Amicus Curiae Brief — Goldman Sachs Group, Inc., et al., Petitioners v. Arkansas Teacher Retirement System, et al.

No. 20-222

IN THE

Supreme Court of the United States

GOLDMAN SACHS GROUP, INC., ET AL.,

Petitioners,

V.

ARKANSAS TEACHER RETIREMENT SYSTEM, ET AL.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals for the Second Circuit

BRIEF OF PROFESSORS OF SECURITIES LAW

AND COMPLEX LITIGATION AS AMICI CURIAE

IN SUPPORT OF RESPONDENTS

JAVIER BLEICHMAR

BLEICHMAR FONTI &

n AULD LLP

7 Times Square, 27th Floor

New York, New York 10036

(212) 789-1341

DEEPAK GUPTA

Counsel of Record

LINNET DAVIS-STERMITZ

GUPTA WESSLER PLLC

1900 L Street, NW

Suite 312

Washington, DC 20036

(202) 888-1741

deepak@guptawessler.com

Counsel for Amici Curiae

March 3, 2021

-iTABLE OF CONTENTS

Table of authorities .............................................................. ii

Introduction and summary of argument ........................... 1

Interest of amici curiae ...................................................... 4

Argument............................................................................... 8

I.

Whether a statement is “generic” has little, if any,

bearing on its price impact. .......................................... 8

A. Investors don’t care whether a statement is

“generic.” ................................................................ 8

B. Placing weight on whether a statement is

“generic” would be inconsistent with—or

work an end-run around—this Court’s

securities precedent. ............................................ 19

II. Price maintenance is a paradigmatic example of

price impact. ................................................................. 25

Conclusion ........................................................................... 32

-iiTABLE OF AUTHORITIES

Cases

Alaska Electrical Pension Fund v. Pharmacia Corp.,

554 F.3d 342 (3d Cir. 2009) .......................................... 31

Amgen, Inc. v. Connecticut Retirement Plans

& Trust Funds,

568 U.S. 455 (2013) ...............................................passim

Arkansas Teacher Retirement System v.

Goldman Sachs Group, Inc.,

955 F.3d 254 (2d Cir. 2020) .......................................... 19, 24

Basic Inc. v. Levinson,

485 U.S. 224 (1988) ........................................... 20, 26, 29

Chadbourne & Parke LLP v. Troice,

571 U.S. 377 (2014) ......................................................... 3

City of Dearborn Heights Act 345 Police & Fire

Retirement System v. Align Technology, Inc.,

856 F.3d 605 (9th Cir. 2017) ........................................ 23

Dura Pharmaceuticals, Inc. v. Bruodo,

544 U.S. 336 (2005) ................................................. 20, 29

Erica P. John Fund, Inc. v. Halliburton Co.,

563 U.S. 804 (2011) ........................................... 20, 21, 26

FindWhat Investor Group v. FindWhat.com,

658 F.3d 1282 (11th Cir. 2011) .............................. 27, 30

Ganino v. Citizens Utilities Co.,

228 F.3d 154 (2d Cir. 2000) .......................................... 17

-iiiGlickenhaus & Co. v. Household International, Inc.,

787 F.3d 408 (7th Cir. 2015) ........................................ 27

Halliburton Co. v. Erica P. John Fund, Inc.,

573 U.S. 258 (2014) ...............................................passim

IBEW Local 98 Pension Fund v. Best Buy Co.,

818 F.3d 775 (8th Cir. 2016) ........................................ 31

In re Vivendi, S.A. Securities Litigation,

838 F.3d 223 (2d Cir. 2016) .............................. 27, 28, 31

Nathenson v. Zonagen, Inc.,

267 F.3d 400 (5th Cir. 2001) ........................................ 31

Omnicare, Inc. v. Laborers District Council

Construction Industry Pension Fund,

575 U.S. 175 (2015) ................................................. 15, 22

Schleicher v. Wendt,

618 F.3d 679 (7th Cir. 2010) .................................. 28, 31

Tongue v. Sanofi,

816 F.3d 199 (2d Cir. 2016) .......................................... 23

TSC Industries, Inc. v. Northway,

426 U.S. 438 (1976) ....................................................... 16

Statutes, regulations, and agency materials

15 U.S.C. § 77k(a) ......................................................... 22, 23

15 U.S.C. § 78j(a)(1) ........................................................... 19

17 C.F.R. § 229.406 ............................................................. 14

17 C.F.R. § 240.10b-5(b) .................................................... 20

-ivCommission Guidance Regarding Disclosure

Related to Climate Change,

Securities Exchange Act Release No. 9106,

Exchange Act Release No. 61,469,

72 Fed. Reg. 6289 (Feb. 8, 2010)................................. 15

In re Dow Chemical Co.,

Securities Exchange Act Release No. 83,581

(July 2, 2018) ................................................................. 14

