LOS ANGELES, Calif. (3/21/13)--A federal judge in Los Angeles has tentatively dismissed several claims in the lawsuit filed by the National Credit Union Administration (NCUA) against Wall Street bank Goldman Sachs about residential mortgage-backed securities (RMBS) sold to several corporate credit unions before the financial crisis.
U.S. District Judge George Wu, in the tentative ruling that became available Tuesday, dismissed with prejudice NCUA's claims about seven of the eight securities certificates at issue in the suit, saying NCUA's complaint was untimely unless it could prove the tranches were certified in covering the purchase.
Goldman Sachs had argued NCUA's claims were either barred by the applicable statute of repose--meaning the lawsuit was filed too late--or did not plead sufficient information to tell if the statute rule of tolling (extending the statute of limitations) would apply.
NCUA's complaint argued that the originators of the loans backing the RMBS vehicles engaged in a "systematic disregard or abandonment of underwriting standards and guidelines," and the court concluded that these allegations against three of the originators are sufficient.
"Although Goldman would like the court to view many of these allegations not as systematic disregard of underwriting guidelines, but instead as blind adherence to underwriting guidelines involving loan products that, by their very nature, were risky products, that is not a conclusion that the court is prepared to reach on the basis of the NCUA's pleadings," Wu wrote.
In the eighth certificate sold and at issue in the case, Wu said the court believes, based on arguments presented so far, that "NCUA had at least a "bona fide dispute" with respect to the standing of the representative plaintiffs in earlier cases covering the certificate. He also reiterated earlier rulings in which he said he expected "something more" than post-origination performance statistics to demonstrate systemic abandonment of underwriting guidelines.
Wu denied Goldman Sachs' motion to strike "immaterial information" from NCUA's complaint, which Goldman said relied on allegations other parties made in other court actions. His ruling cited a case that indicated "where material 'relates directly to the plaintiff's underlying claim for relief' it cannot be considered 'immaterial."
The tentative ruling comes nearly a year after Wu gave the go-ahead for the case to proceed, saying NCUA had met the requirements on an extended "tolling" statute of limitations agreement before it filed its lawsuit over the RMBS sold to U.S. Central Corporate FCU and Western Corporate FCU.
It also comes a week after the U.S. Supreme Court refused to hear Goldman Sachs' appeal of a lower court decision in a similar RMBS case, a class action lawsuit by pension funds.
NCUA, as conservator of five corporate credit unions that collapsed in 2009 from RMBS investments, has also sued RBS Secrutieis, Wachovia Capital Markets LLOC and Wachovia Mortgage Loan , JP Morgan Chase, UBS Securities, Barclay's Capital and Credit Suisse Securities and more. The agency uses similar arguments in several of the cases.