In this action, HSH Nordbank AG, HSH Nordbank AG, Luxembourg Branch, HSH Nordbank AG, New York Branch, HSH Nordbank Securities S.A., and Carrera Capital Finance Limited (collectively Nordbank) assert various claims against The Goldman Sachs Group, Inc., Goldman Sachs Real Estate Funding Corp., GS Mortgage Securities Corp., Goldman Sachs Mortgage Company, Goldman, Sachs & Co., and Goldman Sachs International (collectively Goldman Sachs) in connection with the sale of residential mortgage-backed securities. Nordbank alleges that Goldman Sachs violated the laws of New York and is liable for fraud, fraudulent concealment, negligent misrepresentation, and aiding and abetting fraud. In the alternative, Nordbank alleges that the sale of the securities should be rescinded on the grounds of mutual mistake. Goldman Sachs has moved to dismiss the complaint pursuant to CPLR 3016 (b), 3211 (a) (1), 3211 (a) (5) and 3211 (a) (7).

HSH Nordbank AG is a financial institution incorporated in Germany with offices around the world, including in New York. Between 2005 and 2006, Nordbank purchased securities, known as Certificates, in six different residential mortgage-backed securities (RMBS) offerings. The Certificates were the outcome of a complex securitization process. Before it made each purchase, Nordbank received information from Goldman Sachs about the Certificates and the securitization process in registration statements, prospectuses, prospectus supplements, free writing prospectuses, term sheets, and various other materials (the Offering Materials).

The Goldman Sachs Group, Inc. is the ultimate parent company of the various Goldman Sachs entities and the seller of the Certificates. Goldman Sachs participated in all aspects of the securitization process, including acting as the depositor, sponsor and lead underwriter on all but [*2]one of the offerings.^[FN1] Goldman Sachs also prepared the Offering Materials, which included various metrics and representations regarding the quality and nature of the various pools of loans that collateralized the Certificates. The gravamen of the complaint is that Goldman Sachs knew that these metrics and representations were false, but did not alert Nordbank.

Nordbank alleges that Goldman Sachs knew that loan originators had systematically abandoned underwriting guidelines described in the Offering Materials. It alleges that Goldman Sachs knowingly reported false credit ratings, owner-occupancy percentages, appraisal amounts, and loan-to-value ratios. It alleges that although Goldman Sachs represented otherwise in the Offering Materials, Goldman Sachs never intended to properly effectuate transfer of the underlying notes and mortgages that collateralized the Certificates.

On a motion to dismiss for failure to state a cause of action, the court accepts all factual allegations pleaded in plaintiff's complaint as true, and gives plaintiff the benefit of every favorable inference. CPLR 3211 (a) (7); Sheila C. v Povich, 11 AD3d 120 (1st Dept 2004). The court must determine whether "from the [complaint's]; four corners[,]; factual allegations are discerned which taken together manifest any cause of action cognizable at law." Gorelik v Mount Sinai Hosp. Ctr., 19 AD3d 319 (1st Dept 2005) (quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275 (1977)). Vague and conclusory allegations are not sufficient to sustain a cause of action. Fowler v American Lawyer Media, Inc., 306 AD2d 113 (1st Dept 2003).

On a motion to dismiss on the ground that defenses are founded upon documentary evidence, the evidence must be unambiguous, authentic and undeniable. CPLR 3211 (a) (1); Fontanetta v Doe, 73 AD3d 78 (2d Dept 2010). "To succeed on a [CPLR 3211 (a) (1)]; motion . . . a defendant must show that the documentary evidence upon which the motion is predicated resolves all factual issues as a matter of law and definitively disposes of the plaintiff's claim." Ozdemir v Caithness Corp., 285 AD2d 961, 963 (3d Dept 2001), leave to appeal denied 97 NY2d 605. In other words, "documentary evidence [must]; utterly refute plaintiff's factual allegations, conclusively establishing a defense as a matter of law." Goshen v Mutual Life Ins. Co. of New York, 98 NY2d 314, 326 (2002).