Commodity Futures Trading Commission,

Managing Climate Risk in the U.S. Financial

System (2020), https://perma.cc/M28A-94QH .......... 15

Other Authorities

Stephen M. Bainbridge & G. Mitu Gulati,

How Do Judges Maximize? (The Same Way

Everybody Else Does––Boundedly): Rules of

Thumb in Securities Fraud Opinions,

51 Emory L.J. 83 (2002)............................................... 17

COSO & World Business Council For Sustainable

Development,

Enterprise Risk Management: Applying

Enterprise Risk Management to Environmental

Social and Governance-Related Risks (Oct. 2018),

https://perma.cc/DT7W-E7FG ................................... 12

James D. Cox,

Fraud on the Market After Amgen,

9 Duke J. Const. L.& Pub. Pol’y 1 (2013) .................. 27

-vLaura E. Deeks,

Discourse and Duty: University Endowments,

Fiduciary Law, and the Cultural Politics of

Fossil Fuel Divestment, 47 Envtl. L. 335 (2017) ...... 12

Jill E. Fisch, et al.,

The Logic and Limits of Event Studies in

Securities Fraud Litigation,

96 Tex. L. Rev. 553 (2018) ........................................... 27

Jill E. Fisch,

Making Sustainability Disclosure

Sustainable, 107 Geo. L.J. 924 (2019) ...... 12, 13, 14, 15

Jill E. Fisch,

The Future of Price Distortion in Federal

Securities Litigation,

10 Duke J. Const. L. & Pub. Pol’y 89 (2015) ............. 29

Jill E. Fisch,

The Trouble with Basic: Price Distortion After

Halliburton, 90 Wash. U. L. Rev. 895 (2013) ............ 28

Merritt B. Fox,

After Dura: Causation in Fraud-on-the Market

Actions, 31 J. Corp. L. 829 (2006) .............................. 28

Virginia Harper Ho,

Risk-Related Activism: The Business Case for

Monitoring Nonfinancial Risk,

41 J. Corp. L. 647 (2016) ........................................ 12, 13

-viUsman Hayat and Matt Orsagh,

Environmental, Social, and Governance Issues in

Investing: A Guide for Investment Professionals,

CFA Institute (Oct. 2015),

https://perma.cc/B7RA-VZWZ ................................... 13

David A. Hoffman,

The “Duty” To Be a Rational Shareholder,

90 Minn. L. Rev. 537 (2006) ......................................... 17

Erica T. Jones,

The “ABC’s” of ESG, The National Law Review

(Feb. 8, 2021), https://perma.cc/4JZY-7N26 ............. 13

Donald C. Langevoort,

Disasters and Disclosures,

107 Geo. L.J. 967 (2019) ................................................. 9

Alex LaPlante & Thomas F. Coleman,

Teaching Computers to Understand Human

Language: How Natural Language Processing is

Reshaping the World of Finance, The Global Risk

Institute (Jan. 15, 2017),

https://perma.cc/QQS6-JK5V...................................... 10

Craig Lewis & Steven Young,

Fad or future? Automated analysis of

financial text and its implications for

corporate reporting,

49 Accounting & Bus. Research 587 (2019) ......... 10, 14

Note,

Congress, the Supreme Court, and the Rise of

Securities-Fraud Class Actions,

132 Harv. L. Rev. 1067 (2019) ..................................... 29

-viiFrank Partnoy,

The Secrets in Your Inbox, The Atlantic

(Sept. 2018), https://perma.cc/8RQN-4HD9 ............. 19

Dana Brakman Reiser & Anne Tucker,

Buyer Beware: Variation and Opacity in ESG

and ESG Index Funds,

41 Cardozo L. Rev. 1921 (2020) ............................ 11, 13

Hillary A. Sale & Robert B. Thompson,

Market Intermediation, Publicness, and

Securities Class Actions,

93 Wash. U. L. Rev. 487 (2015) ....................... 26, 28, 29

U.S. SIF,

Report on U.S. Sustainable and Impact Investing

Trends, (2010), https://perma.cc/UB62-QU5C ......... 13

Urska Velikonja,

Distortion Other Than Price Distortion,

93 Wash U. L. Rev. 425 (2015) .................................... 28

Yesha Yadav,

The Failure of Liability in Modern Markets,

102 Va. L. Rev. 1031 (2016) ......................................... 10

-1INTRODUCTION

AND SUMMARY OF ARGUMENT1

Fifty years ago, less than five percent of the American

public owned stocks. The investors whose decisions

shaped the market relied on slide rules and pocket calculators to interpret corporate figures. Analysts read the

Wall Street Journal on the way to work to get an information advantage over their colleagues.

Today, that market is unrecognizable. Traders use sophisticated technology to parse vast troves of data and to

comb through company statements in search of insights

about those companies’ financial health. The composition

of the investing public has changed a great deal, too. Today more than half of the American public has some interest in the stock market. And that public is increasingly interested in companies’ records on social, environmental,

and corporate governance issues—and in what those records say about their reputations and their bottom lines.

Despite its growing appetite for more and different

information, however, the market is not perfect. Under

pressure to post year-over-year growth, troubled publiclytraded companies occasionally make false or misleading

statements about their financial health. Most commonly,

companies try to maintain unsustainable share growth by

downplaying or concealing emerging problems.

Goldman Sachs’s position in this case is untethered

from these market realities. First, hearkening back to an

earlier age, Goldman assumes that the only corporate

1

All parties consent to the filing of this amicus brief. No counsel

for a party authored this brief in whole or in part and no person other

than amici and their counsel made a monetary contribution to its

preparation or submission.

-2statements that can have an impact on the market are

those statements that investors perusing corporate

disclosures by hand would recognize, in isolation, as “nongeneric.” This assumption is sorely mistaken. Investors

have always evaluated corporate statements in the

broader context in which they are made. And today they

are better at that than ever, incorporating sophisticated

computerized tools to provide clues as to each company’s

present or future.

Second, Goldman fails to appreciate that what

statements might strike a judge as intuitively “generic” or

“general” are just the sorts of statements that motivate

whole segments of the investing public. Indeed, Goldman’s

statements in this case—properly understood in

context—would not strike these investors as “generic” at

all, but rather as statements of considerable significance

to its reputation and operations.

And third, Goldman labors under an artificially narrow

view of the scope of securities fraud, supposing that most

fraud occurs when a company hatches a scheme to rapidly

inflate its share price. Reality is less exciting: The vast

majority of securities fraud occurs when companies’

misstatements conceal unknown problems to maintain

their prior share price.

Worse still, Goldman’s position in this case doesn’t just

ask this Court to enshrine these misapprehensions about

the market in securities law. It also seeks an end-run

around the Court’s established precedent concerning class

certification in securities fraud cases.

As the law stands, defendants already have a

mechanism to argue that their statements were too

general to support a claim of securities fraud. They can

argue that those statements were immaterial—that is,

-3that no reasonable investor could have attached

significance to them. See Chadbourne & Parke LLP v.

Troice, 571 U.S. 377, 388 (2014). And defendants already

do this in basically every securities-fraud case—beginning

with the pleadings stage, and again at summary judgment

and trial.

Eight years ago, this Court rebuffed a request from

securities-fraud defendants to allow them to make the

same argument at class certification, too. As the Court

explained in Amgen, Inc. v. Connecticut Retirement

Plans & Trust Funds, 568 U.S. 455 (2013), and reaffirmed

in Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S.

258 (2014) (Halliburton II), materiality is an issue capable

of classwide resolution that need not be resolved at this

juncture.

Yet what Goldman seeks here would render those

holdings a dead letter. While Goldman can point to

theoretical distinctions between materiality and whether

a statement is generic, there would be no point to this

Court’s holding that a plaintiff need not prove materiality

at class certification if the very same arguments that a

defendant would have used to do so can be trotted out in

the guise of an attack on reliance.

Nor is there a need for it to do so. Whether a statement

is generic provides little insight into whether it mattered

to investors—and materiality challenges already provide

ample opportunities for defendants to ask courts to

dismiss securities-fraud complaints on that basis.

The court below correctly applied these principles, and

this Court should affirm.

-4INTEREST OF AMICI CURIAE

Amici are law professors and scholars who focus their

teaching and scholarship on federal securities law and

complex litigation. They submit this brief to clarify the

contours of the modern market for this Court’s benefit,

including investors’ focus on the context in which

statements are made, their reliance on big data and

sophisticated computing, and the investing public’s

growing interest in information about companies’ records

on environmental, social, and especially corporate

governance issues. Drawing on this experience, amici

urge this Court to tread carefully in considering whether

to empower inexpert judges to scrutinize, at a new

juncture, whether statements are too generic to matter to

an increasingly omnivorous investing public.

