Goldman Sachs Wins Summary Judgment In CDO Class Action

On September 8, 2015, the Southern District of New York granted summary judgment in favor of Goldman Sachs Group, Inc. in a class action lawsuit concerning the sale of two collateralized debt obligations. The court had previously dismissed plaintiffs' fraud claims on all grounds but one—whether Goldman was aware of "singularly prohibitive risks" associated with the CDOs but failed to completely and accurately disclose those risks. At summary judgment, it held that plaintiffs had not shown sufficient evidence to prove Goldman's knowledge of such risks. In particular, the court rejected plaintiffs' reliance on inflammatory emails, which merely "show, at most, that some Goldman employees, based on the same information available to Plaintiffs, were bearish on the RMBS market." The court also found insufficient evidence that Goldman knew the CDOs would perform poorly and intended for them to perform poorly. Order.