As an initial matter, Goldman Sachs argues that Nordbank's claims are barred by the applicable three-year German statute of limitations. Limitations-based arguments in RMBS fraud actions have not generally been accepted at the motion to dismiss phase. See e.g. Capital Ventures Intern. v J.P. Morgan Mortgage Acquisition Corp., 2013 WL 535320, at *7 (D Mass 2013); In re Countrywide Fin Corp Mortgage-Backed Secs., 2012 WL 1322884, at *4 (CD Cal [*3]2012]); Allstate Ins Co v Morgan Stanley, No. 651840/2011, 2013 WL 2369953, at *9 (NY Sup Ct 2013). As Judge Pfaelzer aptly explained in Allstate:

Under section 195 of the German Civil Code, the limitation period for contract-based claims and claims for fraud is three years and exists primarily to protect the defendant from "unjustified, unknown, or unexpected claims." According to Uwe Schneider, a professor of German corporate and securities law:

As evidence that Nordbank had such knowledge, Goldman Sachs has provided the court with a number of press reports, lawsuits and other information that was available to the public in 2007. Goldman Sachs claims this information "demonstrate[s]; that Nordbank knew, or was grossly negligent in not knowing, of its claims by the end of 2007." Nordbank responds that information available in 2007 did not put Nordbank on notice that "Goldman Sachs knowingly failed to exclude bad loans from the securitizations at issue, or that Goldman Sachs intentionally or recklessly misdescribed the loans in the Offering Materials."

The court is unable to determine whether Nordbank had sufficient notice of its claims in 2007 at this stage of the proceedings. Goldman Sachs largely relies on news reports from the fall of 2007 that indicate that German banks and investors were "already considering whether to turn to the U.S. courts to seek restitution." Information of this nature does not establish as a matter of law that Nordbank was grossly negligent in not learning of its claims against Goldman [*4]Sachs before the end of 2007. The court agrees with Nordbank's argument that this language is essentially speculative, and does not indicate that Nordbank could have deduced facts sufficient to support its claims for fraud with respect to the sale of specific Certificates at issue in this lawsuit.

While Nordbank may have had notice in 2007 that loan originators were not following their underwriting guidelines, there is nothing to suggest that Nordbank knew or should have known that the Offering Materials for each of the Certificates it had purchased contained false statements, and critically, that Goldman Sachs knew about them. See Allstate, 2013 WL 2369953, at *9 ("The collapse of the various loan originators . . . would not necessarily apprise plaintiffs that Morgan Stanley was complicit in their wrongdoing").

In any case, Goldman Sachs will be given the opportunity to fully develop a factual record that will more clearly indicate whether Nordbank in fact had sufficient notice under German law that it had viable claims against Goldman Sachs in 2007.

The elements of a claim of fraud under New York law are "(1) a material misrepresentation of a fact, (2) knowledge of its falsity, (3) an intent to induce reliance, (4) justifiable reliance by the plaintiff, and (5) damage." Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 (2009). Under CPLR 3016(b), these elements must be stated in detail. As discussed below, Nordbank has adequately alleged each element of its fraud claim with respect to certain alleged misrepresentations, but not as to all of the alleged misrepresentations.^[FN2]

The complaint alleges the Offering Materials contained a number of false or misleading statements. Nordbank accuses Goldman Sachs of falsely representing that the mortgages backing the securities complied with the originators underwriting standards and conformed to certain metrics including appraisal values, loan-to-value ratios and owner occupancy rates. Nordbank also alleges that Goldman Sachs knowingly made false representations concerning the accuracy of the Certificate's credit ratings, as well as the schedule on which the mortgages would be assigned and transferred to the respective issuers of the securities. Goldman Sachs moves to dismiss the complaint on the grounds that none of the various alleged misrepresentations are actionable.