Further, as complex-litigation and securities-law

scholars, amici are familiar with the lower courts’

experience applying this Court’s fraud-on-the-market

decisions. Amici provide the Court with an overview of

that experience to explain why undue attention to

“generic” statements would work an end-run around this

Court’s sensible caselaw in this area and to clear up

confusion surrounding the so-called “price-maintenance”

(or “inflation-maintenance”) theory of price impact. Amici

are:

Samuel Buell

Bernard M. Fishman Professor of Law,

Duke University School of Law

Steve Burbank

David Berger Professor for the Administration of

Justice,

University of Pennsylvania School of Law

-5James Cox

Brainerd Currie Professor of Law,

Duke University School of Law

Meyer Eisenberg

Former Senior Research Scholar,

Columbia University School of Law

Lisa M. Fairfax

Alexander Hamilton Professor of Business Law,

The George Washington University Law School

Jill Fisch

Saul A. Fox Distinguished Professor of Business

Law,

University of Pennsylvania School of Law

Erik F. Gerding

Wolf-Nichol Fellow,

University of Colorado Law School

Virginia Harper Ho

Associate Dean, International and Comparative Law;

Earl B. Shurtz Research Professor; Director,

Polsinelli Transactional Law Center,

University of Kansas School of Law

Thomas Lee Hazen

Cary C. Boshamer Distinguished Professor of Law,

University of North Carolina School of Law

Renee Jones

Associate Dean for Academic Affairs and Professor,

Boston College Law School

Michael Kaufman

Dean and Professor of Law; Founding Director of

-6Education Law and Policy Institute; Director of

Institute for Investor Protection,

Loyola University Chicago School of Law

Robert Klonoff

Jordan D. Schnitzer Professor of Law; Dean of the

Law School, 2007-2014,

Lewis & Clark Law School

Donald C. Langevoort

Thomas Aquinas Reynolds Professor of Law,

Georgetown Law School

Ann M. Lipton

Michael M. Fleishman Associate Professor in

Business Law and Entrepreneurship,

Tulane Law School

Minor Myers

Professor,

University of Connecticut School of Law

Donna M. Nagy

C. Ben Dutton Professor of Law,

Indiana University Maurer School of Law

James J. Park

Professor; Faculty Director, Lowell Milken Institute

for Business Law and Policy,

UCLA School of Law

Joel Seligman

President Emeritus and University Professor,

University of Rochester;

Dean Emeritus and Professor,

Washington University School of Law

-7James C. Spindler

Mark L. Hart, Jr. Endowed Chair in Corporate and

Securities Law,

University of Texas Law School

Marc I. Steinberg

Radford Professor of Law,

SMU Dedman School of Law

Randall Thomas

John S. Beasley II Chair in Law and Business;

Director, Law and Business Program,

Vanderbilt University Law School;

Professor of Management,

Owen Graduate School of Management, Vanderbilt

University

Urska Velikonja

Professor of Law,

Georgetown Law School

David H. Webber

Associate Dean for Intellectual Life,

Boston University School of Law

Cynthia Williams

Osler Chair in Business Law,

Osgood Hall Law School, York University

-8ARGUMENT

I. Whether a statement is “generic” has little, if any,

bearing on its price impact.

Goldman’s position on the first question presented in

this case depends on two premises: that investors respond

differently to “generic” statements than to specific ones,

and that there is a grave need for courts to assess that

question at the class-certification stage. Both premises

are mistaken. Investing decisions are highly contextdependent—especially in today’s markets. Today’s

investors are attuned to a wide and growing range of

company actions and statements, including those that

might strike a reviewing court as insignificant. Take, for

instance, the statements at issue in this case. To today’s

investors, those statements aren’t “generic” at all.

Even if they were, courts already have ample

mechanisms to weed out insignificant statements as a

basis for securities-fraud claims. And Goldman’s position

cannot be reconciled with the basic principles of securities

law—not to mention this Court’s precedent applying the

fraud-on-the-market theory.

Accepting Goldman’s novel proposition—inviting

courts to form their own intuitive judgments as to how

“generic” a statement is at class certification—would

therefore be a mistake.

A. Investors don’t care whether a statement is

“generic.”

1. Call up anyone who works a trading desk or

manages retirements savings for a large mutual fund and

ask them to help you spot whether companies’ statements

are “generic” or meaningful. Their answer will be that that

task is a waste of time. And you won’t find a definition of

-9“generic” in Goldman’s brief in this case, either. That’s

because whether a statement is too “generic” or “general”

to move markets entirely depends on the context in which

it was made—from market conditions, to company

history, to what other companies are saying.

To see why, suppose that a company reports to

investors that it expects to earn “typical” annual profits.

Or suppose that a company reports that its operations are

in strict accordance with local health and safety codes. In

an ordinary year, in isolation, either statement might be

an unremarkable assurance that few investors would vest

with any significance.

But now suppose that a little-understood infectious

disease has begun sweeping the globe, shuttering

businesses and generating radical alterations to modern

life, including prompting local governments to enact

unexpected new health and safety requirements. In those

circumstances, expecting ordinary profits or keeping pace

with local legal changes would be an extraordinary feat

that would certainly attract investor attention.

Some of the ways in which context matters are obvious.

When investors read a company’s disclosures, for

instance, it’s easy to expect them to be attuned to

“wording, syntax, hyperbole, euphemisms, and tone”—all

of which “can carry value-relevant messages” that drive

investment decisions. Donald C. Langevoort, Disasters

and Disclosures, 107 Geo. L.J. 967, 984 (2019).

But some are less so. In today’s markets, what context

clues are available—and which clues investors care

about—reflect a changing technological landscape and a

changing investing public.

Big data and technology. To begin with, the

traditional model of a market—in which individual

-10investors peruse companies’ quarterly disclosures by

hand, review their financial positions, assess a handful of

digestible metrics to determine whether their shares are

accurately priced, and call in trades to a broker—is a thing

of the past. Markets now run on big data. See Yesha

Yadav, The Failure of Liability in Modern Markets, 102

Va. L. Rev. 1031, 1035 (2016).

And investors have help interpreting it. Take

corporate disclosures. Investors can now use

computerized tools to unearth minor changes in company

statements—and then examine those changes to see

whether they have any significance. Some even use

natural-language processing to interpret the language of

the disclosures themselves—deploying what Goldman

itself has dubbed “a critical tool for tomorrow’s investors.”

Frank Partnoy, The Secrets in Your Inbox, The Atlantic

(Sept. 2018), https://perma.cc/8RQN-4HD9; see also Craig

Lewis & Steven Young, Fad or future? Automated

analysis of financial text and its implications for

corporate reporting, 49 Accounting & Bus. Research 587,

588 (2019).

