Just when Goldman was cleaning up their image, and likely, breathing a sigh of relief that the wave of lawsuits over mortgage-backed securities packaged before the financial crisis seems to have abated, three judges changed the game Reuters reports (via Crains).Here’s the gist of it: Yesterday, a New York federal appeals Court granted an electrical workers pension fund, NECA-IBEW Health & Welfare Fund, class certification to sue Goldman Sachs for misleading investors about the quality of mortgage-backed securities.
Sounds like the same old stuff, but the difference is that while the pension fund did own certificates of Goldman MBS, a panel of three judges is granting them permission to sue on behalf of other investors with different certificates that also came from Goldman. All that matters is that the certificates be similar.
“Plaintiff has class standing” to pursue claims under federal securities law, Circuit Judge Barrington Parker wrote for a unanimous three-judge panel, “because such claims implicate the same set of concerns as plaintiff’s claims.”
Parker also said the fund need not allege out-of-pocket losses to pursue claims over illiquid securities. He said this was because losses could exist if there were credit rating downgrades, or borrowers appeared unable to make payments.
The judges are saying that the fact that this pension fund is stuck with mortgages that could blow up in their faces (as similar mortgages sold by Goldman have) could be Goldman’s fault if the pension fund was mislead about the quality of these mortgages.
This changes the game because a 2010 decision by U.S. District Judge Cedarbaum rejected this notion.
The pension fund had sued over 17 MBS offerings dating back to 2007, now 7 of those claims have been reinstated.
Goldman had no comment on the matter.
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