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The court is wrestling with investor class cases in the Goldman case



(Reuters) – The U.S. Supreme Court judge on Monday fought in a case involving Goldman Sachs Group Inc. on how judges should decide when shareholders can collectively sue listed companies for fraudulent statements that keep their stock prices artificially high.

Judges heard arguments in Goldman's appeal of a lower court decision that allowed a class action lawsuit by shareholders who accused the bank and three former executives of concealing conflicts of interest when they created risky subprime securities before the 2008 financial crisis in violation of federal investor protection

Ark. The Teacher Retirement System and other pensions that purchased Goldman shares between February 2007 and June 201

0 sued the company, accusing it of violating a 1934 Securities Exchange Act fraud provision and a related SEC regulation. [19659002] Central to the dispute are shareholders 'claims that when they bought Goldman shares they lied on 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 has argued that these "ambitious" statements were too vague and general to have any impact on the stock price. Consider the general nature of a company's statements in determining whether the market price was affected.

But the justices seemed to be fighting for how to make that decision and what evidence could be used. Companies often try to limit the applicants' ability to pursue class actions in order to avoid the higher damages that often occur in such disputes.

"How do you define generic or, in other words, which types of statements are not generic?" Justice Brett Kavanaugh asked a Goldman lawyer.

Some judges wondered how courts would analyze a class action lawsuit against a company that simply called itself "nice."

"There are people who would consider, 'We are a nice company,' as a fraudulent statement depending on subsequent events, and how would they do it?" Chief Justice John Roberts asked.

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 resolve allegations that it deceived Abacus investors by hiding Paulson's role, including how he made a $ 1 billion profit by betting that the sale of collateral 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, adding that they lost more than $ 13 billion due to Goldman's conduct.

The Manhattan-based Second U.S. District Court last year approved a federal judge's decision to sue the plaintiff as a group and rejected the company's argument that generic statements can never affect a stock price.

A decision will come to an end in June.

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