Goldman Sachs Wins Summary Judgment In CDO Class Action
On September 8, 2015, the Southern District of New York granted summary judgment in favor of Goldman Sachs Group, Inc. in a class action lawsuit concerning the sale of two collateralized debt obligations. The court had previously dismissed plaintiffs' fraud claims on all grounds but one—whether Goldman was aware of "singularly prohibitive risks" associated with the CDOs but failed to completely and accurately disclose those risks. At summary judgment, it held that plaintiffs had not shown sufficient evidence to prove Goldman's knowledge of such risks. In particular, the court rejected plaintiffs' reliance on inflammatory emails, which merely "show, at most, that some Goldman employees, based on the same information available to Plaintiffs, were bearish on the RMBS market." The court also found insufficient evidence that Goldman knew the CDOs would perform poorly and intended for them to perform poorly. Order.
Bank of America and Midland Settle RMBS Litigation
On September 8, 2015, Bank of America NA and Midland Loan Services settled Bank of America's lawsuit seeking a declaratory judgment that it did not breach the representations and warranties in connection with a CMBS securitization and, consequently, did not need to repurchase loans from the securitization. As a result of the settlement, the lawsuit was dismissed with prejudice. The terms of the settlement were not disclosed. Dismissal Order.
Claims Dismissed From RMBS Class Action Against Citibank
On September 8, 2015, the Southern District of New York dismissed, for lack of jurisdiction, a large portion of claims from a derivative class action alleging that Citibank NA, as trustee of 27 trusts, had breached its contractual, statutory, and common law duties in connection with $17 billion of pooled loans. Plaintiffs invoked federal jurisdiction based on the Trust Indenture Act of 1939 ("TIA") and asked the court to take supplemental jurisdiction over the accompanying state law claims. Plaintiffs asserted TIA claims in connection with just 3 of the 27 trusts. The court held that those claims could proceed, denying Citibank's argument that the TIA does not provide a private right of action. However, the court declined to exercise supplemental jurisdiction over state law claims relating to the other 24 trusts. The court concluded that supplemental jurisdiction was permissible, but that it should nonetheless decline such jurisdictions because the claims as to each trust—which must be litigated loan-by-loan and trust-by-trust—were not sufficiently related. Order.
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