LITIGATION TRENDS 2025 | 117 T O C E M P E S G A N T I I P C A P R O W C S P O R T C O N T A C T I N T A P P P A T C C L S E C the form of “active participation” and reasoned that, under that standard, the acquiror’s mere receipt and approval of a draft proxy (having made no changes to the challenged sections of the proxy) did not equate to active (as opposed to passive) participation. In addition, the Court held that a contractual obligation to review the proxy did not change the analysis because such a provision does not create an independent duty of disclosure, nor does a third-party bidder have fiduciary duties to a target’s stockholders. The Mindbody decision, affirming the high bar for proving aiding and abetting liability, is a welcome development as plaintiffs may look to third-parties to recover when they may otherwise be foreclosed from securing direct recoveries against fiduciaries under Delaware law, including in light of the proposed DGCL amendments discussed above. Securities Class Actions: Using the Goldman Defense to Rebut Price Impact at the Class Certification Stage Continues to Gain Steam, but Hurdles Remain Over the past several years, we have highlighted the evolution of an important argument for defendants with the potential to defeat class certification in securities class actions. By way of background, in Basic v. Levinson, 485 U.S. 224 (1988), the United States Supreme Court established a rebuttable presumption of reliance in securities class actions – namely, that a stock trading in an efficient market incorporates into its price all public, material information, including material misrepresentations, and that investors rely on the integrity of the market price when they choose to buy or sell that stock. In 2021, the Supreme Court held that the “generic nature” of an alleged misrepresentation “often is important evidence of price impact that courts should consider at class certification” because the theory “that the back-end price drop equals front-end inflation . . . starts to break down when there is a mismatch between the contents of the misrepresentation and the corrective disclosure.” Goldman Sachs Grp., Inc. v. Arkansas Teacher Ret. Sys., 594 U.S. 113, 117 (2021) (“Goldman”). In 2023, the Goldman case was resolved in defendants’ favor when the Second Circuit de-certified the class because it found that defendants had successfully rebutted the Basic presumption of reliance by showing that the alleged misrepresentations did not actually impact the market price of the stock at issue. Now, almost two years after the Second Circuit’s 2023 decision in the Goldman case, our survey of cases attempting to challenge class certification by making a Goldman argument – i.e., that there is no price impact – reveals that the “no price impact” argument has successfully defeated class certification in at least two other cases. Of note, in each of these two cases where courts denied motions for class certification, they cited the lack of market analysts reporting on the alleged misrepresentations or omissions as strong evidence of lack of market price impact. We identified six other instances where a court narrowed the certified class based on a Goldman price impact argument, which significantly reduces potential damages in a securities class action. And in seven cases, the courts found that defendants failed to rebut the Basic presumption with Goldman price impact arguments and evidence and granted plaintiffs’ motions for class certification. While the results show that Goldman is not a silver bullet to defeating a securities class action, it can have a powerful impact in appropriate cases. Almost two years after the Second Circuit’s decision in the Goldman case, the “no price impact” argument to defeat class certification is not a silver bullet, but it has had a powerful impact in a number of cases. S Securities Litigation 116 | Weil, Gotshal & Manges LLP
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