Sixth Circuit Affirms Dismissal of Claims Against Credit Rating Agencies


On December 3, the United States Court of Appeals for the Sixth Circuit affirmed a decision by Judge James K. Graham of the Southern District of Ohio dismissing, with prejudice, claims against three credit-rating agencies – Standard and Poor’s Financial Services LLC, Moody’s Investors Service, Inc. and Fitch, Inc. (the “agencies”) – relating to $457 million in alleged losses on RMBS purchased by the plaintiff pension and retirement funds. The plaintiffs brought claims for alleged violations of Ohio Blue Sky Laws and for negligent misrepresentation in connection with the allegedly fraudulent sale of 308 RMBS between 2005 and 2008. The Sixth Circuit adopted each the District Court’s holdings in affirming its decision. First, it held that the agencies could not be sued under the Ohio securities laws because they did not receive profits accruing from the sale of securities.  The court found that the agencies’ fees were fixed costs paid for work performed and were not contingent on the sale of the securities or variable depending on the securities’ performance. The fact that the agencies were paid out of proceeds of the sale did not mean that they received profits accruing from the sale.  Second, the court held that the plaintiffs’ complaint failed to allege, even in conclusory terms, any underlying securities fraud for which the agencies could be held liable as aiders and abettors. Third, the court held that the plaintiffs failed to allege any affirmative misrepresentation by the agencies. Finally, the court rejected the plaintiffs’ negligent misrepresentation claim because (1) plaintiffs did not adequately allege any duty owed by the Agencies, and (2) the credit ratings for the RMBS were not actionable misrepresentations. Opinion.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Orrick - Structured Finance Group | Attorney Advertising

Written by:


Orrick - Structured Finance Group on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.