Tennessee, Mississippi and at least 13 other states that sued Standard & Poor’s for allegedly misleading investors about the independence of its ratings asked a federal judge to move the cases back to their state courts.
“The heart of all of these cases is protecting the public, and that’s the heart of state sovereignty,” Olha N.M. Rybakoff, a senior lawyer for the Tennessee attorney general’s office, said today at a hearing in Manhattan.
S&P and its parent company, McGraw Hill Financial Inc. (MHFI), were sued by the U.S. and a group of states in February over ratings on mortgage-backed securities during the housing boom. The New York-based company moved the state cases to federal court and in June won a bid to consolidate them in Manhattan.
“A finder of facts would have to take a very deep dive into federal law to determine the meaning of the word ‘independence,’” Floyd Abrams, a lawyer with Cahill Gordon & Reindel LLP who is leading the S&P defense, told the judge. The entire dispute is “suffused with federal law,” he said.
U.S. District Judge Jesse Furman said he will rule as soon as possible.
The consolidation request was granted by the U.S. Judicial Panel on Multidistrict Litigation, which concluded that joining the cases for pretrial matters including motions and the disclosure of evidence was the most efficient way to proceed.
The states argue their lawsuits raise claims of deceptive trade practices under state laws and don’t assert any federal claims.
The consolidated case is In re Standard & Poor’s Rating Agency Litigation, 13-md-02446, U.S. District Court, Southern District of New York (Manhattan.)
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