These approaches enable investors to both “mitigate

concerns about information overload” and to “detect

latent features in the data that even the closest manual

analysis may struggle to identify”—such as using

attribute dictionaries to assess whether the words

companies use in their disclosures connote a positive or

negative outlook. Id. at 588, 597; see also Alex LaPlante &

Thomas F. Coleman, Teaching Computers to Understand

Human Language: How Natural Language Processing

is Reshaping the World of Finance, The Global Risk

Institute (Jan. 15, 2017), https://perma.cc/QQS6-JK5V.

-11Nowhere in this process do investors—or the

machines they increasingly rely on—discount “generic”

statements. To the contrary, investors use technology to

hunt for clues in and among statements that might

otherwise seem general.

Environmental, Social, and Governance (ESG)

information. Today’s investors are also attuned to new

sorts of information about the companies in which they

might invest. In particular, many investors now

incorporate information about each company’s

environmental, social, and corporate governance (ESG)

performance into their decision-making. And, to meet

investor demand for this information, many companies

disclose information about their performance on those

factors—just the sorts of information Goldman derides as

hopelessly generic.

To be sure, investing based on environmental, social,

or corporate responsibility concerns is nothing new. See

Dana Brakman Reiser & Anne Tucker, Buyer Beware:

Variation and Opacity in ESG and ESG Index Funds, 41

Cardozo L. Rev. 1921, 1930 (2020) (noting as ESG

precursors John Wesley’s “instructions for his followers

to avoid stocks that conflicted with Methodist religious

teachings,” the limitations imposed by Sharia law, and the

“environmental and South African divestment

movements”). But ESG investing differs from past efforts

to “screen” investment products on behalf of a “niche

audience” of investors with an unclear financial payoff. Id.

For one thing, demand for ESG information reflects

the market’s changing assessment of risk and value.

Traditional corporate responsibility efforts weren’t about

profit at all. But today’s investors feel differently, seeing

information about ESG factors as “facilitating their ability

-12to evaluate a firm’s operational plan from a longer term

perspective,” to “evaluate business risk,” and to gain

“insights into a board’s level of engagement and

oversight.” Jill E. Fisch, Making Sustainability

Disclosure Sustainable, 107 Geo. L.J. 924, 932–33 (2019);

see also Laura E. Deeks, Discourse and Duty: University

Endowments, Fiduciary Law, and the Cultural Politics

of Fossil Fuel Divestment, 47 Envtl. L. 335, 344–45 (2017)

(“[C]onsideration of ESG factors is increasingly

recognized as part of the obligations of universal investors

not because it is right to do so from a moral imperative,

but because it is right to do so from a risk management

and prudent investment imperative.”).

Put differently, there is a growing consensus that a

company’s value cannot be understood without

incorporating ESG factors. See Virginia Harper Ho, RiskRelated Activism: The Business Case for Monitoring

Nonfinancial Risk, 41 J. Corp. L. 647, 662–64, 682–85

(2016) (explaining investor demand for ESG information

on ESG risk management and other financial ESG

impacts); COSO & World Bus. Counc. For Sustainable

Dev., Enterprise Risk Management: Applying

Enterprise Risk Management to Environmental Social

and Governance-Related Risks 5, 18 (Oct. 2018),

https://perma.cc/DT7W-E7FG (articulating a riskmanagement framework incorporating ESG factors).

And ESG investing doesn’t just account for traditional

corporate-social-responsibility factors, such as a

company’s impact on air and water pollution, energy

efficiency, or labor standards, or even emerging problems

like data protection and privacy.

Instead, ESG investing is particularly focused on

corporate governance issues like risk management, board

-13composition, executive compensation, business strategy,

and political contributions—not to mention board

oversight, integrity, and attention to community and

stakeholders. See Usman Hayat and Matt Orsagh,

Environmental, Social, and Governance Issues in

Investing: A Guide for Investment Professionals, CFA

Institute (Oct. 2015), https://perma.cc/B7RA-VZWZ;

Harper Ho, Risk-Related Activism, 41 J. Corp. L. at 663–

68.

Moreover, today, ESG investing is big business. One

third of all managed assets in the United States are

sustainably invested using ESG factors. U.S. SIF, Report

on U.S. Sustainable and Impact Investing Trends (2020),

https://perma.cc/UB62-QU5C. It has also moved into the

mainstream: The largest asset manager in the world,

BlackRock, has reported that it plans to have $1.2 trillion

in ESG assets in the next decade. Erica T. Jones, The

“ABC’s” of ESG, The National Law Review (Feb. 8, 2021),

https://perma.cc/4JZY-7N26. The particulars vary, but

these funds are now deploying such strategies as

requiring “portfolio companies to post minimum

performance on ESG factors for inclusion in a fund,” or

even developing their own ESG investment products.

Reiser & Tucker, Buyer Beware, 41 Cardozo L. Rev. at

1932.

Companies have not failed to notice this new focus or

its large audience. Many now tout their performance on

ESG factors precisely because they wish to appeal to the

broadening interests of the investing public. See Fisch,

Making Sustainability Disclosure Sustainable, 107 Geo.

L.J. at 926–27. They, too, recognize that statements that

once looked generic, aspirational, or insignificant can

carry significant weight today.

-142. All this means that today’s investment markets are

driven by factors that once seemed niche—or that might

strike an outsider as “irrelevant” or “generic.” Assurances

about a company’s environmental record, the

independence of its board, the ethical commitments of its

principals, or other reputational factors are now unlikely

to be ignored—least of all by the increasingly

sophisticated methods investors and analysts rely on to

assess a company’s worth.

This reality has not been lost on the SEC. Like

investors and researchers, it now regularly incorporates

natural-language-processing methods and other big-data

tools into its fraud detection and other enforcement

activities. See Lewis & Young, Fad or Future, 49

Accounting & Bus. Research at 596.

And the SEC has long shown an interest in matters of

corporate governance. For instance, it requires companies

to disclose whether they have adopted written codes of

ethics applicable to certain principal officers—and, if no

such code has been adopted, to explain why it has not. See

17 C.F.R. § 229.406.

The SEC has even broadened its requirements in

response to investor interest. For instance, after years of

allowing companies to disregard shareholder proposals

seeking to address executive pay, the SEC began first

imposing extensive mandatory disclosure requirements,

and ultimately accepting the view that “the size and

structure of executive compensation is economically

material to investors.” Fisch, Making Sustainability

Disclosure Sustainable, 107 Geo. L.J. at 936; see also, e.g.,

In re Dow Chem. Co., Securities Exchange Act Release

No. 83,581 (July 2, 2018) (SEC enforcement action against

-15Dow Chemical for failing to adequately disclose executive

perks).