With respect to allegations that it falsely represented that the mortgages in the pools collateralizing the Certificates were underwritten in compliance with originators' own guidelines, Goldman Sachs argues that the representations were in fact not false. Goldman Sachs asserts that the Offering Materials indicated that standards were only followed "generally" and that they further disclosed that originators could depart from guidelines based on certain exceptions.

Allegations of widespread abandonment of underwriting guidelines have been found sufficient to sustain a claim for fraudulent misrepresentation even where the pre-deal representations included general disclaimers that exceptions could occur in the presence of certain compensating factors. See e.g. In re IndyMac Mortgage-Backed Sec Litig, 718 F Supp 2d [*5]495, 509 (SDNY 2010) ("The crux of plaintiffs' claims, however, is that IndyMac Bank ignored even those watered-down underwriting standards, including the standards for granting exceptions . . . . disclosures regarding the risks stemming from the allegedly abandoned standards do not adequately warn of the risk the standards will be ignored."); Stichting Pensioenfonds ABP v Credit Suisse Group AG, 2012 WL 6929336, at *8 (NY Sup Ct Nov. 30, 2012).^[FN3] Accordingly, Nordbank's allegations of widespread abandonment of underwriting guidelines are sufficient to withstand a motion to dismiss.

The alleged misrepresentations regarding appraisal values, loan-to-value ratios and owner-occupancy rates also stand. Nordbank's own investigation and loan-level analysis ^[FN4] yielded materially different information than what was represented in the Offering Materials. The Offering Materials represented that none of the mortgages for each security had combined loan-to-value (CLTV) ratios above 100%. Mortgages with CLTV ratios higher than 100% have been referred to as "underwater" and are far more likely to default. Nordbank alleges that between 10.08% and 28.81% of the loans it sampled in its investigation had CLTV ratios over 100%. Owner-occupancy statistics are also of critical importance in evaluating the risk of securitization of residential mortgages as occupied houses are significantly less likely to default. Nordbank's investigation revealed that between 12.2% and 17.9% of the mortgages backing the Certificates had owner-occupancy circumstances that were allegedly misstated in the Offering Materials.

The statements regarding appraisal values and loan-to-value ratios and owner-occupancy rates are only actionable if Goldman Sachs did not believe the representations to be accurate at the time they were made. The court finds that Nordbank has sufficiently alleged that Goldman Sachs had knowledge that originators were deliberately inflating appraisal values to artificially obtain understated CLTV ratios that corresponded with lower risk. As evidence of Goldman Sachs's knowledge, Nordbank alleges that Goldman Sachs negotiated discounts for defective loans based on information it received before and during the preparation of the Offering Materials. The information was allegedly provided to Goldman Sachs by a diligence provider [*6]that had scrutinized many aspects of the underwriting process, including loan-to-value ratios and owner-occupancy rates.^[FN5]

Because Nordbank alleges that Goldman Sachs made these representations with knowledge of their falsity, the complaint sufficiently describes actionable misrepresentations regarding appraisal values, loan-to-value ratios, and owner-occupancy rates. See e.g. MBIA Ins Corp v Countrywide Home Loans, Inc, 87 AD3d 287, 294 (1st Dept 2011); In re Bear Stearns Mortg Pass-Through Certificates Litig, 851 F Supp 2d 746, 769 (SDNY 2012); Bank Hapoalim BM v Bank of Am Corp, 2012 WL 6814194, at *6; Capital Ventures v JP Morgan, 2013 WL 535320, at *5 Allstate v Ace Sec Corp, 2013 WL 4505139, at *13 (misrepresentations regarding the appraisal process, owner-occupancy rates and loan-to-value ratios were adequately alleged).

The alleged misrepresentations regarding the assignment and transfer of the notes and mortgages are not pleaded with sufficient particularity to survive the motion to dismiss. Because the representation to transfer the notes and mortgages was obviously a statement of future intent, a claim for fraud must be premised on the fact that Goldman Sachs knew at the time it issued the Certificates that proper transfer would not be effectuated. Fatally, the allegations regarding Goldman Sachs's knowledge in this regard are wholly insufficient.

