Courthouse Steps Oral Argument: Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System

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On March 29, 2021, the Supreme Court will hear oral argument in the case of Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System.  The case turns on class action issues and the 1988 Supreme Court case Basic Inc. v. Levinson.  In Goldman Sachs, the Court will address whether a class action defendant in a case alleging securities fraud may rebut a presumption of class-wide reliance on an alleged misstatement by pointing to the generic nature of the statement and if so, whether that defendant ultimately bears the burden of production or the burden of persuasion.



Ted Frank, Director, Center for Class Action Fairness, Hamilton Lincoln Law Institute 


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Event Transcript



Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at



Evelyn Hildebrand:  Welcome to The Federalist Society's teleforum conference call. This afternoon, March 31st, we discuss the Supreme Court's oral argument in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System. My name is Evelyn Hildebrand, and I am an Associate Director of Practice Groups at The Federalist Society.


      As always, please note that all expressions of opinion are those of the expert on today's call. Today we are fortunate to have with us Mr. Ted Frank, Director of the Center for Class Action Fairness at the Hamilton Lincoln Law Institute.


      After our speaker gives his opening remarks, we will turn to you, the audience, for questions. So be thinking of those as we go along and have them in mind for when we get to that portion of the call. With that, thank you for being with us today. Ted, the floor is yours.


Ted Frank:  Thank you, and thank you to The Federalist Society for having me here. Today, we're discussing Goldman Sachs v. Arkansas Teacher Retirement System which was argued Monday in the Supreme Court. And as a disclosure, my organization is adverse to Arkansas Teacher in two pending cases in the First and Seventh Circuits. Those are interesting cases. You should come to our website at and look at those.


      But this particular case is another in a series of cases defining the viability and limits of the fraud on the market doctrine in securities litigation. To recap, courts have inferred a private right of action for securities fraud from Section 10(b) of the Securities Exchange Act of 1934. The elements of such a claim are material misstatement or admission, scienter; a connection with the purchase or sales of security, economic loss; loss causation, i.e., that the misrepresentation caused the asserted loss; and the element at issue in this one case is, here, of reliance.


      To obtain class certification in litigation, one must prove that common issues predominate. Now, normally, reliance would seem to be difficult to prove on a class-wide basis. Isn't it an individualized consideration? Everybody is purchasing stock for their own individualized reasons. It would seem to be impossible to prove reliance on a class-wide basis.


      But in Basic v. Levinson, the Supreme Court used economic theory to endorse what's called the fraud-on-the-market theory of reliance. In an efficient market, a stock's price reflects all public information about the stock. Therefore, a defendant's public misrepresentations would presumptively affect the market price of a stock, and thus, everybody who's purchased the stock at the resultantly inflated price before corrective statement has issued has "relied" on the misrepresentations.


      Under Supreme Court law, a defendant can rebut the presumption. As Basic said, any showing that severs the link between the alleged misrepresentation and either the price received or paid by a plaintiff, or his decision to trade at a fair market price. If a defendant shows that the misrepresentation in fact did not lead to a distortion in price, it would break the causal connection by eliminating the basis for finding that the fraud had been transmitted through the market price.


      In recent years, the Court has interpreted Basic in the Halliburton-Amgen trilogy of cases. And we see two names there, but it's called a trilogy. That's because there are two Halliburtons out of these three cases.


      In Halliburton I and Amgen, the Court held that someone seeking to demonstrate fraud on the market for purposes of class certification need not prove substantive elements of the loss causation or materiality. But in Halliburton II, the Court held that a court must consider evidence the defendant offers to show that an alleged misrepresentation did not affect the price of the relevant security, even if that same evidence would be highly relevant at the merits stage.


      The Court reasoned that a defendant is entitled to rebut the Basic presumption through any evidence showing that the asserted misrepresentation or its correction did not affect the market price of the defendant's stock. The Court observed that Basic's requirements are an indirect proxy for price impact, and an indirect proxy should not preclude direct evidence that the market price was not, in fact, affected.