Similarly, the SEC has long advised issuers that they

are required to disclose material information about their

exposure to risks related to climate change. See Fisch,

Making Sustainability Disclosure Sustainable, 107 Geo.

L.J. 924, at 937 (citing Commission Guidance Regarding

Disclosure Related to Climate Change, Securities

Exchange Act Release No. 9106, Exchange Act Release

No. 61,469, 72 Fed. Reg. 6289, 6290, 6293–97 (Feb. 8,

2010)). As the Commodity Futures Trading Commission

has emphasized, whether companies comply with that

guidance also matters to regulators (and investors)

because of the market-wide effects of climate-related

financial risk. Commodity Fut. Trad. Comm’n (CFTC),

Managing Climate Risk in the U.S. Financial System

(2020), https://perma.cc/M28A-94QH.

3. In its securities fraud cases, this Court has

previously appreciated that the significance of a statement

to the investing public is a highly contextual inquiry.

In Omnicare, Inc. v. Laborers District Council

Construction Industry Pension Fund, 575 U.S. 175

(2015), for instance, the Court acknowledged the many

inputs that go into a single investing decision. Investors,

the Court explained, take all statements in context,

reading each statement, “whether of fact or of opinion, in

light of all its surrounding text, including hedges,

disclaimers, and apparently conflicting information.” Id.

at 190. Moreover, investors “take[] into account the

customs and practices of the relevant industry.” Id. And

they treat statements differently depending on the

medium in which they were expressed. So when

companies expressed opinions in registration statements

-16filed with the SEC, for instance, the Court emphasized

that “[i]nvestors do not, and are right not to, expect

opinions contained in those statements to reflect baseless,

off-the-cuff judgments, of the kind that an individual

might communicate in daily life.” Id.

This Court has brought the same appreciation of how

investing functions to the question of materiality. As this

Court explained in TSC Industries, Inc. v. Northway, 426

U.S. 438 (1976), whether a statement is material for

securities fraud purposes depends upon whether there is

a “substantial likelihood that the disclosure of the omitted

fact would have been viewed by the reasonable investor as

having significantly altered the ‘total mix’ of information

made available.” Id. at 449. That “total mix” explicitly

invites consideration of the full context available to an

investor.

4. Yet in this case, Goldman asks this Court to depart

from this well-reasoned logic and to hold that courts can,

or even must, make their own commonsense judgments as

to whether a statement is too “generic” to matter. As the

foregoing discussion makes plain, there are three fatal

flaws with this approach.

First, it asks this Court to disregard how investors

actually operate. That move risks damaging consequences

for investors and the market. Because there is likely to be

a mismatch between courts’ assessments of how “generic”

a statement is and investors’ reliance on it, Goldman’s rule

penalizes investors who behave differently. And that

effect is unlikely to be random, but instead will penalize

particular investors—those who use automated tools to

draw meaning from anodyne statements, or those focused

on the sorts of ESG factors that could strike a court as

insignificant, but which may indeed matter. This Court

-17should exercise extreme caution before creating this

distorting effect.

Second, Goldman offers a solution in search of a

problem. When securities-fraud defendants want to argue

that their statements are too “generic” to matter to

investors, they have a convenient vehicle to do so: a motion

to dismiss on materiality grounds. In such a motion, they

can argue that their statements (or omissions) were “so

obviously unimportant to a reasonable investor that

reasonable minds could not differ on the question of their

importance.” See, e.g., Ganino v. Citizens Utilities Co.,

228 F.3d 154, 162 (2d Cir. 2000) (quotation omitted).

Nearly every securities fraud defendant—Goldman

included—does just this. And they have fantastic success:

Surveys reflect that half of the opinions addressing such

motions have dismissed claims for lack of materiality. See

David A. Hoffman, The “Duty” To Be a Rational

Shareholder, 90 Minn. L. Rev. 537, 542 (2006); see also

Stephen M. Bainbridge & G. Mitu Gulati, How Do Judges

Maximize? (The Same Way Everybody Else Does-Boundedly): Rules of Thumb in Securities Fraud

Opinions, 51 Emory L.J. 83, 116 n.94 (2002) (noting that

in one survey 70 percent of securities dismissals held that

at least one alleged misstatement was immaterial).

To be sure, Goldman insists that the questions whether

a statement is (a) material or (b) too generic to be

reflected in its securities price are distinct. As discussed

below, they must be in order for it to prevail here.

But third, even if that’s right, it’s no help to Goldman,

because it simply underscores the ways in which

Goldman’s suggested approach lacks the guardrails that

guide the materiality inquiry and ensure that it accurately

captures investor behavior. When a defendant argues that

-18a statement is immaterial as a matter of law, as explained

above, it must meet a highly context-dependent standard,

under which it must explain why the total mix of

information available rendered the defendant’s

communication misleading.

Goldman offers no comparable guardrails to guide the

generality question here. To the contrary, the facts of this

case amply demonstrate the difficulties judges would have

deploying Goldman’s ill-defined “generality” standard.

Start with Goldman’s insistence that every company

invariably assures its investors that it operates with

integrity and honesty, that it carefully manages conflicts

of interest, that those conflicts are “fully disclosed and

well known to investors.” JA 209. Even if that’s so, it’s no

help to Goldman.

For one thing, the fact that disclosures are general—

or ubiquitous—doesn’t illustrate that investors don’t care

about them. As discussed above, the significance of ESG

information to investors, including growing investor

attention to questions of corporate governance, has made

disclosures pertaining to conflicts and ethics focal points

for many investors. There is no doubt that Goldman

anticipated as much and intended its statements about

these issues to burnish its reputation. And whether

investors would have taken note of Goldman’s assurances

in this respect hinges on context—such as whether other,

similar companies made similar assurances. If Goldman

had failed to make the same assurances the market did,

investors likely would have noticed, regardless of their

purported “genericness.”

In any event, Goldman’s account of what happened

here is missing crucial context. As the respondents’ brief

explains (at 6–8), on the cusp of a financial crisis, Goldman

-19cultivated a position that was exceptionally vulnerable to

conflicts of interest by developing financial products that

it could sell to two different sides of the transaction (or

hold an interest in itself). And Goldman didn’t even stop

there—instead, it repeatedly denied charges that it was

not managing its conflicts properly, even as scrutiny over

its practices intensified. Given its business model,

investors would surely have noticed if Goldman had failed

to make “generic” assurances that it had procedures and

controls in place to identify and address conflicts of

interest.

Yet despite all this, in his dissent below, Judge Sullivan

confidently assessed all of Goldman’s statements as

“generic” statements to which investors would have

attached no significance at all. Ark. Tchr. Ret. Sys. v.

Goldman Sachs Grp., Inc., 955 F.3d 254, 278 (2d Cir.