The allegations regarding the transfer and assignment representations fail to satisfy the requirements of CPLR 3016(b). Accordingly, the court grants the motion to dismiss with respect to the statements regarding assignment and transfer.

Similarly, Nordbank's allegations concerning representations about the accuracy of the credit ratings are not pleaded with sufficient particularity. Nordbank alleges that Goldman Sachs knew at the time the representations were made that the ratings were not accurate because it had essentially fed inaccurate data into the ratings system. Nordbank does not identify the inaccurate data that was allegedly provided to the rating agencies, much less how and when such information was provided. Without particular factual allegations that Goldman Sachs provided false or incomplete information to the credit agencies such that it knew the ratings were inaccurate, Nordbank cannot state a claim for fraudulent misrepresentation. Compare In re Nat'l Century Investment Litig., 2008 WL 2872279 (S.D. Ohio July 22, 2008) with M & T Bank Corp v Gemstone CDO VII, Ltd, 68 AD3d 1747, 1749 (4th Dept 2009) (sustaining claim for fraudulent nondisclosure where complaint identified specific relevant information that was withheld from ratings agencies); Stichting, 2012 WL 6929336, at *9 (same).

Goldman Sachs next argues that the claims for fraud fail because Nordbank has not pleaded that it justifiably relied on the alleged misstatements in the Offering Materials. "New York law imposes an affirmative duty on sophisticated investors to protect themselves from misrepresentations made during business acquisitions by investigating the details of the transaction." Global Minerals & Metals Corp v Holme, 35 AD3d 93, 100 (1st Dept 2006). But if the allegedly misrepresented facts are "peculiarly within the misrepresenting party's knowledge," reliance will be justified. Dallas Aerospace, Inc v CIS Air Corp, 352 F3d 775, 785 (2d Cir 2003). As the Court of Appeals explained:

The issue of justifiable reliance generally implicates questions of fact which are not to be resolved at this early stage in the proceedings. See e.g. DDJ Mgmt, 15 NY3d at 156 ("If plaintiffs can prove the allegations in the complaint, whether they were justified in relying on the warranties they received is a question to be resolved by the trier of fact."); Knight Secs, LP v Fiduciary Trust Co, 5 AD2d 172, 173 (1st Dept 2004) ("on a motion to dismiss for failure to state a cause of action, a plaintiff . . . need only plead that he relied on misrepresentations made by the defendant . . . since the reasonableness of his reliance [generally]; implicates factual issues whose resolution would be inappropriate at this early stage."); MBIA Ins Corp v Countrywide, [*9]2013 WL 1845588, at *5 (NY Sup Ct Apr 29, 2013) ("[W];hether MBIA's due diligence review was sufficient and whether MBIA's review made adequate use of the means available to it, at bottom, are disputed issues of fact.").

Goldman Sachs argues that Nordbank failed to conduct even a "minimal pre-purchase investigation." Goldman Sachs further argues that to adequately plead justifiable reliance, the complaint must allege that Nordbank evaluated the quality of the underlying loans. Finally, Goldman Sachs argues that Nordbank should have requested access to the underlying loan files, or alternatively, should have requested access to Goldman Sachs' own diligence reports.

As long as it otherwise conducted a reasonable investigation, Nordbank was under no duty to request the underlying loan files. See CIFG v Goldman Sachs, 106 AD2d 437, 437 (1st Dept 2013). Goldman Sachs' efforts to distinguish CIFG are unavailing. Although Nordbank did not commission a pre-purchase third party due diligence report as CIFG did, it did engage in other methods of investigation that may render its reliance on the alleged misstatements justifiable. Determining whether the totality of Nordbank's efforts was reasonable is a question of fact. Id.

