Q&A: Professors Daniel J. Capra and Stephen A. Saltzburg

POMERANTZ MONITOR | NOVEMBER DECEMBER 2021

By the Editors

Do defendants in securities fraud class actions bear the burden of persuasion when seeking to rebut the presumption of reliance originated by the Supreme Court in its landmark decision in Basic, Inc. v. Levinson, or do defendants bear only the lower burden of production? In early 2021, Partner Emma Gilmore led a team of Pomerantz attorneys and twenty-seven of the foremost evidence scholars in drafting an amicus brief in Goldman Sachs Group, Inc. et al v. Arkansas Teachers Retirement System, et al. (No. 20- 222) – the sole brief submitted to the Supreme Court on this hot-button issue. Emma spoke with two of those experts – Daniel J. Capra and Stephen A. Saltzburg – about the SCOTUS decision that sustained their argument.

Monitor: Please share the journey you took to becoming an evidence expert.

Professor Capra: My road to expertise began with learning from the best --- Professor Steve Saltzburg. After that, I was lucky enough to be appointed as a Reporter to the Judicial Conference Advisory Committee on Evidence Rules, where I have received 25 years of on-the-job training.

Professor Saltzburg: There was no trial advocacy or skills training when I was a law student, so I chose upon graduation to clerk for a federal district court instead of a court of appeals. Back then trials were frequent and I was in court with the judge every other day. Hearing lawyers argue evidence issues and speaking to the judge about his rulings got me really interested in Evidence. So when I joined the University of Virginia faculty, I had no difficulty in choosing Evidence as one of my courses. I have been teaching Evidence since 1972.

M: Can you describe what you believe was at stake for the plaintiffs’ bar in the issue you addressed in Goldman Sachs Group?

Profs: The fraud on the market presumption of reliance is essential to the system of private enforcement of securities laws that we have in the United States. Two key things were at stake in the case: (a) Without the presumption, class securities actions might be doomed, given that individual plaintiffs might have to show that they relied on particular statements or omissions. This would have been difficult and expensive, and courts might have found that a class action was not an appropriate vehicle in securities fraud cases since some plaintiffs might not be able to prove reliance; (b) The position of the defendant – that any evidence offered to rebut the presumption would make the presumption disappear – would have meant that the presumption would be rebutted in almost every case, virtually automatically.

We felt that the evidentiary question in this case was critical to maintaining the fraud on the market presumption and the viability of securities laws.

M: What is the biggest takeaway from the Supreme Court’s Goldman ruling?

Profs: By enforcing a stronger presumption, the Court has signaled that it intends to adhere to the fraud on the market presumption that it established in the Basic case. That is an important signal of the Court’s interest in allowing private causes of action to enforce the securities laws. This was somewhat surprising given the Court’s favorable view of commercial entities in a variety of cases.

M: What was the biggest challenge against the argument made in Pomerantz’s amicus brief?

Profs: The Evidence Rule involved – Rule 301 (“[i]n a civil case, unless a federal statute or these rules provide otherwise, the party against whom a presumption is directed has the burden of producing evidence to rebut the presumption”) – provides that presumptions governed by the Rule are rebutted by a minimal showing (enough for a reasonable person to find that the contrary fact exists). So it was our task to convince the court that the Rule did not apply. The Rule contains an exception for when a federal statute provides otherwise --- but the fraud on the market presumption is not specifically contained in legislation. Rather it is a presumption established by the Court in Basic to promote Congressional intent. So the best argument against our position was that Rule 301, by its terms, governs because the fraud on the market presumption is not found in a federal statute; and the Court rejected that argument.

M: A majority of the Supreme Court agreed with your arguments. What are your thoughts about the dissenting opinion?

Profs: With respect, we believe the dissent incorrectly diminished the holding and meaning of Basic and its progeny. And as to the Evidence question, the dissent read Rule 301 to cover presumptions in a way that would undermine Congressional intent.

M: The Amicus Brief expressed the opinions of 27 of the brightest legal and scholarly minds, including yourselves. How did the 27 of you coordinate your efforts?

Profs: The group of Evidence scholars in the United States is relatively small. At the stage of our careers, everyone knows everyone. If your work is respected, then others in the field will be willing to rely on it --- and, in the case of an amicus brief, to sign on to it. Most of the experts who signed on did so without any suggestions for change. But several of our colleagues provided very helpful suggestions that we implemented. We are extremely grateful to our colleagues who signed on to the brief --- as well as to our counsel, and to Emma Gilmore, without whom the brief would not have been possible.