LOS ANGELES (8/13/13)--Goldman, Sachs & Co. has asked a federal court in Los Angeles to stay the discovery process in the National Credit Union Administration's lawsuit against the firm over residential mortgage-backed securities (RMBS), until an appellate court resolves the matter of whether NCUA's lawsuits against several brokerage firms are time-barred.
NCUA had brought 47 claims for $491 million in losses related to 21 certificates and 13 RMBS offerings in the Goldman Sachs case, which is one of seven similar lawsuits the agency has filed against Wall Street banks over losses incurred by U.S. Central FCU and Western Corporate FCU.
The corporate credit unions no longer exist and NCUA has argued that the offering documents for the certificates materially misrepresented the risk involved in investing in the RMBS and contributed to the corporates' demise.
In the motion filed Thursday with the U.S. District Court for the Central District of California, Goldman Sachs said the certificates sold were backed by almost 45,000 loans and that some of the non-parties such as loan originators Indy Mac, First Franklin and Countrywide, depositors such as Residential Accredit Loans Inc., and even the corporates have failed "and obtaining their records will require substantial effort."
It is requested the stay of discovery because of "the extraordinarily voluminous, complex, expensive and burdensome discovery from the parties and numerous non-parities (including loan originators, loan servicers, due diligence providers, and rating agencies, among many others) necessary to litigate this action may be streamlined (if not obviated entirely) by a decision from the Ninth Circuit."
NCUA's lawsuit is on interlocutory appeal in the Ninth Circuit Court of Appeals, while a similar case against RBS Securities is on appeal in the Tenth Circuit Court of Appeals. Both appellate courts are reviewing issues related to whether NCUA filed its lawsuits before the statute of limitations or repose expired. NCUA argues that tolling agreements signed by some of the defendant banks and an extender statute gave it more time to file.
Goldman Sachs pointed out that a Kansas court involved in the RBS Securities case has granted a similar stay of discovery. It based its request on four arguments: that the petitions raise serious legal questions; the discovery process would impose "staggering costs, many (if not all) of which could be avoided depending on the resolution of the appeals"; NCUA would not be injured as a result of a stay "since there is no risk that evidence would be lost during the stay"; and that granting a stay appeals to the public interest by judicial resources and avoiding burdensome non-party discovery.
The motion also pointed out that NCUA waited two and a half years after putting the corporates into conservatorship before it filed a suit and that the agency might also benefit from the stay by avoiding expenses related to the discovery process.
The court document also said NCUA has stated in its July 23 Notice of Lodging and during a July 29 status conference "that it opposes any stay of discovery." Goldman Sachs said it confirmed NCUA's opposition to a stay during a meeting on Aug. 7.
A hearing is set for Sept. 5, according to the court document.