On May 7, New York’s First Department appellate court reinstated CIFG Assurance North America, Inc.’s fraud claim against Goldman Sachs & Co. and M&T Bank. Last May, a New York trial court dismissed CIFG’s claim for fraudulent inducement relating to its insurance of RMBS, holding that CIFG was unable to establish reasonable reliance as a matter of law because it had not reviewed a sample of the mortgage loans in its pre-investment due diligence, and dismissed certain breach of contract claims for lack of standing. The First Department held that CIFG had adequately pleaded that it was unaware that defendants’ warranties were false despite having conducted its own limited diligence, and found that questions of fact existed as to whether CIFG’s reliance was reasonable. The court upheld the other aspects of the lower court’s decision, including that CIFG did not have standing to sue for breach of certain transaction documents. Decision.
M&T Bank
New York Court Dismisses RMBS Claims Brought By CIFG against Goldman and M&T Bank
On May 1, 2012, Justice O. Peter Sherwood of the New York State Supreme Court dismissed the majority of claims brought by CIFG Assurance North America, an insurer of RMBS, against M&T Bank and Goldman Sachs, the originator and underwriter respectively of those securities. CIFG asserted causes of action for fraud, breach of contract and accounting and seeks $275 million in damages based on alleged misrepresentations and omissions in RMBS offerings. The court dismissed all claims against M&T for lack of standing, and dismissed the fraud and accounting claims against Goldman Sachs, allowing only the breach of contract claims against Goldman Sachs to remain. Decision.
Order Compelling Deutsche Bank to Produce Documents Previously Provided to NY Attorney General Affirmed
On November 19, 2010, the Appellate Division of the New York Supreme Court, Fourth Department, affirmed an order compelling Deutsche Bank Securities, Inc. to produce to M&T Bank Corp. approximately 1.7 million pages of documents it previously produced to the New York State Attorney General concerning the packaging and sale of RMBS. Deutsche argued that discovery of documents concerning RMBS not underlying the CDOs at issue in the suit with M&T should not be required. The New York appellate court rejected that contention, stating that the discovery rules in New York are “to be interpreted liberally in favor of disclosure.” Decision.