Similarly, the court cannot determine as a matter of law that Nordbank failed to conduct a reasonable investigation by failing to request access to Goldman Sachs's own due diligence reports. The underwriter of securities adds value by efficiently pricing the offering after assisting the issuer in marshaling facts required for disclosure in a prospectus. It engages in a due diligence process aimed at ensuring the correctness of disclosed facts. Traditionally, the underwriter's internal notes, memoranda, and other file material are closely guarded work product, no more available for review by securities purchasers than the work papers of auditors who opined on the issuer's financial statements. The court is highly skeptical that a request here to view these internal materials would have been fruitful. Goldman Sachs's point that failure to make this request negatively impacts justifiable reliance borders on meritless. Whether Nordbank knew before the transaction that Goldman Sachs had such information, whether Nordbank should have asked for the information, and whether Goldman Sachs would have provided the information upon request are all questions of fact inappropriate for resolution at this stage.

In arguing that reliance was not justifiable, Goldman Sachs points to a recent case in which the First Department affirmed the dismissal of a different RMBS complaint also filed by Nordbank. See HSH Nordbank v UBS, 95 AD2d 185, 195 (1st Dept 2012). Importantly, Nordbank's fraud claims against UBS were predicated on publicly-available information. Id. ("[H];ere, the true nature of the risk being assumed could have been ascertained from reviewing market data or other publicly available information"). In the present case, however, Nordbank alleges that it relied on Goldman Sachs' characterization of the underlying loans because it did not have the ability to obtain samples of these loans. Simply put, the information was not publicly-available. See id. at 208 n15 (citing cases where denial of a motion to dismiss was warranted because "the matter allegedly misrepresented—whether the mortgage loans backing the securities that the plaintiff insured were made in compliance with applicable standards—was [*10]a matter peculiarly within the knowledge of the defendants").^[FN8]

Viewing the allegations in the light most favorable to Nordbank, the complaint adequately alleges justifiable reliance. Nordbank alleges that it conducted due diligence by evaluating the structure of each Certificate according to criteria based on appraisal values, CLTV ratios and owner occupancy rates. Based on representations made by Goldman Sachs concerning the quality of the underlying loans, Nordbank applied "rigorous investment criteria" in determining which Certificates to purchase. Nordbank further alleges that it "conducted due diligence with respect to the efficiency and cost of foreclosures by various services." Taken together, these allegations serve to defeat Goldman Sachs' motion to dismiss on the grounds that Nordbank failed to conduct an adequate pre-purchase investigation.

As the final element of its claim of fraud, Nordbank must plead "that the misrepresentations directly caused the loss about which plaintiff complains." Laub v Faessel, 297 AD2d 28, 31 (1st Dept 2002); see also Citibank, NA v K-H Corp, 968 F2d 1489, 1495 (2d Cir 1992). Goldman Sachs asserts that Nordbank cannot establish that the decline in the value of the securities was proximately caused by their alleged misrepresentations. Courts have consistently rejected this argument as premature. See e.g. MBIA Ins Corp v Countrywide Home Loans, Inc, 87 AD2d 287, 294 (1st Dept 2011) ("It cannot be said on this pre-answer motion to dismiss, that [plaintiffs']; losses were caused, as a matter of law, by the 2007 housing and credit crises."); MBIA Ins Co v Morgan Stanley, 2011 WL 2118336, at *5 (NY Sup Ct May 26, 2011) ("whether MBIA's losses were caused by Morgan Stanley's representations or the economic down[turn]; is a question of fact for trial."); Allstate v Morgan Stanley, 2013 WL 2369953, at *12 (same). "Untangling the effect of the alleged misrepresentations from the effects of the broader financial crisis will present a complicated issue of fact . . . . better saved for a more complete factual record." Dexia Holdings, Inc v Countrywide Fin Corp, 2012 WL 1798997, at *6 (CD Cal Feb 17, 2012). Where the plaintiff pleads some causation between the defendant's misstatements and the loss, and the defendant claims some other mechanism of causation such as a market downturn, causation "is a matter of proof at trial and not to be decided on a . . . motion to dismiss." Emergent Capital Inv Mgmt, LLC v Stonepath Group, Inc, 343 F3d 189, 197 (2d Cir 2003).

