Last week, Goldman Sachs & Co filed a petition for certiorari to the Supreme Court asking for review of the 2nd Circuit’s decision in NECA-IBEW Health & Welfare Fund v. Goldman, Sachs & Co. Just two months ago, the 2nd Circuit held that a union pension fund, NECA, had standing to represent a class of plaintiffs who purchased various mortgage-backed securities (MBS) certificates, including those who purchased wholly separate securities than NECA had.
The 2nd Circuit reviewed the lower court’s finding that NECA lacked standing to represent the putative class. There, Goldman had argued that, because of differences among the offerings, NECA lacked standing to represent certificate holders who purchased different notes than the fund had. Each MBS offering was made subject to a different “registration statement,” with distinct information as to the quality of those specific securities. Accordingly, Goldman argued, NECA could not have standing to represent plaintiffs who bought different securities and received different statements as to the strength of those securities.
Goldman now petitions the Supreme Court to review the 2nd Circuit’s decision. Chief among its arguments is that the ruling could substantially increase liability in MBS litigation, citing its own case as an example—namely, NECA’s newfound ability to pursue a putative class action for several billions of dollars (as opposed to a much more modest amount based on a single offering). Goldman also argues that the NECA decision created a split with the 1st Circuit’s holding in Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., which dismissed, on standing grounds, class claims involving securities which “the named plaintiffs never purchased.” That split currently gives securities plaintiffs a strong incentive to bring their cases in the 2nd Circuit.
This standing issue sounds a lot like the “similarity of claims” determination for class certification, but these are distinct questions analyzed at separate times in the litigation. The 2nd Circuit was careful to stress this as well. Indeed, the court noted that these differences and idiosyncrasies between the offerings may well doom class certification down the line, but it did not destroy standing.