On February 5, the Attorney General of California, Kamala D. Harris, filed suit in Superior Court in California against Standard & Poor’s and its parent company, the McGraw Hill Company. The Complaint alleges violations of California’s False Claims Act, Unfair Competition Law, and False Advertising Law, and alleges that S&P made knowingly false representations in connection with credit ratings for RMBS and CDOs between 2004 and 2007. The complaint further alleges that California’s public pension funds lost hundreds of millions of dollars in connection with their purchase of RMBS rated by S&P. The state seeks treble damages, civil penalties and a permanent injunction. Complaint.
McGraw Hill Co.
State of Connecticut’s Action Against Ratings Agencies Remanded to State Court
On January 5, 2011, Federal District Court Judge Janet Bond Arterton of the District of Connecticut granted the State of Connecticut’s motion to remand its case back to state court. Defendants (Moody’s, McGraw Hill Co., and Standard & Poor’s) argued that the State was suing to benefit specific citizens, thus creating federal diversity jurisdiction. Judge Arterton concluded that the case, brought under the Connecticut Unfair Trade Practices Act, related to the State’s articulated interest in protecting all of its citizens from unfair practices, unique from the interests of individual investors, and therefore the State is a citizen of no state for diversity jurisdiction purposes. The court also found that the Class Action Fairness Act did not apply. Decision.