* Judges' panel says combining lawsuits more efficient
* U.S. $5 bln lawsuit, some state lawsuits remain separate
* S&P accused of inflating ratings to win business
By Jonathan Stempel and Luciana Lopez
June 6 Standard & Poor's and its parent company
McGraw Hill Financial Inc on Thursday won a ruling that
moves 15 lawsuits in which they were accused of fraudulently
inflating credit ratings to a single federal court.
The U.S. Judicial Panel on Multidistrict Litigation said it
would promote efficiency to move the lawsuits by 14 U.S. states
and Washington, D.C. to a federal court in New York, where they
will be overseen by U.S. District Judge Jesse Furman.
It rejected the states' arguments that moving the lawsuits
to New York, where McGraw Hill is based, would be inconvenient
for them and was unnecessary in light of the historic
cooperation among state attorneys general.
"Even though we have never centralized litigation comprised
solely of sovereign enforcement actions such as these,
centralization is appropriate in light of the significant
factual overlap," the six-judge panel said.
"The inconvenience to S&P of litigating in numerous
different districts, as well as state courts, is high, and
centralization allows for all parties to obtain substantial
efficiencies in dealing with common issues," it added.
Most of the lawsuits were filed on the same day in February
that the U.S. Department of Justice hit Standard & Poor's with
its own $5 billion lawsuit, which is being overseen in Los
Angeles federal court.
The lawsuits generally accuse S&P of inflating ratings on
structured finance securities to win more business from issuers,
while touting its ratings independence and objectivity.
Many of the challenged ratings were for collateralized debt
obligations and other mortgage-backed securities whose value
plunged during the housing and credit crises.
S&P, represented by prominent First Amendment lawyer Floyd
Abrams, has said in court papers that the state lawsuits raised
significant regulatory and constitutional issues to justify
The lawsuits being moved were filed in Arizona, Arkansas,
Colorado, Delaware, the District of Columbia, Idaho, Iowa,
Maine, Mississippi, Missouri, North Carolina, Pennsylvania,
South Carolina, Tennessee and Washington.
Consolidating them may limit the potential for S&P to face
multiple financial judgments or conflicting court rulings that
the rating agency has said could impede its ability to function.
The multidistrict litigation panel did not decide whether
the states' cases must stay in federal court, leaving open the
possibility for future jurisdictional challenges.
"It does seem extraordinary to me to consolidate state
enforcement actions in federal court," said Gil Seinfeld, a
University of Michigan law professor specializing in federal
courts and jurisdiction. "These state attorneys general are not
going to be able to litigate in their backyard where they may be
more familiar, and consolidation reduces logistical, management
and cost burdens for S&P."
Gregory Strong, a Delaware deputy attorney general who
helped lead the states' case, did not immediately respond to a
request for comment.
S&P in a statement said it is pleased with the decision.
MOODY'S NOT FACING SIMILAR FEDERAL LAWSUIT
The federal lawsuit was filed under the Financial
Institutions Reform, Recovery, and Enforcement Act, adopted
following the 1980s savings-and-loan crisis.
S&P has called that lawsuit meritless. It also faces ratings
lawsuits in California, Connecticut and Illinois state courts,
which are not being consolidated.
The rating agency's main rivals, Moody's Corp's
Moody's Investors Service and Fimalac SA's Fitch
Ratings, were not hit with similar federal lawsuits.
Moody's is a defendant in the Mississippi lawsuit, and the
panel rejected its request to separate its part of that case.
Neither Moody's nor the Justice Department immediately
responded to requests for comment.
McGraw Hill was renamed in March after selling its education
business to Apollo Global Management LLC. Shares of the
former McGraw-Hill Cos fell 26.9 percent in the week when the
U.S. lawsuit and most of the state lawsuits were announced.
In afternoon trading, McGraw Hill shares were up 5 cents at
$53.85 on the New York Stock Exchange.
The case is In re: Standard & Poor's Rating Agency
Litigation, U.S. Judicial Panel on Multidistrict Litigation, No.