Compuware Alleges Moody's Defamation

January 22, 2003 ( - Following a downgrade by Moody's Corp, Compuware Corp has sued the rating agency for defamation.

The lawsuit, filed in a federal court in Detroit, alleges the downgrade by Moody’s of its issuer and senior bank facility rating to “junk” status represented defamation.   Further, the maker of application tools for mainframe computers said Moody’s actions constituted a breach of contract.

The Farmington Hills, Michigan-based company’s allegations came after an August 13, 2002 action by Moody’s cutting Compuware’s ratings two notches to “Ba1,” its highest junk grade, from “Baa2,” with a “negative” outlook.   In making the downgrade, Moody’s cited revenue and profit weakness, a difficult environment for software and information technology services, and litigation with International Business Machines Corp.

In the suit, Compuware claimed, “Moody’s published the statements with knowledge of their untruth or reckless disregard for the truth of the statements and without any justification.”   The action by Moody’s, the lawsuit said, committed “libel per se.”

Compuware is seeking punitive damages and the return of $245,000 that the company says was paid for credit ratings.