Union Pension Fund Requests Approval of Settlement With Goldman Sachs in RMBS Litigation

On August 13, 2015, union pension fund NECA-IBEW Health & Welfare (“NECA”) and the Police and Fire Retirement Systems of the City of Detroit (“PFRS”), acting on behalf of proposed classes of institutional and individual investors, requested preliminary approval for a $272 million settlement with Goldman Sachs Group Inc.  The proposed settlement would conclude lawsuits in which NECA and PFRS alleged that Goldman Sachs had made numerous misstatements about the loans underlying $6 billion in RMBS offerings.  Stipulation and Agreement of SettlementMemorandum ISO Preliminary Approval.

New York Appellate Court Upholds ACA’s Fraud Suit Against Goldman Sachs

On August 18, 2015, the New York Appellate Division’s First Department held that ACA Financial Guaranty Corp. adequately pled its fraud suit against Goldman Sachs Group Inc.  A four-judge panel held that ACA sufficiently alleged that Goldman Sachs’ allegedly false statements about hedge fund Paulson & Co.’s short position on the Abacus collateralized debt obligation transaction were material, that the statements were made with the requisite intent, and that ACA would not have provided the financial guaranty for the deal had it known the truth.  The case had been remanded from the New York Court of Appeals, which had overturned the First Department’s prior decision to grant Goldman Sachs’ motion to dismiss.  Order.

5th Circuit Revives FDIC’s Suit Against Goldman, Deutsche Bank, and Royal Bank of Scotland

On August 10, 2015, the Fifth Circuit revived a securities fraud suit brought by the Federal Deposit Insurance Corporation (“FDIC”) as receiver for Guaranty Bank against Goldman Sachs & Co., Deutsche Bank AG, and the Royal Bank of Scotland PLC. The FDIC brought claims under the federal Securities Act and the Texas Securities Act, alleging that the defendants made false and misleading statements in selling and underwriting $2.1 billion in RMBS to Guaranty Bank. The suit was filed within the limitations period in the FDIC Extender Statute, 12 U.S.C. § 1821(d)(14), but outside of the limitations period in the Texas Securities Act. The district court held that state law statutes of repose are not pre-empted by the FDIC Extender Statute, and it therefore dismissed the case as untimely. The Fifth Circuit reversed and remanded. The appellate court held that the FDIC Extender Statute preempts all state limitations periods, whether characterized as statutes of limitations or as statutes of repose. The court distinguished the Supreme Court’s decision in CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014), which held that a similar extender provision in CERCLA did not preempt state statutes of repose. The Fifth Circuit characterized the similarities between the two provisions as “superficial,” and cited legislative history as supporting Congress’s intent to preempt state statutes of repose.  Opinion.

Citigroup, Goldman, and UBS to Pay $235 Million Settlement in MBS Class Action

On February 13, 2015, the plaintiffs in New Jersey Carpenters Health Fund, et al., v. Residential Capital, LLC, et al., No. 08-cv-8781 (S.D.N.Y.) filed an unopposed motion for certification of the class and to approve a preliminary settlement.  The complaint, originally filed in 2008, included claims for materially false and misleading statements in securities offering documents under the Securities Act of 1933 against Citigroup, Goldman Sachs, and UBS as underwriters for 16 mortgage-backed securities transactions in 2006 and 2007.  The class consists of investors who purchased the certificates, with the majority of the settlement funds set aside for investors who purchased their certificates within ten days after the relevant initial offering.  The proposed $235 million settlement does not include a $100 million settlement with Residential Capital, LLC that had previously been reached in the case.  Motion.

Goldman Sachs Settles RMBS Suit

On February 6, 2015, plaintiffs Union Central Life Insurance, Ameritas Life Insurance, and Acacia Life Insurance filed a letter with the court stating that they had reached an agreement with Goldman Sachs to settle claims arising out of the insurance companies’ investments in RMBS sponsored by Goldman Sachs.  The details of the settlement are not public.  The plaintiffs had asserted causes of action for violations of federal securities laws as well as for common law fraud, negligent misrepresentation, and unjust enrichment.  Letter.

Goldman Reaches Settlement with FHFA

On August 22, Goldman Sachs and FHFA announced a US$3.15 billion settlement of claims brought by FHFA against Goldman in two separate lawsuits related to RMBS purchased by Fannie Mae and Freddie Mac between 2005 and 2007.  FHFA, as conservator for Fannie Mae and Freddie Mac, asserted claims for violations of federal and state securities law on the basis of alleged material misrepresentations or omissions in the offering documents for the RMBS sold to Fannie Mae and Freddie Mac.  As part of the settlement, Goldman is repurchasing most of the RMBS at issue.  Goldman did not admit any liability or wrongdoing as part of the settlement.  Fannie Mae AgreementFreddie Mac Agreement.

Goldman Sachs and Prudential Settle RMBS Action

On January 6, Judge Susan D. Wigenton of the United States District Court for the District of New Jersey “so ordered” the parties’ stipulation of voluntary dismissal with prejudice of Prudential’s claims against Goldman Sachs after the parties reached an undisclosed settlement.  Prudential and its affiliates had sued Goldman Sachs and its affiliates for alleged material misrepresentations and omissions in the offering materials for more than $375 million in RMBS.  Prudential asserted claims for common law fraud and fraudulent inducement, negligent misrepresentation, equitable fraud and New Jersey civil RICO violations.  Order.

Goldman Sachs Motion to Dismiss RMBS Fraud Suit Granted in Part, Denied in Part

On November 26, Justice Melvin Schweitzer of the New York Supreme Court granted in part and denied in part Goldman Sachs’s motion to dismiss a lawsuit brought by HSH Nordbank.  Justice Schweitzer dismissed claims arising out of alleged misstatements regarding assignment and transfer of the mortgages underlying the RMBS at issue and the credit ratings assigned to the RMBS, holding that HSH Nordbank had not adequately alleged such statements were knowingly false when made.  Justice Schweitzer also dismissed HSH Nordbank’s negligent misrepresentation claim, finding no special duty between Goldman Sachs and HSH Nordbank that could support such a cause of action.  Justice Schweitzer allowed the remaining claims and allegations to proceed, including claims for fraud, fraudulent concealment, aiding and abetting fraud and rescission.  In particular, he denied Goldman Sachs’s argument that the lawsuit was time-barred under German law, hold that HSH Nordbank’s knowledge of the existence of its claims was a question of fact not capable of resolution at the pleading stage.  Justice Schweitzer also held that the complaint adequately alleged misrepresentations concerning compliance with underwriting guidelines, loan to value ratios and occupancy status.  Order.

Investor Funds Bring Lawsuit Against Goldman Sachs

On July 3, Phoenix Light SF Limited, Blue Heron Funding Ltd., Silver Elms CDO II Limited and Kleros Preferred Funding V PLC, filed a complaint against Goldman Sachs in the Supreme Court of the State of New York relating to more than $450 million of RMBS certificates purchased between 2005 and 2007.  Plaintiffs allege that Goldman Sachs disseminated offering documents containing false and misleading information regarding collateral quality and underwriting standards.  Plaintiffs further allege that Goldman failed to disclose that it shorted the same certificates it offered.  The complaint alleges fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation, and seeks compensatory damages, punitive damages, rescission and/or rescissory damages and costs.  Complaint.