2020). That’s sorely mistaken, and this Court risks similar

outcomes if it approves Goldman’s tack.

B. Placing weight on whether a statement is

“generic” would be inconsistent with—or work

an end-run around—this Court’s securities

precedent.

Goldman’s position also creates untenable tension with

existing securities law—both in this context and in

general.

1. Section 10(b) of the Securities Exchange Act of 1934

prohibits any person from using or employing, “in

connection with the purchase or sale of any security,” “any

manipulative or deceptive device or contrivance in

contravention of” the SEC’s rules. 15 U.S.C. § 78j(a)(1).

SEC Rule 10b-5 in turn implements that statute. It

prohibits making “any untrue statement of a material

fact” or “omit[ting] to state a material fact necessary in

-20order to make the statements made, in the light of the

circumstances under which they were made, not

misleading.” 17 C.F.R. § 240.10b-5(b). As this Court has

explained, recovery under Rule 10b-5 requires a plaintiff

to show that (1) a defendant made a material

misrepresentation or omission; (2) with scienter—that is,

a “wrongful state of mind”; (3) in connection with the

purchase or sale of securities; (4) upon which the plaintiff

relied; and (5) an economic loss to the plaintiff that (6) that

misrepresentation or omission caused. Dura Pharms.,

Inc. v. Bruodo, 544 U.S. 336, 341–42 (2005).

As framed by Goldman, this case concerns a simple

question relating to the “reliance” element. The reality,

however, is more complicated.

In Basic Inc. v. Levinson, 485 U.S. 224 (1988), this

Court identified one means of satisfying the reliance

element. Id. at 421–27. Under what is now known as the

“fraud-on-the-market theory,” a plaintiff who shows that

“the defendant’s misrepresentation was public and

material and that the stock traded in a generally efficient

market” may invoke what amount to two related

presumptions: (1) that the defendant’s “misrepresentation

affected the stock price,” and (2) that, if the plaintiff

purchased the stock at the market price during the

relevant period, it did so “in reliance on the defendant’s

misrepresentation.” Halliburton II, 573 U.S. at 268.

The theory is especially useful in securities class

actions like this one, where it is one avenue by which class

action plaintiffs may demonstrate that common questions

predominate over individual ones as part of a bid for class

certification. See Erica P. John Fund, Inc. v. Halliburton

Co., 563 U.S. 804, 809–10 (2011) (Halliburton I).

-21Following Basic, this Court has set forth some of the

parameters for their doing so. First, such plaintiffs need

not prove an element of securities fraud that, like loss

causation, has “no logical connection” to the factual

“predicate[s]” of the fraud-on-the-market theory.

Halliburton I, 563 U.S. at 813. And, conversely, plaintiffs

need not prove every element of the fraud-on-the-market

theory either, but instead must prove only those elements

required to satisfy the ordinary criteria of Rule 23.

Amgen, 568 U.S. at 465–66, 468. That means plaintiffs

need not prove materiality: While it’s an element of the

fraud-on-the-market theory, any ultimate failure of proof

on that element would not demonstrate that individual

issues predominated over common ones, but rather would

demonstrate that materiality was such a common issue.

Id.

Finally, while reaffirming the theory’s general

contours, this Court has emphasized that a defendant may

“defeat the presumption at the class certification stage

through evidence that the misrepresentation did not in

fact affect the stock price.” Halliburton II, 573 U.S. at 266,

279.

Here, Goldman argues that such “evidence” may

include evidence that the statements on which the

plaintiffs’ claim is premised were too “generic” to affect

the price of its stock. That position is in tension with

securities law as a general matter—and would work an

end-run around this Court’s approach to fraud-on-themarket cases in particular.

2. To begin with, Goldman’s approach is altogether

incompatible with claims that a defendant’s omissions

violated SEC Rule 10b-5.

-22Consider again the text of that Rule. It prohibits

“omit[ting] to state a material fact necessary in order to

make” a defendant’s statements, “in light of the

circumstances under which they were made, not

misleading.” Goldman never explains how a court could

coherently apply a “generic” statement bar in the

omissions context. One would plainly be inappropriate: To

understand whether a defendant’s omission violated the

Rule, a court must take account not just of the defendant’s

statement itself, but also of all the surrounding

circumstances. Those could include the defendant’s other

statements, the nature of the defendant’s business, the

presence of regulatory scrutiny, and a wide host of other

factors.

This Court recognized a similar point in Omnicare, 575

U.S. at 175. There, the Court explained that even

statements of opinion—statements that, by Goldman’s

standard, look quite “general,” see id. at 179–80—may

generate a misleading omission, because a reasonable

investor may understand such statements to “convey facts

about how the speaker has formed the opinion—or,

otherwise put, about the speaker’s basis for holding that

view.” Id. at 188. If the “real facts are otherwise, but not

provided,” the Court explained, the statement “will

mislead its audience”—even though it is merely opinion.

Id.2

2

Omnicare concerned a claim brought pursuant to 15 U.S.C.

§ 77k(a) rather than Section 10 (or Rule 10b-5). That provision concerns the obligation of companies that seek to sell securities in interstate commerce to first file registration statements with the SEC.

Though distinct from Section 10(b) (and Rule 10b-5), it contains the

same material misstatement or omission element: If a registration

statement “contain[s] an untrue statement of a material fact” or

-23If so, that means the company has a duty to correct the

misimpression.

To be sure, perhaps Goldman’s view is simply that the

bar applies only to affirmative statements. But that view

risks introducing similar problems. After all, as discussed

at length above, whether a statement—as opposed to an

omission—had an impact on the market is a similarly

contextual inquiry.

3. Goldman’s approach deviates from this Court’s

ordinary approach to securities cases in another way too:

by working an end-run around this Court’s holding in

Amgen that plaintiffs are under no obligation to prove

materiality in order to invoke the fraud-on-the-market

theory at the class-certification stage.

Goldman is no doubt correct that price impact and

materiality are different questions. See Goldman Br. at 32;

see also Brief of United States at 15. The first asks what

the market did, while the second asks what a reasonable

investor would have considered important. A statement

could have a price impact without being material (and

conceivably could be material without having a price

impact).

But that’s not the right comparison. Goldman doesn’t

really ask this Court to approve its introduction of

evidence of an absence of price impact—which it’s already

entitled to do. Instead, it seeks to introduce evidence that

“omit[s] to state a material fact . . . necessary to make the statements

therein not misleading,” those who purchased the stock may sue. 15

U.S.C. § 77k(a). Recognizing this similarity, several courts of appeals

have extended the Court’s logic in Omnicare to the Section 10 context.

See City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v. Align

Tech., Inc., 856 F.3d 605, 616 (9th Cir. 2017); Tongue v. Sanofi, 816

F.3d 199, 209–10 (2d Cir. 2016).

