CIFG sued Goldman in August, claiming the investment bank knowingly sold shaky mortgage bonds to get the risk off its books.

In a ruling made public Thursday, New York state Supreme Court Justice O. Peter Sherwood dismissed some claims against Goldman, including fraudulent inducement, but refused to toss out claims for breach of contract.

CIFG claimed in its lawsuit that Goldman fraudulently induced it to provide insurance on the portfolio of over 6,000 subprime residential mortgage loans by misrepresenting their quality and origination.

The judge granted Goldman's motion to dismiss that claim. "Had CIFG conducted proper due diligence prior to writing the insurance, it would have uncovered the alleged misrepresentations about which it now complains," Sherwood wrote in his decision.

However, the judge let stand three breach of contract claims based on CIFG's providing a statistical sampling that showed pervasive breaches in the underlying loans.

The judge ruled the insurer did not need to make "specific representations as to each of the individual loans."

Goldman bought the subprime mortgages from six originators, including Buffalo-based M&T Bank, which also was a defendant in the suit.

In the decision, the judge also dismissed claims against M&T Bank.

CIFG's suit seeks compensation for claims as well as buy- backs of non-performing loans.

Michael Duvally, a spokesman for Goldman, had no immediate comment.

The case is CIFG Assurance North America, Inc., v. Goldman Sachs & Co., 652286/2011, New York state Supreme Court (New York County).

(Reporting By Karen Freifeld; Editing by Ryan Woo)

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