      In permitting a defendant to rebut the Basic presumption through evidence of the absence of price impact, Halliburton II emphasized that price impact differs from materiality. Materiality is a substantive element of the securities claim. The fact that a misrepresentation was reflected in the market price at the time of the transaction has everything to do with the issue of predominance at the class certification stage. The Court thus prohibited a court from artificially eliminating the evidence at class certification and expressly permitted a defendant to "seek to defeat the  Basic presumption at that stage through direct as well as indirect price impact evidence."


      And if you're confused at this point, well, so are the lower courts. There's a very good 2020 Seventh Circuit decision by Judge Hamilton on this called Allstate. I think that will be likely influential on the court where it complains that these decisions require courts to split very fine hairs, as he notes. The challenge lies in the fact that both reliance and loss causation overlap the materiality of the alleged misrepresentations.


      At the heart of this confusing area of the case law is the fact that all three concepts addressed, loss causation, materiality, price impact, are in essence slightly different takes on the same fundamental question. Did a statement matter? As a result, evidence relevant to each issue is likely also to be relevant to the others. And reversing the district court, they noted taking a piece of evidence and placing it in any of the three boxes to the exclusion of the others would be an artificial and logically questionable exercise.


      So that sets up this case. Goldman Sachs, like every company, has generic statements of ethical aspirations that you would find on Successories posters and corporate statements. "Our clients' interests always come first." "Integrity and honesty are at the heart of our business." "We are dedicated to complying fully with the law." Yadda, yadda, yadda.


      In 2010, The SEC engaged in enforcement actions and investigations against Goldman over collateralized debt obligations it sold in 2006 and 2007 in the runup to the financial crisis. These investigations were over alleged conflicts of interest and whether Goldman was selling CDOs, collateralized debt obligations, that it knew it would decline in value. These never resulted in criminal charges, but in response to the news, the stock price declined.


      As columnist Matt Levine states—and I absolutely recommend his daily column if you're at all interested in securities law and just the hedge funds and finance world, in general—everything is securities fraud. You do something wrong, and your stock price drops. You can say it was securities fraud for not giving sufficient warning that something was going to go wrong. And sure enough, here, plaintiff sued alleging that the generic statements Goldman made about its ethics were misleading and caused loss when they were corrected by revelations of the investigations.


      And to be fair to plaintiff's claims, they presented expert evidence that because Goldman was involved in such complicated transactions with many parties on many sides, its statements about its conflict of interest policies were allegedly important to the marketplace. Goldman argued that these generic statements were immaterial as a matter of law. The district court disagreed and denied the motion to dismiss. So law of the case, the statements are potentially material.


      At the class certification stage, Goldman tried to rebut the Basic fraud-on-the-market presumption. It argued that the general aspirational statements alleged as misstatements could not have affected the stock price. And it contended that the nature of the statements was relevant evidence in assessing price impact, despite any overlap with the considerations relevant to the merits issue of materiality.


      Goldman noted that there are dozens of public and press reports about alleged conflicts of interest that did not cause its stock to decline. There are hundreds of analyst reports about Goldman, and none of them single out their aspirational statements in analyzing the stocks, so on and so forth. Nevertheless, the district court certified the class, refusing to consider Goldman's evidence because it, putting the statements in a box, said these statements go to materiality and not price impact. And therefore, the presumption was not rebutted.


      The first time around, the Second Circuit reversed, correctly noting that the district court had failed to apply the preponderance of evidence standard in determining whether the presumption of Basic had been rebutted and should have considered the evidence of the price impact, even though it touched on materiality. It differs from materiality in a crucial respect because it refers to the theft of a misrepresentation on a stock price.


      But the Second Circuit rejected Goldman's argument that Federal Rule of Evidence 301 applied. Goldman argued that it only had the burden of production to rebut the presumption, not the burden of persuasion. The court left the burden of persuasion on Goldman.


      So on remand, Goldman again presents its evidence, multiple expert reports. Plaintiffs responded with a single expert. In my view, this expert's sort of cherry picking. The expert admitted he didn't consider alternative hypothesis, but with that narrow scope of his analysis, concluded there was price impact through inflation maintenance of price. Inflation maintenance is a theory on the notion that even though a statement, when made, may not have had an impact on the stock price, it somehow maintains the price at an inflated level. But even under that theory, the expert didn't have any explanation when the original inflation occurred.