Nordbank alleges that it has suffered losses totaling more than $1.5 billion as a result of the alleged misrepresentations regarding the loans' conformity with originators' underwriting guidelines. Specifically, Nordbank alleges that it has been unable to transfer notes and mortgages that have declined in value because of the poor quality of the underlying loans. The representations at issue allegedly resulted in higher rates of default, an impaired ability to obtain forecloses, and ultimately, a lower cash flow to Certificate-holders like Nordbank. Because [*11]Nordbank has sufficiently alleged a chain of causation leading from the alleged abandonment of underwriting standards to a decline in the market value of the Certificates, the complaint cannot be dismissed for failure to allege lost causation.

To state a claim for negligent misrepresentation in connection with a commercial transaction, a plaintiff must plead that the defendant "possess[ed]; unique or specialize expertise, or [was]; in a special position of confidence and trust with the injured party." Greenberg, Trager & Herbst, LLP v HSBC Bank USA, 17 NY3d 565, 578 (2011). A cause of action for negligent misrepresentation can only stand in the presence of a special relationship of trust or confidence, which creates a duty for one party to impart correct information to another. United Safety of America, Inc v Consolidated Edison Co of New York, Inc, 213 AD2d 283, 285-86 (1st Dept 1995). An arm's length relationship is not of a confidential or fiduciary nature and thus does not support a cause of action for negligent misrepresentation. MBIA v Countrywide, 87 AD2d 287, 296 (1st Dept 2011); River Glen Assocs, Ltd v Merrill Lynch Credit Corp, 295 AD2d 274, 275 (1st Dept 2002).

Superior knowledge of the particulars of its own business practices is insufficient to sustain a cause of action for negligent misrepresentation. MBIA v Countrywide, 87 AD3d at 297. "The knowledge of the information in the loan files is not specialized knowledge because the details of those loan files constitute the particulars of [its own]; business." MBIA Ins Co v GMAC Mortgage LLC, 914 NYS2d 604, 611 (Sup Ct 2010)

Goldman Sachs's exclusive access to the underlying loan files does not constitute the type of unique or specialized knowledge necessary to state such a claim. See e.g. Allstate v Morgan Stanley, 2013 WL 2369953, at *16; CIFG Assur N Am, Inc v Bank of Am, NA, No 654028/12, 2013 WL 5459468 (NY Sup Ct Sept 23, 2013); Stichting, 2012 WL 6929336, at *13; MBIA Ins Corp v Residential Funding Co, No. 603552/08, 2009 WL 5178337, at *6 (NY Sup Ct Dec 22, 2009). Because there is no other allegation that suggests that Nordbank's purchase of the Certificates was anything other than an "ordinary arm's length business transaction," the claim for negligent misrepresentation must be dismissed.

In alternative to its fraud-based claims, Nordbank alleges a claim for rescission based upon mutual mistake with respect to the subject matter of the purchase and sale transaction. Nordbank argues that if Goldman Sachs did not know that the notes and mortgages would be properly transferred, then there was no "meeting of the minds."

To bring a claim for rescission based on mutual mistake, it must be alleged that "the parties have reached an oral agreement and, unknown to either, the signed writing does not express that agreement." Chimart Assoc v Paul, 66 NY2d 570, 573 (1986). A claim for mutual mistake must be pleaded with particularity pursuant to CPLR 3016(b). Simkin v Blank, 19 NY3d 46, 52 (2012). A claim for rescission based on mutual mistake can be pleaded in the alternative to a fraud theory in an RMBS suit. See M & T Bank Corp v Gemstone CDO VII, Ltd, 881 NYS2d 364 (Sup Ct Erie Cnty 2009), affd as mod., 68 AD2d 1747 (4th Dept 2009)

