S&P Case Should Stay in Connecticut Court, U.S. SaysDon Jeffrey
McGraw-Hill Cos.’ Standard & Poor’s unit shouldn’t be allowed to move Connecticut’s lawsuit over ratings of securities to a federal court, the U.S. argued in a court filing.
McGraw-Hill, based in New York, filed so-called notices of removal in several courts to put the cases by Connecticut and other states under federal jurisdiction and combine them for pretrial matters, such as the exchange of evidence and questioning of witnesses.
“It is tempting to find federal jurisdiction every time a multibillion-dollar case with national implications arrives at the doorstep of a federal court,” the U.S. said in its filing yesterday in federal court in New Haven, Connecticut. “The jurisdiction of the federal district courts, however, is left to Congress, not to the discretion of the courts themselves.”
The lawsuits, filed by the attorneys general of 16 states and the District of Columbia, claim S&P violated state consumer-protection and unfair-trade-practices statues. The U.S., in a lawsuit filed in federal court in Los Angeles, accuses S&P of inflating ratings on mortgage-backed securities and collateralized debt obligations.
McGraw-Hill argued in the Connecticut case that state-court action on the claims would “disrupt and supplant” regulation of S&P by the U.S. Securities and Exchange Commission. McGraw-Hill also argued that the claims test the boundaries of the free-speech rights of the First Amendment to the U.S. Constitution, which is a federal defense.
Jason Feuchtwanger, a spokesman for New York-based McGraw-Hill, didn’t immediately respond to messages yesterday seeking comment on the U.S. filing. McGraw-Hill previously said in a statement that the U.S. and state lawsuits are “meritless” and that its ratings reflected its best judgments.
The Connecticut case is Connecticut v. McGraw-Hill Cos., 13-00311, U.S. District Court, District of Connecticut (New Haven). The U.S. case is U.S. v. McGraw-Hill Cos., 13-cv-00779, U.S. District Court, Central District of California (Los Angeles).