      The district court, again, certified the class determining that Goldman had failed to rebut the Basic presumption by a preponderance of the evidence. Goldman argued that the statements were too generic, that they could not have impacted the stock price. The court disagreed.


      So Goldman appeals again to the Second Circuit. And a different panel of the Second Circuit affirms in a 2-1 decision. Notwithstanding the first panel's decision in Halliburton II, the court characterized Goldman's argument as "an attempt to smuggle materiality into Rule 23." According to the court, whether the statements are too general to demonstrate price impact has nothing to do with the issue of whether common questions predominate because the issue of materiality is common to all class members. The court concluded that defendants could still challenge materiality in moving to dismiss or for summary judgment.


      Having refused to consider the generic nature of the alleged misstatements, the court of appeals proceeded to determine that Goldman had failed to rebut the Basic presumption by a preponderance of evidence, characterizing Goldman's burden as "a heavy one," explaining that Goldman could rebut the basic presumption only by showing that the entire price decline on the corrected disclosure dates was due to something other than their alleged misstatements. The court repeatedly stressed that Goldman bore the burden of persuasion.


      The dissent on Goldman in the cert petition complained that the majority's approach basically makes Basic irrebuttable. And indeed, in the years since Halliburton, defendants have only rebutted the Basic presumption five times.


      So Goldman successfully seeks certiorari on two questions. First, whether the defendant in a securities class action may rebut the presumption of class-wide reliance that Basic recognized by pointing to the generic nature of the alleged misstatements and showing that the statements had no impact on the price of the security, even though that evidence is also relevant to the substantive element of materiality. And then second, the Federal Rule of Evidence 301 question, does the defendant seeking to rebut the Basic presumption have only a burden of production, or also the ultimate burden of persuasion?


      So the issues joined, but at the merits briefing stage, the division shrunk considerably. Goldman had argued that generality had demonstrated legal immateriality and thus lacked a price impact. At the merits stage, they argue instead that the statement's generality can support other evidence of a lack of price impact and that it just goes to the likelihood of price impact, and that judges can make that determination as a matter of common sense.


      Respondents argued that expert evidence matters more than common sense and makes the disputed contention that Goldman had abandoned its argument on appeal, whereas plaintiffs argued below that courts couldn't consider the evidence at all. They concede that courts should consider the nature of the statement in determining price impact.


      On the Rule 301 issue, Goldman relies on the language of Rule 301 and argues that the court's creation of a presumption in Basic does not rise to a rule or statute overriding that rule. Respondents disagree, complaining that defendants will always be able to meet the burden of production and that Goldman's interpretation of Rule 301 will undo the Basic presumption and the holding of Halliburton II.


      Respondents also argue that Rule 301 does not apply to class certification decisions, a question that wasn't really addressed in the reply brief or at oral argument. The plaintiffs argue that the Basic rule is a proxy rather than a presumption. Goldman responds by saying that Basic itself cited Rule 301 and that the court repeatedly calls it a presumption.


      So this is an important case. As I noted, rebuttal of the Basic presumption has only happened five times. And Goldman put it at oral argument, if certification is permitted here, the promise of Halliburton II will have been "betrayed," and any stock drop will inevitably result in a reverse engineered security class action based on generic statements that everyone makes, the Matt Levine "everything is securities fraud" principle.


      Though this was potentially important, oral argument suggested that we might be getting a very narrow decision. As the Chief and Justice Barrett noted, there isn't much daylight between the parties on the first question. Goldman conceded at argument that plaintiffs inflation maintenance theory is conceivably valid in some circumstances. Goldman argues that materiality focuses on what a hypothetical reasonably investor would care about, while price impact focuses on what actually happened, and that this proof of price impact touches on materiality shouldn't preclude its evaluation. But the plaintiffs don't disagree with that, either.


      Justice Sotomayor, I think, is a clear vote for the plaintiffs in this. She had problems with Goldman's argument, asking how should a judge go about weighing her intuition against the opinion of experts? If the district court says, "I agree with the expert," does the appellate court then check its gut and decide whether it disagrees with the district court that the experts were convincing? Justice Kagan had similar skepticism.


