The U.S. government, which is pursuing a $5 billion lawsuit accusing Standard & Poor's of misleading investors by inflating its credit ratings, on Friday asked a federal judge move similar cases by 15 U.S. states and the District of Columbia back to state courts.
In a filing in the U.S. District Court in Manhattan, the U.S. Department of Justice said federal courts do not have jurisdiction to hear the states' cases, which it said turn on alleged violations of their respective laws against unfair consumer practices or deceptive business practices.
The Justice Department said S&P had argued that the cases belong in federal court because they touch on the meaning of the First Amendment to the U.S. Constitution and a 2006 federal law governing credit rating agencies.
But it said these issues touch on potential federal defenses to the states' claims, and are not inherent in the claims themselves.
"Assertions of federal defenses cannot provide a basis for removal of properly pleaded state-law claims," the Justice Department said.
S&P spokeswoman Catherine Mathis did not immediately respond to a request for comment. The rating agency is a unit of McGraw-Hill Financial Inc.
U.S. District Judge Jesse Furman in Manhattan has scheduled an October 4 hearing over the states' effort to move their lawsuits back to various state courts, and S&P's effort to dismiss the states' litigation altogether.
Consolidating the state cases may help S&P avoid multiple judgments or conflicting rulings, and reduce its legal bills. The lawsuits were consolidated before Furman in June to decide whether to send them back to state court.
The cases before the judge represent the bulk of the 17 lawsuits state attorneys general have filed against S&P. Most were filed on the same February day that the Justice Department sued the rating agency for $5 billion.
The Justice Department won a ruling on July 17 by U.S. District Judge David Carter in Santa Ana, California allowing it to continue pursuing its own lawsuit over S&P's ratings.
The cases are In re: Standard & Poor's Rating Agency Litigation, U.S. District Court, Southern District of New York, No. 13-md-02446; and U.S. v. McGraw-Hill Cos et al, U.S. District Court, Central District of California, No. 13-00779.
(Additional reporting by Nate Raymond; Editing by Leslie Gevirtz)