LOS ANGELES Goldman Sachs asked a federal court to suspend discovery in a suit brought by NCUA over the failures of U.S. Central FCU and WesCorp while the Ninth Circuit Court of Appeals one of two appeals courts reviewing the issue determines whether the credit union regulator waited too long to bring its securities claims.
Goldman told the U.S. District Court for the Central District of California discovery in the case, which could entail more than 45,000 loan records, will be lengthy and expensive and could prove to be unnecessary if the appellate court rejects NCUA’s appeal and upholds its March ruling dismissing many of NCUA’s claims.
The Wall Street bank pointed to the U.S. District Court for the District of Kansas, which agreed to stay NCUA’s suit against RBS Securities for the failure of U.S. Central and WesCorp while the Tenth Circuit Court of Appeals reviews the issue of whether the statute of limitations had expired before NCUA filed suit.
NCUA told Goldman in a conference call Wednesday it will not agree to a stay of the case, which seeks $491 million in damages from the Wall Street bank for the sale of faulty mortgage-backed securities that helped to sink the two corporate giants in 2009.
In arguing for a stay, Goldman told the court the records sought by discovery will be voluminous and difficult to obtain, as many of the subprime loan originators cited as codefendants in the NCUA suit such as IndyMac, First Franklin and Countrywide, depositors such as Residential Accredit Loans, Inc., and even the credit unions themselves have failed, and obtaining their records will require substantial effort. If the Ninth Circuit Court of Appeals sides with the lower court’s ruling then some of the discovery can be avoided at great savings of time, money and other resources, asserted Goldman.
“NCUA waited two and a half years after placing [U.S. Central and WesCorp] into conservatorship before bringing this action, thereby belying any claim of urgency,” argued Goldman. “Far from being prejudiced, NCUA may also benefit from a stay by avoiding discovery-related expenses, consistent with its publicly stated goal of minimizing litigation expenses.”
The Goldman suit is one of nine filed by NCUA against Wall Street banks over the collapse of U.S. Central, the one-time $52-billion central bank for credit unions, and WesCorp, the one-time $34-billion corporate. NCUA also has filed suits against JP Morgan Chase, Bear Stearns and Washington Mutual, which have since been acquired by JP Morgan, as well as RBS Securities (in both California and Kansas), UBS, Credit Suisse, Barclays Capital, and Wachovia (now a unit of Wells Fargo) claiming almost $9 billion total in damages.
