A New York judge put two shareholder lawsuits against executives and directors of Goldman Sachs Group Inc on hold until progress is made on 16 other lawsuits related to a controversial debt transaction involving the Wall Street bank.
The lawsuits, brought in state Supreme Court by Robert Rosinek and Morton Spiegel, accuse Goldman officials, including Chief Executive Lloyd Blankfein, of breaching their fiduciary duties by letting the bank enter transactions involving risky collateralized debt obligations tied to subprime mortgages.
At the center of the lawsuits is Abacus, a transaction in which the bank sold CDOs without telling investors that hedge fund Paulson & Co helped choose, and then bet against, the underlying securities.
The U.S. Securities and Exchange Commission brought a civil fraud complaint against Goldman over Abacus on April 16 and the investment bank ultimately agreed to settle for $550 million, without admitting wrongdoing. A judge approved the settlement last week.
Since the SEC lawsuit, investors have filed at least 18 lawsuits against Goldman: 15 in Manhattan federal court, the two in the New York State Supreme Court in Manhattan, and another in Delaware Chancery Court. All relate to Abacus.
At a Wednesday hearing in the Manhattan Supreme Court, Justice Richard Lowe agreed to combine the two derivative lawsuits assigned to him.
He then adjourned both cases after Jennifer Sarnelli, a lawyer representing the plaintiffs, said time was needed to coordinate the litigation with the federal cases.
Why did you not join the federal action? Lowe asked.
We believe that this is the right jurisdiction, responded Sarnelli, a lawyer at Gardy & Notis LLP.
Theodore Edelman, a partner at Sullivan & Cromwell LLP representing the Goldman officials, said coordinating the litigation avoids wasting the bank's and courts resources.
The defendants' position is that these cases should not be litigated in multiple fora, he said.
Lowe rejected a request that new derivative lawsuits be combined with the existing lawsuits and assigned to the same plaintiffs' lawyers. I'm not depriving in any new action the litigant's right to counsel, he said.
Lawyers declined to comment after Wednesday's hearing.
The case is Rosinek v. Blankfein et al, New York State Supreme Court, New York County, No. 650318/2010.
(Reporting by Jonathan Stempel; Editing by Steve Orlofsky)