speaker 1: shut the door even more firmly against future suits under

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Speaker 1: the Alien Tour Statute because the plaintiffs had to show

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Speaker 1: such a strong connection between conduct in the United States

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Speaker 1: and the acts that allegedly are against the law of nations.

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Speaker 1: Interestingly in the decision is that a majority of the

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Speaker 1: court seemed to come to an agreement that corporate defendants

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Speaker 1: can be sued under the Alien Tour Statute, but nonetheless

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Speaker 1: they decided the case on a different ground, and a

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Speaker 1: minority of the justices said that we can no longer

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Speaker 1: find any kind of new violations in the national law

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Speaker 1: there were unknown to the framers in and Justice Thomas

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Speaker 1: said that only those three areas that have been recognized

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Speaker 1: our interference with ambassadors, interference with safe passages, and interference

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Speaker 1: with shipping right through piracy, and so somewhat counterintuitively, a

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Speaker 1: number of justices would say, we will only recognize towards

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Speaker 1: in those three areas, and we won't even admit of

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Speaker 1: a tort of something like slavery or a tort of

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Speaker 1: genocide because shockingly that wasn't recognized back in nine But

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Speaker 1: nonetheless the court majority does not make that holding. Thanks hell.

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Speaker 1: That's Harold Grant of the Chicago Kent College of Law.

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Speaker 1: And that's it for the edition of the Bloomberg Lawn Show.

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Speaker 1: Remember you can always at the latest legal news on

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Speaker 1: our Bloomberg Lawn podcast. You can find them on you

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Speaker 1: can find them on Apple Podcasts, Spotify, and at www

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Speaker 1: dot Bloomberg dot com, slash podcast, slash Law, and please

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