NEW YORK (Reuters) - The three major U.S. 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 U.S. Circuit Court of Appeals in New York upheld the dismissal of three lawsuits against McGraw-Hill Co's <MHP.N> Standard & Poor's, Moody's Corp's <MCO.N> Moody's Investors Service and Fimalac SA's <LBCP.PA> Fitch Ratings.
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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."
Joel P. Laitman of Cohen Milstein Sellers & Toll, who represents all of the plaintiffs except Vaszurele Ltd and the Wyoming state treasurer, said, "We are reviewing the decision."
Moody's spokesman Michael Adler said, "Moody's is pleased that the court has affirmed the dismissal of these cases."
Judges Wilfred Feinberg and Jose A. Cabranes rounded out the panel.
The case is In re Lehman Brothers Mortgage-Backed Securities Litigation, 10-0712-cv; 10-0898-cv; 10-1288-cv.
(Reporting by Jonathan Stempel, Noeleen Walder and Joseph Ax in New York: Editing by Howard Goller and John Wallace)