      Justice Kavanaugh was curious what Goldman meant by generic. Is there a legal rule that can be divined from that? Goldman responded that a generic statement is essentially a statement that has little specific factual content. And is there a difference between generic and exceedingly generic, as Goldman repeatedly phrased it at oral argument. That was left unclear.


      Justice Barrett asks, "How does a ruling on this very, very narrow issue saying, 'Sure, judges can also consider their common sense,' make the Basic presumption rebuttable? What does what Goldman then is asking really accomplish?" Goldman argues that the Court has the discretion to apply the legal standard once it articulates it and can throw out the certification here. Barrett is skeptical, but Goldman doesn't want an open-ended remand but the Court to evaluate the legal standard and reverse things.


      The Solicitor General took an intermediate position. Justice Breyer, you'll be pleased to know, had a hypothetical about the word "ishkabibble" that he posed to the government. And the government's response, I think, as well as the question, was a lot of ishkabibble.


      So everybody agrees there's no reason to disregard evidence that goes to price impact that would rebut the Basic presumption just because it would go to the issue of materiality. They just disagree whether the Second Circuit applied that standard in its second decision. They clearly did in its first decision.


      Kagan notes that it's hard to find, in the second opinion, the correct statement of the law, though it's present in the first opinion. She asks respondents, "Why shouldn't we just vacate and say here's what the law really is. We want to make sure you do it under the appropriate standard." And respondents make a very record-based argument, arguing that Goldman didn't address it in their briefs.


      Goldman disagrees. Not having gone through the thousand-page appendix, I can't really opine on that. But if respondents are correct, we're going to see a pretty narrow opinion in this case. Respondents admitted that if the defendant comes forward with credible evidence that there's no direct impact, and the plaintiffs just try to stand on their presumption, that the plaintiffs would lose in that case.


      So Goldman's asking for a very broad decision. I don't know that they have five votes to get that sort of thing. They may have enough votes to get a remand on these questions if the Court agrees that Goldman did preserve that issue before the Second Circuit and the Second Circuit failed to address it.


      You can see Goldman's complaints here. They presented a lot of evidence about the lack of price impact, but a single expert report was enough for the court to just say, "I'm going to throw it to a decision -- to a jury and let the class be certified on the reliance question, despite the conflicting evidence on price impact." Plaintiffs are always going to be able to find that kind of expert witness. But the plaintiffs also have a point that defendants will always be able to find their own kind of expert witness meeting the burden of production.


      Then again, it's doubtful that on remand the district court would say that the positions are in equipoise, so it's not clear that the burden of persuasion, when it's a preponderance of the evidence standard, really makes that much difference. There are surely very, very few cases where the evidence is going to be in equipoise.


      But it's very clear that the law in this area is a bit of a mess. That's very hard for district courts to apply and puts defendants in a very difficult position, especially with the creativity of expert witnesses and inflation maintenance theories. What can be done about that when Goldman seems to be asking for a very fact-specific decision based on these particular facts is going to be difficult. And Arkansas Teachers in their argument repeatedly did emphasize that they did have expert witness that these generic statements weren't so generic. Whether that's true or not, it does seem to be evidence that the district court bought.


      Happy to answer your questions. But I think we're going to be seeing more fraud-on-the-market cases going before the Supreme Court as lower courts grapple with these issues.


Evelyn Hildebrand:   Great, thank you so much. We'll now turn to audience questions.


Ted Frank:  Yes, as you ask a question, please first identify yourself.


Evelyn Hildebrand:   Okay, great. And while we're waiting for a caller to join the queue to ask a question, I wanted to ask if you think that the Court will take this opportunity to reassess Basic, if -- that's not relief that either of the parties are asking for, but do you think that that's something that the Court might do on its own?


Ted Frank:  Well, that came up in Halliburton where there was an express attack on Basic. And the Court declined to undo Basic at that time. I think, at this point, it's a matter for Congress. I don't think the economic evidence on it is ever going to be strong enough. There are too many economists out there with an incentive to continue to push the fraud-on-the-market theory for the evidence to ever be sufficiently unambiguous for the Supreme Court to want to reverse itself on such a statutory question. But I don't think we have a Congress that's willing to look at securities litigation before it anytime soon, either.


