The three major US credit rating agencies won the dismissal of lawsuits seeking to hold them liable as "underwriters" for helping banks structure securities transactions in order to achieve desired ratings. The 2nd US Circuit Court of Appeals in New York upheld the dismissal of three lawsuits against McGraw-Hill Co's Standard & Poor's, Moody's Corp's Moody's Investors Service and Fimalac SA's Fitch Ratings.
The class-action plaintiffs, which included a group of unions, said they bought $155 billion in mortgage pass-through certificates. They alleged the credit rating agencies made misstatements and omissions in the certificates' offering documents and thus were liable.
To qualify as an underwriter under section 77(b)(a)11 of the Securities Act of 1933, a "person must have participated, directly or indirectly, in the purchase of securities with a view toward distribution, or in the sale or offer of securities in connection with a distribution," Judge Reena Raggi wrote for the three-judge panel. The court also ruled that the lower court properly dismissed the plaintiffs' Section 11 claims since the rating agencies' "alleged structuring or creation of securities was insufficient to demonstrate their involvement in the requisite distributional activities."
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