Goldman Sachs argues that the claim for mutual mistake fails because the Offering Materials themselves contemplated contractual remedies in the case loans were not properly transferred. While it is correct that there can be no claim for mutual mistake where the parties made an express provision regarding a contingency, only the Offering Materials for the FBRSI 2005-2 security expressly discusses the potential "breach . . . by the Seller in the Transfer and [*12]Servicing Agreement that materially and adversely affects the Indenture Trustee's or the Noteholders' interest." Id. With respect to the other securities, the disclaimers in the Offering Materials concerning "missing," "defective" and "unrelated" documents are insufficient to show that the parties' agreement contemplated improper transfer.

Goldman Sachs also argues that the alleged mistake cannot merely relate to the value of the Certificates. That is a correct statement of the law in New York. Highmount Olympic Fund, LLC v Pipe Equity Partners, LLC, 93 AD3d 444 (1st Dept 2012). However, Nordbank alleges that the failure to transfer the notes and mortgages resulted in their purchase of what was essentially unsecured subprime debt. Fed Home Loan Bank of Chicago v Banc of Am Funding Corp, No. 10CH45033, 2012 WL 4364410 (Ill Cir Ct Cook Cnty Sept 19, 2012) ("Defendants' claim that the Offering Documents never said the notes would be validly transferred insinuates that Defendants wish the court to believe that investors bought securities knowing that the underlying assets could not be enforced"). Nordbank's clear position is that the parties were mistaken as to the subject matter of the exchange. For instance, Nordbank argues that failed transfers affected the ability to initiate foreclosure proceedings, an essential part of a mortgage-backed security.^[FN9]

This goes to the heart of the bargain as to the nature of the property being sold. The facts here are analogous to those in Sherwood v Walker, 66 Mich 568 (1887), which has instructed generations of first year law students. There, the seller and purchaser of a cow believed her to be sterile in setting the sales price. Before delivery, it was determined she was fertile and worth ten times the sales price. The court ruled the transaction voidable, saying "Yet the mistake was not the mere quality of the animal, but went to the very nature of the thing. A barren cow is substantially a different creature than a breeding one. There is as much difference between them . . . as there is between an ox and a cow." Sherwood, 66 Mich at 577.

Two noted commentators, citing 7 Corbin § 28.35 (Perillo) and Palmer, Mistake and Unjust Enrichment, § 926 n. 4 write:

"One explanation for the decision is that in any contract parties take certain risks, but do not take risks of the existence of facts materially affecting their bargain which both shared as a common pre-supposition. In deciding which facts are vital and basic to their bargain one must search the facts for unexpected, unbargained-for gain on the one hand and unexpected, unbargained-for loss on the other. . . . Here the buyer sought to retain a gain that was produced, not by a subsequent change in circumstances, nor by the favorable resolution of known uncertainties when the contract was made, but by the presence of facts quite different from those on which the parties based their bargain." Calamari and Perillo on Contracts at 363, 364 (5th Edition 2003).

The court is not persuaded by Goldman Sachs's argument that the transfer of notes and mortgages was not the subject of the parties' exchange.

The claim that the Certificates should be rescinded based on an alternate theory of mutual mistake is sustained. See M & T Bank, 881 NYS2d 364, affd as mod., 68 AD2d 1747. Nordbank [*13]will be entitled to prove that both parties were sufficiently mistaken about the transfer and assignment provisions to warrant rescission.

ORDERED that the motion to dismiss the third cause of action for negligent misrepresentation is granted; and it is further

ORDERED that the motion to dismiss the first, second, and fourth causes of action with respect to the statements regarding credit ratings and the transfer of the notes and mortgages is granted; and it is further

ORDERED that the motion to dismiss the first, second, and fourth causes of action with respect to the statements regarding loan-to-value ratios, owner-occupancy rates, appraisal values and underwriting guidelines is denied; and it is further

ORDERED that the motion to dismiss the fifth cause of action for rescission based upon mutual mistake is denied.