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In re Goldman Sachs Group, Inc. Securities Litigation

United States District Court, S.D. New York

June 23, 2014

IN re GOLDMAN SACHS GROUP, INC. SECURITIES LITIGATION. This Document Relates To: ALL ACTIONS

MEMORANDUM & ORDER

PAUL A. CROTTY, District Judge.

In this consolidated securities class action, Plaintiffs allege that Goldman Sachs Group, Inc. ("Goldman") and certain of its senior executives (collectively, "Defendants") made material misstatements and misleading omissions relating to four collateralized debt obligation ("CDO") transactions in 2006 and 2007. Previously, the Court (1) granted Defendants' motion to dismiss claims regarding their failure to disclose Goldman's receipt of Wells notices from the Securities and Exchange Commission ("SEC"), but (2) denied the motion with respect to claims that Goldman had made misstatements about its conflicts of interest in those transactions. See Richman v. Goldman Sachs Grp., Inc., 868 F.Supp.2d 261 (S.D.N.Y. 2012). Defendants now move for partial reconsideration of that decision on the grounds that three intervening Second Circuit decisions have clarified what kinds of statements constitute inactionable "puffery." The motion is denied.

BACKGROUND

A. The Court's Prior Decision

As explained more fully in the Court's prior decision, Plaintiffs allege that Goldman improperly failed to disclose that it, or a favored client, held short positions in certain CDO transactions that it sold to other clients. See id. 269-71. That is, Goldman allegedly had conflicts of interests with those buyer-clients because it was selling them the same financial products that it was effectively betting against and profiting from the clients' losses. See id. In three of those transactions, "Goldman affirmatively represented that it held a long position in the equity tranches, without disclosing its substantial short positions." Id. at 278. In one of those three, "Goldman stated that it had aligned incentives' with investors by investing in a portion of equity, ' which amounted to $6 Million, without disclosing that it also held 100% of the short position at the same time, which amounted to $2 Billion." Id. at 278-79.

In light of the foregoing conduct, Plaintiffs claim that the following statements made by Defendants during the class period were materially misleading:

• "[W]e increasingly have to address potential conflicts of interest, including situations where our services to a particular client or our own proprietary investments or other interests conflict, or are perceived to conflict, with the interest of another client...." (Compl. ¶ 134 (Form 10-K))
• "We have extensive procedures and controls that are designed to... address conflicts of interest." (Compl. ¶¶ 134, 154 (Form 10-K))
• "Our clients' interests always come first. Our experience shows that if we serve our clients well, our own success will follow." (Compl. ¶ 154 (Goldman Annual Report))
• "We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard." (Compl. ¶ 154 (Goldman Annual Report))
• "Integrity and honesty are at the heart of our business." (Compl. ¶ 289 (Goldman Annual Report))
• "Most importantly, and the basic reason for our success, is our extraordinary focus on our clients." (Compl. ¶ 154 (Viniar's Statements on Goldman's Investor Conference Call))
• "Our reputation is one of our most important assets." (Compl. ¶ ...

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