Monday, June 21, 2021

Supreme Court Opinion on Presumptions and Burden of Proof (6/21/21)

Readers will recall that I have written on burden of proof, including its components, the burden of persuasion and the burden of production.  I have posted blogs, but my principal offering burden of proof was in Burden of Proof in Tax Cases: Valuation and Ranges—An Update, 73 Tax Lawyer 389 (2020), available on SSRN here.  Readers of this blog have surely been anxiously awaiting more on burden of proof.  The Supreme Court offered one today in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System, ___ U.S. ___ (6/21/21), here.  Actually, I would not call it an update, but simply a rehashing of familiar burden of proof concepts in a specific setting in a class action securities fraud case.  The case is also perhaps notable because on the burden of proof issue, the majority opinion was written by Justice Barrett, and the dissent was written by Justice Gorsuch.

The case involved the burdens the parties bore in meeting the requirement that the class action plaintiffs show that the defendant’s false statements affected the market so that the plaintiffs’ reliance on the market price as a measure of value established damage.  The resolution turned on the plaintiffs’ invocation of a presumption in their favor and whether the presumption then shifted to the defendant a burden of production or a burden of persuasion.  The traditional role for a presumption, reflected in FRE 301, here, is to shift the burden of production—meaning a burden to produce some credible evidence without regard to whether that evidence persuades on the issue and without shifting the burden of persuasion.  In classic theory, the presumption does not shift the burden of persuasion, which, in Goldman, would have required that the plaintiffs bear the burden of persuasion on reliance.

The Court majority (Barrett, J.) held that, in this type of market reliance case, its precedents imposed the burden of persuasion on the defendant once the plaintiff met the requirements for creating the presumption.  In other words, the presumption in this case shifted the burden of persuasion, which is not the normal function of presumptions.

Once the majority found that its precedents imposed the burden of persuasion upon the presumption, the game was over.  Justice Gorsuch in dissent wanted to apply the general rule that the presumption only shifted the burden of production to Goldman and, once that limited production burden is met, the burden of persuasion remains with the plaintiffs.

That’s what the fight is all about.

Some interesting points from the opinions.

1. The shifting of the burden of persuasion (or, in a broader sense, the allocation of the burden of persuasion) only rarely would be outcome determinative.  (Majority Slip Op. 2 & 12-13).  This from pp. 12-13 is particularly good:

            Although the defendant bears the burden of persuasion, [*12] the allocation of the burden is unlikely to make much difference on the ground. In most securities-fraud class actions, as in this one, the plaintiffs and defendants submit competing expert evidence on price impact. The district court’s task is simply to assess all the evidence of price impact—direct and indirect—and determine whether it is more likely than not that the alleged misrepresentations had a price impact. The defendant’s burden of persuasion will have bite only when the court finds the evidence in equipoise—a situation that should rarely arise. Cf. Medina v. California, 505 U. S. 437, 449 (1992) (preponderance of the evidence burden matters “only in a narrow class of cases where the evidence is in equipoise”).