* Goldman accused of misleading mortgage debt investors
* US appeals court in New York revived part of lawsuit
* Goldman says lower courts divided on central issue
By Jonathan Stempel
WASHINGTON, Nov 2 Goldman Sachs Group Inc
has urged the U.S. Supreme Court to throw out a mortgage
securities class-action lawsuit that it said could cost Wall
Street tens of billions of dollars.
The bank is challenging a Sept. 6 decision by the 2nd U.S.
Circuit Court of Appeals in New York allowing the lawsuit, which
accuses it of misleading investors about the securities' risks.
That court let the NECA-IBEW Health & Welfare Fund, which
owned some mortgage-backed certificates underwritten by Goldman,
sue on behalf of investors in certificates backed by mortgages
from the same lenders, but which the fund did not own itself.
Circuit Judge Barrington Parker wrote for a three-judge
panel that the NECA-IBEW fund could pursue these claims because
they "implicate the same set of concerns" as its own.
Goldman's lawyers argued that the 2nd Circuit created a
direct conflict with the federal appeals court in Boston, which
in a similar case involving Japan's Nomura Asset Acceptance
Corp, found in January 2011 that a plaintiff could not pursue
claims on behalf of a class that it could not bring by itself.
The stakes are "difficult to overstate," according to an
Oct. 26 brief by Theodore Olson, a partner at Gibson, Dunn &
Crutcher and former U.S. solicitor general, who represents
"In the context of mortgage-backed securities litigation in
which this case arises, the decision will effectively increase
by tens of billions of dollars the potential liability that
financial institutions face in this and similar class actions,"
he wrote. "Moreover, the new standard threatens to expand the
scope of class actions in many other areas of the law."
A split among federal courts often increases the chance that
the Supreme Court will accept an appeal.
The NECA-IBEW fund serves electrical workers and is based in
Decatur, Illinois. It has an opportunity to respond to Goldman's
filing. If the Supreme Court accepted Goldman's appeal, no
decision would likely be issued before the middle of 2013.
Joseph Daley and Arthur Leahy, partners at Robbins Geller
Rudman & Dowd who represent the NECA-IBEW fund, did not
immediately respond on Friday to requests for comment.
JPMORGAN SEEKS HOLD ON SEPARATE CASE
Goldman and its rivals have faced thousands of lawsuits by
investors seeking to recoup losses on mortgage securities.
Investors typically claim they were misled about the risks
relating to the underlying home loans, most of which were made
before or as the U.S. housing slump took hold in 2007.
The 17 offerings in the NECA-IBEW lawsuit dated from 2007,
were sold under the same registration statement, and contained
loans from many mortgage lenders.
According to court papers, the fund had bought certificates
from two Goldman-led offerings that contained loans from
GreenPoint Mortgage Funding, later part of Capital One Financial
Corp, and Wells Fargo & Co.
The 2nd Circuit let the NECA-IBEW fund represent investors
in these and five other offerings backed by GreenPoint or Wells
Fargo loans. It said the 10 other offerings were too different.
On Friday, JPMorgan Chase & Co urged a Manhattan
federal judge to put a similar case against it on hold while the
Supreme Court addresses Goldman's appeal. That case is led by
the Fort Worth Employees' Retirement Fund in Texas.
Goldman's appeal is Goldman Sachs & Co et al v. NECA-IBEW
Health & Welfare Fund et al, U.S. Supreme Court, No. 12-528.