Real Estate Law

$26M Settlement Reached In Mortgage-Backed Securities Shareholder Class Action

NEW YORK - (Mealey's) Lead plaintiffs in a securities class action lawsuit against The Goldman Sachs Group Inc. and others have agreed to settle their claims for more than $26 million, according to court documents filed yesterday in a New York federal court (Public Employees' Retirement System of Mississippi v. Goldman Sachs Group, Inc., et al., No. 09-1110, S.D. N.Y.).

According to a footnote contained in the memorandum in support of the motion for preliminary approval of settlement, "the total settlement amount is $26,612,500.00, which consists of:  (i) a fund of $21,312,500.00, subject to a $1,312,500.00 reduction if Stichting APB, which has filed a private action against Goldman Sachs, elects to exclude itself from the Class; and (ii) a fund of $5,300,000.00 for attorneys' fees, litigation expenses, and claims administration expenses, subject to Court approval."

Lead counsel for the shareholders, attorney David L. Wales of Bernstein Litowitz Berger & Grossmann, sent a letter to U.S. Judge Harold Baer Jr. of the Southern District of New York on July 17 stating that both sides had accepted the terms of the settlement and that settlement documents would be filed in the District Court by July 31.

Registration Statement

Lead plaintiff Public Employees' Retirement System of Mississippi (MissPERS) filed a second amended complaint in the District Court on behalf of all purchasers of mortgage pass-through certificates issued pursuant or traceable to GS Mortgage Securities Corp.'s Aug. 15, 2005, registration statement.

MissPERS alleged that Goldman Sachs Group, offering sponsor Goldman Sachs Mortgage Co., depositor GS Mortgage, Goldman, Sachs & Co. Inc. and GS Mortgage officers and directors Daniel L. Sparks, Mark Weiss and Jonathan S. Sobel (collectively, the GS defendants) and ratings agencies Moody's, The McGraw-Hill Cos. Inc. and Fitch Inc. (collectively, the rating agency defendants) issued false and misleading statements concerning the subprime exposure of the mortgage-backed securities issued in the offering in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933.

On Jan. 12, 2011, Judge Harold Baer Jr. granted in part and denied in part the defendants' motions to dismiss, ruling that MissPERS lacks standing to bring claims against the Goldman Sachs defendants and failed to properly bring its claims against the ratings agency defendants for securities it did not purchase.

Class Certification

On Feb. 2, Judge Baer granted MissPERS's motion to certify a class of all purchasers of "all persons or entities that purchased or acquired publicly offered certificates of GSAMP Trust 2006-S2 and who were damaged thereby", and to appoint itself as lead plaintiff and the Bernstein Litowitz as lead counsel.

MissPERS is represented by David R. Stickney, Timothy A. DeLange, Elizabeth Lin and Matthew P. Jubenville of Bernstein Litowitz in San Diego and Bruce D. Bernstein of Bernstein Litowitz in New York.

Defendants

The GS defendants are represented by Richard H. Klapper, Michael T. Tomaino Jr., Patrice A. Rouse and Harsh N. Trivedi of Sullivan & Cromwell in New York.

Moody's is represented by Joshua M. Rubins and James J. Coster of Satterliee Stephens Burke & Burke.  Fitch is represented by Martin Flumenbaum, Roberta A. Kaplan, Andrew J. Ehrlich and Tobias J. Stern of Paul, Weiss, Rifkind, Wharton & Garrison.  The McGraw-Hill Cos. are represented by Floyd Abrams, S. Penny Windle, Adam Zurofsky and Tammy L. Roy of Cahill Gordon & Reindel.  All are in New York.

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