Evelyn Hildebrand:  And I was curious, if you don't mind me asking another question, do you see the outcome of this case affecting how corporations deal with the repercussions of publishing information to their stockholders that could line them up for a potential class-action suit? Is there a way that they can kind of hedge their bets a little bit and avoid this litigation?


Ted Frank:  They could stop issuing generic statements, but everybody issues generic statements. It's hard. One of the things that was called misleading was their standard statements about risk factors, saying, "Hey, we deal with complex transactions. We do our best to try to avoid conflicts of interest. But if conflicts of interest arise, we could have liability." And that was called misleading because it didn't disclose the actual conflicts of interest or sufficiently indicate the risks.


      I think corporations are in a very tough situation. There are always -- no corporation can always completely avoid surprises. Surprises result in stock drops. And in the instance where everything is securities fraud, you can always reverse engineer a generic statement, and then an expert who will happily testify that your generic statement about your commitments to truth, justice, and the American way created price maintenance that inflated the price that caused a stock drop later on.


      There is the scienter aspect of things, and some of these might get thrown out at the motion to dismiss stage. But once we get past the motion to dismiss, I think it becomes very difficult to rebut the presumption unless you have a very mathematically oriented judge that can see through some of the quackery that you see in expert witnesses from time to time.


Evelyn Hildebrand:  Great. We do have a caller in the queue.


Jeff Wood:  Yes, good afternoon Mr. Frank. This is Jeff Wood. Great to hear you on Teleforum again. Just had a quick question about the future of 10b-5 actions, generally, as judicial creations. They were not -- my recollection of the history of them is that they are not expressly provided for as private rights of action in the statute.


      And I wonder if you have any -- if you think there's any hope that the current Court, or litigants going to the Court, will be amenable to either plead and/or acknowledge that this is an entirely judicially fabricated right of action, and that maybe we should push it back to Congress to either expressly create such a right of action, if that's what they really want, or leave enforcement to the actual enforcement authorities.


Ted Frank:  Well, certainly, if this was a question of first impression, as the Chief had said in another case, "When it comes to creating new private rights of action, we don't do that anymore." And if they were looking at the statute for the first time and that question for the first time, I think you're absolutely right.


      But what we have here is decades of precedent and, arguably, Congress sort of ratifying the fact of private securities litigation when it passed the Private Securities Litigation Reform Act and placed certain limits and procedures and standards on 10b-5 litigation back in the Clinton administration. And that passed over Clinton's veto. And so I don't see anybody litigating for the argument that this should be dismissed because there's no private right of action. And it would have to be resolved by the Supreme Court. No lower court is going to get there.


      So for it to get to the Supreme Court, somebody would have to be willing to litigate a case to conclusion and lose the case, and then take it up on appeal, lose on appeal, and then take the flier that the Supreme Court reverse a decades-old decision in the face of Congressional inaction and, in fact, arguable Congressional ratification. So I don't see that as a viable vehicle for it ever happening.


      While the Court has in cases like Stoneridge said, "Gosh, we created this private right of action. Let's not expand it too much," I don't think they have the stomach to undo their own statutory interpretation, given the reliance interests.


Evelyn Hildebrand:  Great, thank you. And in the absence of anyone else wanting to ask a question, I would hand the floor back over to you, Ted, for any closing remarks that you would like to make.


Ted Frank:  Thank you. Well, these are obviously very interesting issues, and there's enough at stake that they get heavily litigated. And I think we'll see it before the Court again and again as they grapple with how to resolve these things with a minimum of false positives and false negatives.


      One of the things my nonprofit does is look at the rent-seeking that happens in these cases. We've found substantial overbilling of shareholders when these cases do settle and the attorneys' fees requests come in. But we can't do anything about it without class members who are shareholders and affected by the overbilling to object. And do visit our website,, to get a sense of the work we're doing in this area. And if you are the victim of an unfair class action settlement or a class action settlement fee request, please do get ahold of us.


