(Reuters) – The US Supreme Court on Monday handed over a victory to Goldman Sachs Group Inc. in its attempt to avoid a lawsuit for investors accusing the bank of hiding conflicts of interest when it creates risky subprime securities before the 2008 financial crisis  Judges overturned a decision by Manhattan-based other U.S. Circuit Court of Appeals last year that had allowed Goldman shareholders including the Arkansas Teacher Retirement System to sue as a group under a federal investor protection law. The plaintiffs accused the company of illegally hiding conflicts of interest when they created risky subprime securities.
By directing the other circle to reconsider the case, the judges said that the lower court had failed to properly assess whether the bank's statements that investors had called misleading were too generic to have affected its share price. The verdict, written by Justice Amy Coney Barrett, gives Goldman another chance to avoid class action where the plaintiffs said they lost more than $ 1
The Arkansas Teacher Retirement System and other pensions that bought Goldman shares between February 2007 and June 2010 brought an action, accusing the company and three former executives of violating a 1934 Securities Exchange Act fraud provision and a related SEC regulation. The complainants said that the bank's fraudulent statements kept its share price artificially high.
The case had been followed closely for clues as to how the Supreme Court, with its 6-3 Conservative majority, would view shareholders' class actions. Companies often try to limit the plaintiff's ability to sue collectively to avoid the higher damages often awarded in such disputes.
The complainants said that when they bought Goldman shares, they trusted the bank's statements about its ethical principles and internal controls. against conflicts of interest and its promise that its "customers' interests always come first."
Goldman argued that these "ambitious" statements were too vague and general to have any impact on the stock price.
The case stemmed from Goldman's sale of collateral including the Abacus 2007 AC-1, which it collected with the help of hedge fund manager John Paulson.
In 2010, Goldman reached a $ 550 million deal with the US Securities and Exchange Commission to settle fees that it deceived Abacus investors by hiding Paulson's role, including how he made a profit of $ 1 billion by investing in sales of security obligations would fail.
The complainants stated that the share price would have been lower if the truth had been known about the company's conflicts of interest.
The second circuit last year approved a federal judge's decision to sue the plaintiff as a group and rejected one of the company's arguments that generic statements can never affect a stock price.