Goldman Sachs is named as a defendant in several lawsuits alleging violations of the Securities Exchange Act of 1934 in connection with the issuance of mortgage-backed securities. One of the actions involved a groundbreaking judicial decision.
The U.S. Court of Appeals for the Second Circuit outlined a potentially significant expansion of class standing in a Sept. 6 decision made in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., Christopher P. Malloy of Skadden, Arps, Slate, Meagher & Flom LLP wrote in JD Supra.
The decision runs contrary to many rulings that the named plaintiff has standing to assert claims only relating to the offerings in which it purchased securities and injects uncertainty into current MBS litigation and potentially increases the exposure of MBS issuers and underwriters in pending and future litigation.
“A common theme in MBS class actions is an allegation that the lenders that originated the underlying loans were ‘systematically disregarding’ the loan underwriting standards described in the prospectus supplements, rendering them misleading,” Mallow said. “In NECA, the Second Circuit reinstated claims with respect to five offerings that contained loans originated by the lender that also had originated loans in the two offerings from which the plaintiff purchased its certificates.”
Thomson Reuters reported that the 2nd Circuit Court of Appeals’ ruling redefined standing in class actions involving MBS. Soon after the ruling, U.S. Senior District Judge Edward Korman of Brooklyn issued an order expanding the claims for which the name plaintiff in an MBS case against JPMorgan, the Mississippi Public Employees’ Retirement System, has standing to sue.
The Goldman Sachs Group Inc. is the target of several lawsuits recently filed in New York’s supreme court in New York County.
The first was filed on Aug. 24 by HSH Nordbank AG. Money damages of $110,468,000 and punitive damages in the same amount are sought from Goldman.
Bayerische Landesbank followed by filing a lawsuit on Sept. 5 against Goldman. That case centers on losses from $512 million in RMBS purchased in 2006 and 2007.
In addition, IKB International S.A. filed a complaint on the same day in the same court against Goldman seeking $73,203,000.
A notice was published indicating that a settlement has been proposed in a class action filed against Goldman Sachs, Bernstein Litowitz Berger & Grossmann LLP announced. The lead plaintiff in the case, the Public Employees’ Retirement System of Mississippi, represents investors of GSAMP Trust issuances from 2006 until 2009..
CIFG Assurance North America Inc. sued GreenPoint Mortgage Funding Inc. in New York’s Supreme Court on Oct. 1. At issue is a 2007 securitization for $277,251,000 of which GreenPoint originated $58 million as governed by an Oct. 1, 2006, sale agreement with Goldman Sachs Mortgage Co. and an Assignment and Recognition Agreement with GS Mortgage Securities Corp. GreenPoint, which is a subsidiary of Capital one Financial Corp., is accused of providing false information and making material omissions about loan quality on its originations. GreenPoint has rejected repurchase demands.
