Plaintiffs holding out hope that they could hold credit rating agencies liable for slapping AAA ratings on doomed mortgage-backed securities on the theory that the agencies acted as underwriters on MBS transactions got some bad news on Wednesday.
In a 44-page decision, the U.S. Court of Appeals for the Second Circuit ruled against plaintiffs lawyers who used the underwriter theory in an attempt to circumvent the agencies’ defense that their ratings are covered by the First Amendment. The ruling affirms Manhattan federal district court judge Lewis Kaplan’s dismissals of securities class action claims facing Moody’s Inc., Standard & Poor parent McGraw-Hill Companies Inc., and Fitch Inc. stemming from their ratings of mortgage-backed securities.
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