Evelyn Hildebrand:  Wonderful, thank you. Oh, we have one more caller in the queue if you have a moment to answer one more question.


Ted Frank:  I'm happy to answer questions. That's the fun part.


Evelyn Hildebrand:   Okay, fantastic.


Caller 2:  Hi. Thanks for taking my call. I appreciate all the work you do on the class action side.


      It seems sometimes though that the way that the system works in this area of law, and many others, is you have sort of legal entrepreneurship, legal innovation where things are created, sometimes, out of whole cloth. Someone has a theory about a better way to do justice. It doesn't necessarily have statutory support. They come up with a superstructure of various inventions, and then it works its way through the system. It finally gets to the Supreme Court. There's so much, you know as you mentioned, which concerned me and bothered me, and I know why you said it, reliance aspect.


      And so the conservative approach is, "Well, we're going to hold the line here. We're not going to let it go any further." And then, of course, what happens is you try to come up with some principle that will make logical sense of this entire superstructure created out of people's inventions, ipse dixit, and then practitioners keep pushing.


      And then 10 years later, you find that they've crossed the line and they've come up with these other new theories. And so then the wide and sensible approach is, "Well, we're going to hold the line here, or maybe try to cut it back a little bit to something that's more sensible." But you never see what I would call these legal inventions, legal fables almost, ever get cut back in a serious way.


      And so it seems like it's a game where I understand the lawyers see themselves as bound by precedent. The judges are respectful of precedent. And then you get up to the justices, which are not bound by precedent in the same sense, but they also seem to be in the mindset that the standard is, "We're going to hold the line here." And of course, the line never is held here. It's never pushed back, and it's really an invitation to the next assault that makes up things that go, well, far beyond the line.


      I also have a general question. I appreciate Goldman making a serious effort here, and I think the strong argument saying, "Look, you guys make up these rules, but they never get applied the way you say that they should be, and it's always a dead letter." And so what are we doing?


Ted Frank:  You know, I didn't see a question there. But in this particular case, it was the 1970's Supreme Court that had recognized the cause of action back in the battle days when they were still recognizing and creating private rights of action as part of their statutory interpretation.


      I think with securities litigation, I don't think there's -- I think a lot of securities litigation is, if you're a diversified shareholder, securities fraud is something that is a transfer of wealth from one set of shareholders to another set of shareholders. So if you're a diversified shareholder and the type of securities fraud isn't insider trading or something where the insiders are extracting wealth from shareholders, if you're a diversified shareholder, it's a wealth transfer from one set of diversified shareholders to another set of diversified shareholders. And it's a wash for you, in the aggregate, except for the transactions cost of securities litigation.


      But notwithstanding that, there doesn't seem to be any stomach for getting rid of securities litigation as a whole. And I think even if Congress got around to getting rid of securities litigation as a whole, you would just see all of these cases at the California State Court, or New York State Court, and not clear that those forums would be better than the status quo. And I think --


Caller 2:  -- Well, let me interrupt you on a point there. You mentioned New York State Court.  Having practiced there a little bit, New York State Courts are not generally open to securities class actions, and they set a much higher standard. People may be surprised to hear that, but it's really a creature of federal law. But it sort of let this monster grow, and then we just kind of trim its toenails every once in a while.


      But there's no conservative attack on -- again, I think your point is exactly right. We've created a monster based on these ideas that we've done this logical, rational analysis. But as you said, it really doesn't benefit the people who are purportedly the beneficiaries of the settlement. I don't think any shareholder's ever delighted to say, "Oh, the shareholder litigation is really going to help me out." That's never the case.


Ted Frank:  I think that's generally right. Whether New York would turn out to be a good forum in the counterfactual world where federal securities litigation disappears, I couldn't say. I was very surprised at the results the one time I litigated in New York State Court about a pretty bogus derivative suit where attorneys got millions of dollars for a $0 settlement that had very generic corporate disclosures and shareholder reforms, or corporate governance reforms, as part of the settlement.


