Landesbank Baden-Württemberg v. Goldman, Sachs & Co., 821 F. Supp. 2d 616

This action by Landesbank seeks damages for common law fraud, negligent misrepresentation, and unjust enrichment arising from the devaluation of the Davis Square Funding VI CDO.
Defendants Goldman Sachs & Co. and TCW Asset Management Co. move to dismiss under Rule 12(b)(6) for failure to state a claim.
Davis Square was marketed as a $2 billion High Grade Structured Product CDO with triple-A ratings, collateralized by residential mortgage-backed securities; Landesbank purchased two notes for $37 million.
The Offering Circular warned about risks, including subordinate classes and nonconforming loans; Countrywide, New Century, and Fremont originated a substantial portion of the collateral; Goldman also securitized loans backed by Countrywide, New Century, Fremont, and others.
Clayton Holdings provided loan-level due diligence to Goldman; Landesbank alleges Goldman knew of higher than normal nonconforming loan rates yet securitized the pools and touted ratings in marketing materials.
The court ultimately granted the Defendants’ motion to dismiss, finding failures in pleading, lack of particularity, and absence of requisite relationships or contract-based recovery for unjust enrichment.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Fraud: adequacy of particularized pleading	Landesbank asserts Goldman knew of toxic mortgages and misrepresented ratings and Circular disclosures.	Plaintiff fails to identify specific reports, dates, and links tying alleged knowledge to the Davis Square securities; Clayton Report timing mismatches.	Fraud claim dismissed for lack of particularity.
Negligent misrepresentation: reliance and special relationship	Landesbank relied on defendants' statements due to their expertise in securitizations.	No special relationship; Landesbank is sophisticated and had access to disclosures; arm's-length transaction precludes justifiable reliance.	Negligent misrepresentation claim dismissed.
Unjust enrichment: contract precludes recovery	Even if no contract, unjust enrichment could lie from misstated benefits.	Existence of a valid purchase agreement precludes unjust enrichment claims.	Unjust enrichment claim dismissed; contract bars recovery.

Ashcroft v. Iqbal, 556 U.S. 662 (S. Ct. 2009) (plausibility standard for pleading; rejects mere conclusory statements)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (S. Ct. 2007) (pleading must contain more than mere allegations of conceivable conduct)
Rombach v. Chang, 355 F.3d 164 (2d Cir. 2004) (fraud must be pled with particularity)
Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (concrete identifying reports required when opposing party had contrary facts)
San Leandro Emergency Med. Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801 (2d Cir. 1996) ( Rule 9(b) pleading requirements for fraud allegations)
In re Scholastic Corp. Sec. Litig., 252 F.3d 63 (2d Cir. 2001) (requirement to identify specific reports or statements)
Kalnit v. Eichler, 264 F.3d 131 (2d Cir. 2001) (fraud claims cannot be based on speculation or generalized allegations)
SmarTalk Teleservices, Inc. Sec. Litig., 124 F. Supp. 2d 505 (S.D. Ohio 2000) (rejects fraud claims based on speculative allegations)
Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of NY., 375 F.3d 168 (2d Cir. 2004) (requirements for negligent misrepresentation with sophisticated parties)
U.S. East Telecomms., Inc. v. U.S. West Commc’ns Servs., Inc., 38 F.3d 1289 (2d Cir. 1994) (unjust enrichment motivations in presence of contract)