Another Suit against Rating Agencies Dismissed

Bloomberg reports that U.S. District Judge James L. Graham of the U.S. District Court for the Southern District of Ohio agreed with the firms that the ratings were predictive opinions. Without specific allegations of intent to defraud, the companies couldn’t be held liable.  

“The Ohio funds make a bare allegation that the ratings agencies knew or should have known that their ratings were false or misleading,” Graham wrote, according to Bloomberg. “But a complaint must provide further factual enhancement to avoid dismissal.”  

The lawsuit brought by former Ohio Attorney General Richard Cordray alleged the rating agencies gave many mortgage-backed securities-related investments the highest investment-grade credit rating of “AAA” which assured institutional investors that the investments were extremely safe with a very low risk of default (see Ohio AG Sues Rating Agencies). According to preliminary estimates, the improper ratings cost the Ohio funds losses in excess of $457 million.    

Ohio Attorney General Mike DeWine, who replaced Cordray, is disappointed in the ruling and discussing further moves in the case with the pension funds, his spokesman, Mark Moretti, told Bloomberg. Michael Adler, a spokesman for Moody’s said the company “is pleased that the court has dismissed all of the claims in this matter.”  

Ed Sweeney, a spokesman for S&P, said his company is also pleased it succeeded in getting the case dismissed. Daniel Noonan, a Fitch spokesman, said he couldn’t comment right away.  

The case is Ohio Police & Fire Pension Fund v. Standard & Poor’s Financial Services LLC, 09-cv-01054.  

Other similar lawsuits have also been dismissed (see Judge Dismisses Ratings Agency Lawsuit and Pension Fund Suit against Rating Agencies Dismissed).