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NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co.

United States Court of Appeals for the Second Circuit

February 3, 2012, Argued; September 6, 2012, Decided

Docket No. 11-2762-cv

Opinion

 [*148]  Barrington D. Parker, Circuit Judge:

] Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 impose essentially strict liability for material misstatements contained in registered securities offerings. See 15 U.S.C. § 77k, l(a)(2), o. This appeal requires us to consider a plaintiff's standing to assert claims on behalf of purchasers of securities issued under the same allegedly false and misleading SEC Form S-3 and base prospectus (together, the "Shelf Registration Statement"), but sold in separate offerings by unique prospectus supplements and free writing prospectuses (together, the "Prospectus Supplements") (collectively, the "Offering Documents").

We hold that plaintiff  [**3] has class standing to assert the claims of purchasers of certificates backed by mortgages originated by the same lenders that originated the mortgages  [*149]  backing plaintiff's certificates, because such claims implicate "the same set of concerns" as plaintiff's claims. Gratz v. Bollinger, 539 U.S. 244, 267, 123 S. Ct. 2411, 156 L. Ed. 2d 257 (2003). We further hold that plaintiff need not plead an out-of-pocket loss in order to allege a cognizable diminution in the value of an illiquid security under § 11. Accordingly, we affirm in part and vacate in part the judgment of the district court and remand with instructions to reinstate plaintiff's §§ 11, 12(a)(2), and 15 claims to the extent they are based on similar or identical misrepresentations in the Offering Documents associated with certificates backed by mortgages originated by the same lenders that originated the mortgages backing plaintiff's certificates.

BACKGROUND1

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693 F.3d 145 *; 2012 U.S. App. LEXIS 18814 **; Fed. Sec. L. Rep. (CCH) P97,005; 2012 WL 3854431

NECA-IBEW HEALTH & WELFARE FUND, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. GOLDMAN SACHS & CO., GOLDMAN SACHS MORTGAGE COMPANY, DANIEL L. SPARKS, MICHELLE GILL, GS MORTGAGE SECURITIES CORP., KEVIN GASVODA, Defendants-Appellees, GS MORTGAGE SECURITIES CORP., GSAA HOME EQUITY TRUST 2007-3, GSAA HOME EQUITY TRUST 2007-4, GSAMP TRUST 2007-HE2, GSAMP TRUST 2007-FM2, GSAA HOME EQUITY TRUST 2007-5, GSAA HOME EQUITY TRUST 2007-6, GSAA HOME EQUITY TRUST 2007-7, GSAA HOME EQUITY TRUST 2007-8, GSR MORTGAGE LOAN TRUST 2007-4F, GSAMP TRUST 2007-HSBC1, GSAMP TRUST 2007-HEI, STARM MORTGAGE LOAN TRUST 2007-4, GSAA HOME EQUITY TRUST 2007-10, GSR MORTGAGE LOAN TRUST 2007-5F, GSR MORTGAGE LOAN TRUST 2007-3F, GSR MORTGAGE LOAN TRUST 2007-OA2, SUNTRUST ROBINSON HUMPHREY, INC., Defendants, THE POLICE AND FIRE RETIREMENT SYSTEM OF THE CITY OF DETROIT, Intervenor.

Subsequent History: US Supreme Court certiorari denied by Goldman, Sachs & Co. v. NECA-IBEW Health & Welfare Fund, 133 S. Ct. 1624, 185 L. Ed. 2d 576, 2013 U.S. LEXIS 2314 (U.S., 2013)

On remand at, Request denied by NECA-IBEW Health & Welfare Fund v. Goldman, 2015 U.S. Dist. LEXIS 1268 (S.D.N.Y., Jan. 6, 2015)

Motion granted by NECA-IBEW Health & Welfare Fund v. Goldman, Sachs & Co., 2016 U.S. Dist. LEXIS 85029 (S.D.N.Y., May 2, 2016)

Costs and fees proceeding at, Request granted NECA-IBEW Health & Welfare Fund v. Goldman, 2016 U.S. Dist. LEXIS 85030 (S.D.N.Y., May 2, 2016)

Settled by, Judgment entered by, Dismissed by Neca-Ibew Health & Welfare Fund v. Goldman, Sachs & Co., 2016 U.S. Dist. LEXIS 85027 (S.D.N.Y., May 2, 2016)

Prior History: Appeal from a judgment of the United States District Court for the Southern District of New York (Cedarbaum, J.) dismissing a putative securities class action brought under §§ 11, 12(a)(2), and 15 of the Securities Act on behalf of all persons who acquired certain mortgage-backed certificates issued under the same allegedly false and misleading shelf registration statement, but sold in 17 separate offerings by 17 unique prospectus supplements. The district court dismissed plaintiff's class action for lack of standing and for failure to allege a cognizable injury under § 11. We hold that plaintiff has class standing to assert the claims of purchasers of certificates backed by mortgages originated by the same lenders that originated the mortgages backing plaintiff's certificates, because such claims implicate "the same set of concerns" as plaintiff's claims. Gratz v. Bollinger, 539 U.S. 244, 267, 123 S. Ct. 2411, 156 L. Ed. 2d 257 (2003). We further hold that plaintiff need not plead an out-of-pocket loss in order to allege a cognizable diminution in the value of an illiquid security under § 11.

NECA-IBEW Health & Welfare Fund v. Goldman, Sachs & Co., 743 F. Supp. 2d 288, 2010 U.S. Dist. LEXIS 109953 (S.D.N.Y., 2010)

Disposition:  [**1] AFFIRMED in part, VACATED in part, and REMANDED.

CORE TERMS

Certificates, Offering, loans, originated, Prospectus, registration statement, backing, alleges, Trusts, district court, borrower's, purchasers, Shelf, Documents, Mortgage, underwriting, Supplements, tranches, damages, mortgage loan, misrepresentations, appraisals, guidelines, cash flow, transfers, secondary market, representations, quotation, marks, rates

Securities Law, Registration of Securities, False Registration Statements, General Overview, Civil Liability, Communications & Prospectuses, Civil Procedure, Appeals, Standards of Review, De Novo Review, Justiciability, Standing, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Secondary Liability, Controlling Persons, Pleadings, Heightened Pleading Requirements, Fraud Claims, Postoffering & Secondary Distributions, Securities Exchange Act of 1934 Actions, Heightened Pleading Requirements, Evidence, Burdens of Proof, Allocation, Fraudulent Interstate Transactions, Defenses, Due Diligence, Reasonable Care, Constitutional Law, Case or Controversy, Elements, Class Actions, Class Members, Third Party Standing, Remedies, Particular Parties, Special Proceedings, Certification of Classes, Damages, Elements of Proof, Inferences & Presumptions, Presumptions, Creation, Complaints, Requirements for Complaint