      But even if New York State Courts turned out to be a poor venue for plaintiffs, there would still be 49 other venues, and somebody would make themselves the home court for these sorts of things. So at least with the federal system, there is some set of protections under the PSLRA. And while it's far from optimal, it's also -- the world is a better place than it was 40 years ago in these regards.


Caller 2:  It sounds like you're almost suggesting -- we did gain from the PSLRA. I recognize that. I've practiced on both sides of securities plaintiff, securities litigation defendant. It sounds like we haven't had any discussion about, what have we learned from PSLRA? What are we learning from the abuses that continue? I mean, there were more abuses then, but they continue now. PSLRA 2, here's the movement. It starts today. We really do need to think of what is the next reform that we need to try to make more sense out of this. I mean, some abuses were limited just to back in the day.


      But in terms of whether value is added for shareholders, or whether this is really -- these were just -- as you know more than anyone else—you've been a champion on this, Mr. Frank, and we certainly see this—the real answer is to take all the learning that we have from all these cases, including what's going on with Goldman today, and say, okay, we may not be able to pass this today. But I think it would be something that would be part of the next set of legal reform movements that hopefully will be initial in the next round of campaigns.


Ted Frank:  Well, yeah. As a public policy matter, I don’t disagree. There's a lot that can be done. Over a decade ago, I testified before Congress at a very half-hearted attempt at a PSLRA 2, and that just promptly died. And just as a matter of public choice theory, you know as well as I, there are vested interests who make a lot of money from the status quo, and donate a lot of money to politicians, and are very -- don't have any interest in seeing a change.


Caller 2:  Absolutely agree. I do think sometimes the populous potential of the shareholder class is overlooked. I mean, I think people who are investors know when management is infringing itself, know when there are gains within the system. Obviously, securities litigation is one of those where lots of corporate firms make a lot of money defending these cases and don't necessarily want to shake the boat up anymore than the plaintiffs. They want the plaintiffs and the defense also.


      I hate to say that, but again, you're someone who's outside that system and is maybe one of the few honest voices that could be heard on that. But I do think that, again, when -- there is a shareholder class that are not the folks who are in management, and we understand that the managers are sometimes -- or the lawyers are sometimes in cahoots with the people they're supposedly fighting against.


      And so I think speaking up on that issue as a policy matter, you might find that there's more interest. But I think it's one of those things, like everyone knows it's a sterile exercise that hands out cash all around at the expense of the actual shareholder. I think at the right moment, it'll get the right attention. I agree with you that some of these things are proposed and don't go anywhere. But when you're right, the fight happens. Eventually it'll catch fire. And I think, hopefully, there'll be a PSLRA 2. Thank you so much for your time.


Ted Frank:  You raise an interesting point, though, in terms of rolling back entrepreneurial litigation. And sometimes the strategies to do that can be counterproductive. One place where some in the business community have been fighting to roll back entrepreneurial litigation is the theory of Article 3 standing under Spokeo and its progeny. And it's just very curious that the business community fought very hard to get these cases into federal court for very good reason.


      That got the Class-Action Fairness Act passed in 2005 in the very last bipartisan tort reform we've seen. And we now have this movement by the business community, or at least some in the business community, to get all these cases kicked out of federal court back into state court through narrowing of Article 3 jurisdiction on many of these entrepreneurial causes of action. And I don't understand why people think that they're going to be better off when these cases go back to Madison County, Illinois. But we'll see how that plays out in the case that got argued yesterday in Transunion v. Ramirez.


      Are there any other questions?


Evelyn Hildebrand:   Not at this time. So if you'd like to make some closing remarks, then we can close out after that, unless someone else has a question and would like to join the queue.


Ted Frank:  I've previously made closing remarks. I don't want to waste anyone's time by repeating them. But again, I thank The Federalist Society for hosting this, and you, my audience, for your attention.


Evelyn Hildebrand:   Fantastic. In that case, on behalf The Federalist Society, I want to thank our expert, Mr. Ted Frank, for the benefit of his valuable time and expertise today. And I want to thank our audience for calling in and participating. We welcome listener feedback by email at [email protected].


      As always, keep an eye on our website and your emails for announcements about upcoming teleforum calls and virtual events. Thank you all for joining us today. We are adjourned.     





Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at