-24a statement is “generic” (or to pursue a judge’s intuitive

assessment of that question). And the distinction Goldman

draws between a “generic” statement and an “immaterial”

one is so thin as to be nearly invisible.

Judge Sullivan didn’t distinguish between the two

when, dissenting below, he asserted that “no reasonable

investor would have attached any significance” to the

statements Goldman had issued—a classic invocation of

immateriality. Ark. Tchr. Ret. Sys., 955 F.3d at 278. And

all the statements Goldman could find of a “general”

standard akin to the one it wants this Court to apply here

were materiality cases, too. See Cert. Pet. at 21 (citing four

materiality cases).

That’s because whatever distinction is viable in theory,

in practice there is no difference between what a

defendant would argue about these concepts. See Brief of

United States at 16–17 (using “immaterial” and “general”

interchangeably); id. at 17–18 (noting that courts seeking

to determine whether “a misstatement was material

would consider its generic character, together with any

additional evidence bearing on whether a reasonable

investor would have viewed the misstatement as

‘significant’”). At best, then, Goldman renders Amgen a

dead letter: Defendants can’t argue that a statement is

immaterial to defeat class certification, but they can make

identical arguments that the statement is “generic.”

In light of all this, this Court shouldn’t entertain

Goldman’s effort to evade Amgen through a labeling

exercise. After all, the point the Court made in Amgen is

just as true here: The ostensible price-impact question of

generality (whether a statement is too general to have

mattered to investors) is just as susceptible of common

proof as the materiality question (whether a statement is

-25too general to matter to investors). Put differently, the

central flaw with Goldman’s argument is that it tries to

smuggle an issue at the core of the merits of a plaintiff’s

securities fraud claim, and which has nothing to do with

the requirements of Rule 23, into the class-certification

context.

This Court should reject that attempt. Doing so would

impose no hardship on defendants like Goldman. If a

defendant wants to introduce evidence of a lack of price

impact, it should introduce evidence of a lack of price

impact—not ask inexpert courts to hypothesize about how

“likely” it is, Goldman Br. at 28, that the “nature” of the

defendant’s statements precluded them from causing a

price impact, Goldman at 29. And if a defendant wants to

argue that a statement is too general to matter to

investors, it can seek dismissal or summary judgment on

that basis—although we urge caution in pre-trial

applications of materiality defenses for all the reasons

discussed above.

II. Price maintenance is a paradigmatic example of

price impact.

Though the merits of the “price-maintenance” or

“inflation-maintenance” theory of price impact are not at

issue in this appeal, Goldman repeatedly (at 4, 13, and

elsewhere) suggests that that theory is somehow suspect.

Far from it. To the contrary, price-maintenance theory is

a straightforward and unremarkable way in which

investors asserting fraud-on-the-market claims may

establish price impact. It is a well-established doctrine

that reflects how securities fraud typically unfolds and

that enjoys near-universal acceptance by academic

commentators and courts. This Court should disregard

Goldman’s aspersions to the contrary.

-261. “Price impact,” as this Court has used the term,

“simply refers to the effect of a misrepresentation on a

stock price.” Halliburton I, 563 U.S. at 814; see also

Hillary A. Sale & Robert B. Thompson, Market

Intermediation, Publicness, and Securities Class

Actions, 93 Wash. U. L. Rev. 487, 519–25 (2015) (tracing

the origins and evolution of the term in this Court’s cases).

And that “effect” is “the difference between the price that

prevailed” and what that price would have been “had there

been no fraud (that is, had the truth been told).” Donald

C. Langevoort, Judgment Day for Fraud-on-theMarket?: Reflections on Amgen and the Second Coming

of Halliburton, 57 Ariz. L. Rev. 37, 56 (2015).

Price impact is one of two presumptions securitiesfraud class-action plaintiffs may invoke in order to

establish reliance as a common question capable of

classwide resolution. As this Court explained in Basic, it

captures this logic: Because “certain well-developed

markets are efficient processors of public information,” a

defendant’s public, material misrepresentations may be

presumed to be “reflected” in its securities’ “market

price.” 485 U.S. at 247. Reliance can be established by one

further presumption: that, if the plaintiffs bought stocks

at a price reflecting the defendant’s misrepresentations,

that purchase was in reliance on the misrepresentations.

Halliburton II, 573 U.S. at 268. If, however, a defendant

can prove the absence of price impact, the presumption of

reliance “collapses” and class certification is

“inappropriate.” Id. at 283.

Within this framework, price maintenance is simply

one way that market price may reflect a defendant’s

misrepresentations: the effect of maintaining the

-27company’s stock price in the face of what would otherwise

be a decline.

For instance, suppose a company with a strong

environmental record conducts routine emissions tests at

its manufacturing plants and discovers a serious leak at

several—but represents to its investors that the tests

proceeded without a hitch. In these circumstances, the

company’s stock price may well remain unchanged. The

market has no reason to suspect the problem, and, after

all, “information that is not new to the market cannot be

expected to move a security’s price.” James D. Cox, Fraud

on the Market After Amgen, 9 Duke J. Const. L.& Pub.

Pol’y 1, 22 (2013).

But

that

doesn’t

mean

the

company’s

misrepresentation had no effect. To the contrary, it

maintained the company’s stock at a higher price than it

could have borne if the company had come clean.

Glickenhaus & Co. v. Household Int’l, Inc., 787 F.3d 408,

419 (7th Cir. 2015). And because the company’s

misrepresentation was reflected in that artificially high

price, new investors who paid that price may be presumed

to have relied on the misrepresentation in doing so.

FindWhat Investor Grp. v. FindWhat.com, 658 F.3d 1282,

1317 (11th Cir. 2011).

Price impact, in other words, depends on the

application of a simple counterfactual: What would have

happened to a company’s stock if it had “spoken

truthfully”? In re Vivendi, S.A. Sec. Litig., 838 F.3d 223,

258 (2d Cir. 2016); see also Jill E. Fisch, et al., The Logic

and Limits of Event Studies in Securities Fraud

Litigation, 96 Tex. L. Rev. 553, 564–65 (2018). Whether it

would have fallen or failed to rise, the defendant’s decision

to misinform the market had a clear effect.

-28Accordingly, there is no reason to treat “theories of

‘inflation maintenance’ and ‘inflation introduction’” as

“separate legal categories.” Vivendi, 838 F.3d at 259. It

doesn’t matter whether fraudulent statements “initially

introduce” inflation to a defendant’s stock price, or instead

“wrongfully prolong” the presence of that inflation.

FindWhat, 568 F.3d at 1316. The latter situation is simply

a “mirror image” of the former, but “in black ink, rather

than red.” Schleicher v. Wendt, 618 F.3d 679, 683 (7th Cir.

2010).

