By Joseph Ax
NEW YORK (Reuters) - Goldman Sachs Group Inc
CIFG claimed in a 2011 lawsuit that the investment bank fraudulently induced it to provide insurance for a portfolio of more than 6,000 subprime residential mortgages by concealing the shoddy quality of the loans.
A trial judge in Manhattan threw out that claim last year, ruling that CIFG would have uncovered the alleged misrepresentations had it performed proper due diligence.
The New York State Supreme Court's Appellate Division, First Department, reversed on Tuesday, finding that CIFG had done enough by having an outside consultant analyze the loans.
"There is a question of fact as to whether plaintiff reasonably relied on defendants' representations," a five-judge panel wrote in a unanimous decision.
Michael DuVally, a spokesman for Goldman, declined to comment.
The ruling also revived fraud claims against M&T Bank Corp
The decision could have implications for similar lawsuits brought by monoline insurers against banks, including one filed by Assured Guaranty Ltd
In that case, JPMorgan had asked a New York judge to dismiss similar fraud claims but agreed to hold off until the First Department ruled in the CIFG case.
Other insurers, including Ambac Financial Group Inc
Tuesday's ruling also let stand breach of contract claims against Goldman.
CIFG is seeking compensation for claims as well as buy-backs of defective loans.
"We're very pleased with the decision, and we look forward to proving our case," Michael Vogel, a lawyer for CIFG, said.
The case is CIFG Assurance North America, Inc., v. Goldman Sachs & Co., New York State Supreme Court, New York County, No. 652286/2011.
(Reporting by Joseph Ax; editing by Noeleen Walder and Alden Bentley)