Overview
In March, Judge Marrero permitted a putative securities fraud class action to proceed against Goldman Sachs, alleging that Goldman had defrauded investors in two of its allegedly "rigged-to-fail" morgage-shorting CDOs. Now, Goldman is suing back, claiming that the filing of the lawsuit itself constitutes a breach of contract and fraudulent inducement by the plaintiffs. Goldman alleges that the lead plaintiff, a hedge fund manager who "epitomizes the sophisticated investor," signed agreements disclaiming any reliance on any statements made by Goldman, and also represented that Goldman would have no liability for losses resulting from the investment. The claims in the lawsuit, Goldman contends, are "premised on theories of liability, reliance and damages" that contradict those reprsentations, and thus constitute a breach of contract. Moreover, because the plaintiff represented in the agreements that it was not relying on Goldman and had done its own independent analysis of the risks associated with the investment, Goldman claims that the plaintiff's allegations in the lawsuit that it relied on Goldman and was unaware of those risks reveal that the plaintiff did not believe those representations when they were made, and thus constitute fraudulent inducement. Goldman is represented by Sullivan & Cromwell.