Earlier this year, a panel of the U.S. Court of Appeals for the Second Circuit issued an opinion in the securities fraud action Arkansas Teachers Retirement System v. Goldman Sachs Group, 879 F.3d 474 (2d. Cir. 2018), that provides district courts with long-overdue guidance for assessing a defendant’s rebuttal evidence at the class certification stage.

Although the U.S. Supreme Court held in its seminal opinion, Halliburton v. Erica P. John Fund (Halliburton II), 134 S. Ct. 2398 (2014), that a defendant may rebut the fraud-on-the-market presumption of reliance permitted under Basic v. Levinson, 485 U.S. 224 (1988), with evidence that the alleged misrepresentations did not impact the company’s stock price, Halliburton II does not provide clear standards for assessing a defendant’s rebuttal evidence. Consequently, many lower courts, including the U.S. District Court for the Southern District of New York in Goldman, have been reluctant to fully consider a defendant’s evidence of lack of price impact. (See In re Goldman Sachs Group Securities Litigation, Master File No. 10 Civ. 3461, 2015 U.S. Dist. LEXIS 128856, at *17-22 (S.D.N.Y. Sept. 24, 2015) (certifying class after declining to consider the defendants’ lack of price impact evidence).)