2. Far from fanciful, these facts describe most

incidents of securities fraud.

Indeed, “the prototypical fraud case” doesn’t involve a

company’s hatching a scheme to pump its share value up

to new heights. Sale & Thompson, Market

Intermediation, 93 Wash. U. L. Rev. at 524. Instead, a

“majority” of cases unfold like this one did. Urska

Velikonja, Distortion Other Than Price Distortion, 93

Wash U. L. Rev. 425, 426 (2015). A company experiences

mounting troubles—or takes on a new risk, such as

Goldman’s decision to begin operating a business that

either was, or might be perceived as being, self-dealing.

To “avoid disappointing” the market’s expectations, the

company then attempts to conceal its problems by

resorting to false assurances and denials—or by failing to

reveal information necessary to make its statements true.

Merritt B. Fox, After Dura: Causation in Fraud-on-the

Market Actions, 31 J. Corp. L. 829, 852 (2006). The

company’s goal in doing so isn’t to cause a spike in stock

price, and it’s unlikely to produce one. But its statements

(or omissions) nevertheless affect the company’s stock

price—by keeping it higher than it would have been if the

company had told the truth. Price-maintenance (or

-29inflation-maintenance) theories of price impact simply

apply securities-fraud liability to these common facts.

To see that such price-maintenance cases are

“ubiquitous,” Jill E. Fisch, The Trouble with Basic: Price

Distortion After Halliburton, 90 Wash. U. L. Rev. 895,

921–22 (2013), this Court need look no further than its own

fraud-on-the-market cases.

In Basic, for instance, the plaintiff investors argued

that the defendants’ public, but false, denial of merger

negotiations had artificially prevented the company’s

stock price from going up. See Jill E. Fisch, The Future of

Price Distortion in Federal Securities Litigation, 10

Duke J. Const. L. & Pub. Pol’y 89, 93 (2015). Meanwhile,

both Halliburton cases were based on allegations of

misstatements that were designed to prevent a stock

drop—not simply misstatements designed to inflate the

company’s stock price. See Sale & Thompson, Market

Intermediation, 93 Wash. U. L. Rev. at 548. Indeed, on

remand from Halliburton II, the district court certified a

class premised on such a price-maintenance theory. See id.

at 548. Likewise Amgen and Dura: They, too, involved

price-maintenance claims. See Sale & Thompson, Market

Intermediation, 93 Wash. U. L. Rev. at 548 n.329

(discussing the defendant’s alleged confirmatory

misrepresentations concerning profits, safety, and new

product development).

Securities-fraud litigation in the lower courts reflects

a similar composition; as of 2019, over seventy percent of

securities-fraud cases decided in the district courts relied

on a price-maintenance theory. See Note, Congress, the

Supreme Court, and the Rise of Securities-Fraud Class

Actions, 132 Harv. L. Rev. 1067, 1077–78 (2019).

-303. To be sure, that price-maintenance is ubiquitous

doesn’t mean it’s correct. But Goldman is mistaken in

suggesting that the lower courts are somehow confused.

As the courts of appeals to consider the question have

uniformly—and persuasively—explained, the theory

captures exactly what this Court was concerned with in

Basic and its progeny.

Take the Eleventh Circuit’s decision in FindWhat

Investor Group. There, the Eleventh Circuit explained

that fraudulent statements that prolong a stock’s inflated

price “can be just as harmful to subsequent investors” as

the statements that “create inflation in the first instance.”

FindWhat, 658 F.3d at 1315. Indeed, inflationmaintaining misstatements may pose graver risks to the

market than inflation-generating ones. “Every investor

who purchases at an inflated price,” the court explained,

“is at risk of losing the inflationary component of his

investment

when

the

truth

underlying

the

misrepresentation comes to light.” Id. And the “longer

that inflation remains within a stock price, the more

shares that are purchased at inflated prices, and the more

shares that stand to lose when the inflation subsequently

dissipates from the price.” Id. at 1316. Of course, some

investors in these circumstances don’t suffer. If investors

manage to sell while the defendant’s inflationmaintenance continues apace, they won’t be able to

recover for securities fraud, because the defendant’s

misstatements didn’t cause them any loss. But those

investors who do hold stocks they purchased at an inflated

price are entitled to the presumption of reliance—whether

their purchases came “at the beginning, middle, or end of

the inflationary period.” Id. at 1315.

-31The other courts to consider this question have

reached similar conclusions. See Vivendi, 838 F.3d at 259

(“Securities-fraud defendants cannot avoid liability for an

alleged misstatement merely because the misstatement is

not associated with an uptick in inflation.”); Schleicher,

618 F.3d at 683–84 (7th Cir. 2010) (similar); Alaska Elec.

Pension Fund v. Pharmacia Corp., 554 F.3d 342, 352 (3d

Cir. 2009) (similar); Nathenson v. Zonagen, Inc., 267 F.3d

400, 419 (5th Cir. 2001) (similar).3

And other plausible circumstances drive home the

point. Suppose a company makes projections estimating

its future performance, but learns that it won’t be able to

live up to them. And suppose the company then fails to

reveal the problems, trying to maintain the flawed rosy

picture it had previously presented. Because of pricemaintenance theory, investors could hold the company

accountable for that misconduct. But without it, having

once done something to inflate its stock, the company

would have license to lie thereafter.

In Schleicher, the Seventh Circuit warned of a similar

risk. 618 F.3d at 683. There, the Seventh Circuit examined

a plaintiff’s claims that a failing company had made false

statements not to inflate its stock, but to “slow the rate of

[its] fall.” Id. The court sensibly rejected the argument

that the company could avoid securities-fraud liability

simply because its stock failed to rise. To conclude

otherwise would immunize failing companies against

3

Although the Eighth Circuit in IBEW Local 98 Pension Fund

v. Best Buy Co., 818 F.3d 775 (8th Cir. 2016), declined to apply pricemaintenance theory, its logic centered on the facts of that case, not

disapproval of price-maintenance as such. See id. at 782–83. Indeed,

the court left the door open for the application of the theory to other

facts. See id.

-32securities fraud—and give the color of the ink on the

company’s balance sheets dispositive significance. See id.

at 683–84.

This Court should reject Goldman’s effort to disturb

this well-reasoned consensus.

CONCLUSION

The decision below should be affirmed.

Respectfully submitted,

DEEPAK GUPTA

Counsel of Record

LINNET DAVIS-STERMITZ

GUPTA WESSLER PLLC

1900 L Street, NW, Suite 312

Washington, DC 20036

(202) 888-1741

deepak@guptawessler.com

JAVIER BLEICHMAR

BLEICHMAR FONTI &

AULD LLP

7 Times Square, 27th Floor

New York, New York 10036

(212) 789-1341

March 3, 2021

Counsel for Amici Curiae