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Sixth Circuit Upholds Dismissal in Securities Suit Against Ratings Agencies

Posted in Recent Cases

In Ohio Police & Fire Pension Fund v. Standard and Poor’s, the Sixth Circuit affirmed the dismissal of the suit brought against the three major credit rating agencies regarding mortgage-backed securities in the wake of the financial collapse of 2008.  The suit was premised on Ohio’s Blue Sky laws and common law negligent misrepresentation.  Although the Court’s analysis was largely confined to Ohio law, the issues it addressed carry significance beyond that.  

The Court notably rejected the effort to hold the ratings agencies liable for the sale of securities.  The ratings agencies’ fees were not contingent upon the actual sale, which was significant because there was no allegation in the complaint of an actual material misrepresentation by the ratings agencies.  The Court also made short work of the plaintiff’s effort to seek the remedy of rescission.  The Court conducted a thorough analysis of the complaint, and found the allegations insufficient under the Twombly/Iqbal standard.  

Another notable aspect of the Court’s opinion is its discussion of the amicus brief that was filed in the case.  (We have discussed several times on this blog the potential impact of amicus briefs at the Court).  The Court devoted a paragraph of its opinion to rejecting the amicus party’s argument about the definition of “profit.”   It is not clear whether this argument was different than that of the plaintiff’s, but the Court certainly treated it as such.  The Court noted in a separate section of the opinion that the amicus party offered an argument that was advanced by the parties, which the Court accordingly declined to address. Therefore, this amicus brief did not prove effective in persuading the Court, although it certainly captured some attention.