A year ago, U.S. District Judge Harold Baer Jr. set an important precedent for securities class-actions against mortgage-backed securities issuers. Baer refused to certify classes in two cases before him, one against the Royal Bank of Scotland, the other against the GMAC subsidiary Residential Capital. The judge concluded that the MBS investors had varying levels of knowledge about the notes they were buying, so there were too many individualized factual questions to bind them together as a class.

It shouldn't shock anyone that when Goldman Sachs was sued by investors in a $622 million offering backed by New Century mortgages, its lawyers at Sullivan & Cromwell looked straight to Baer's class-certification analysis -- especially because Baer is presiding over the Goldman class action. Sullivan & Cromwell littered Goldman's opposition to class certification with references to the judge's ruling in the ResCap and RBS cases. Like the investors in those offerings, Goldman argued, its MBS investors were sophisticated purchasers who made highly-informed decisions based on their individualized information about the mortgages underlying the notes.

This time around, though, Baer disagreed, drawing a distinction between investors in the Goldman notes and the RBS and ResCap offerings.

"In those cases where common issues failed to predominate because of individual investor knowledge, certain putative class members either participated in or had knowledge of the alleged conduct," the judge wrote Friday in a 25-page opinion. "The balance in those cases was not struck on the likelihood of knowledge alone, and I am not persuaded that the potential varying degrees of investor knowledge here will create issues subject to individual proof sufficient to overwhelm common issues."

Baer's Goldman ruling, as he notes, is in line with the two most recent MBS class-certification rulings by his colleagues in Manhattan federal court. Last June, U.S. Senior Judge Jed Rakoffgranted class certification to a class of Merrill Lynch MBS investors, despite Merrill's invocation of Baer's Residential Capital ruling. (That case subsequently settled for $315 million.) And in August, U.S. District Judge Paul Crottycertified a class of investors suing DLJ Mortgage Capital over a $2.4 billion MBS private placement. (Crotty had a tart comment about DLJ's citation of Baer's Residential Capital ruling: "Defendants' argument is ironic -- the potential class includes unsophisticated investors and so the class should not be certified; in the alternative, the class should not be certified because the class includes very sophisticated investors. Defendants' view is apparently that, in order for a class to be certified, it must be like Baby Bear's porridge in the story of Goldilocks: just right. This suggestion is untenable.")

The plaintiffs' firm in the RBS and Residential Capital cases, Cohen Milstein Sellers & Toll, has appealed Baer's MBS class-certification ruling to the U.S. Court of Appeals for the Second Circuit. It will be interesting to see if the string of rulings contrary to Baer's -- including Baer's own Goldman opinion -- influences the appeals court.

Lead counsel for the MBS class suing Goldman is David Wales of Bernstein Litowitz Berger& Grossmann. Both Wales and a Goldman Sachs spokesperson declined Reuters' request for comment.

(Reporting by Alison Frankel)