Standard & Poor's, Moody's Corp. and Fitch won dismissal of a lawsuit alleging that their ratings of nonprime MBS were faulty and caused five Ohio public employee pension funds to buy into these money-losing investments.
Former Ohio Attorney General Richard Cordray filed the suit in 2009, accusing the three companies of making "spectacularly misleading evaluations" of the securities because of what they were paid by the issuers.
According to a report by Bloomberg, U.S. District Judge James L. Graham threw out the case Monday, agreeing with the firms that the ratings were predictive opinions. Without specific allegations of intent to defraud, the companies couldn't be held liable, he said.
"The Ohio funds make a bare allegation that the ratings agencies knew or should have known that their ratings were false or misleading," Graham wrote. "But a complaint must provide further factual enhancement to avoid dismissal."
Ohio Attorney General Mike DeWine, who replaced Cordray, is disappointed in the ruling and is discussing further moves in the case with the pension funds, said a spokesman for the AG's office.
Michael Adler, a spokesman for Moody's, said the company "is pleased that the court has dismissed all of the claims in this matter." Ed Sweeney, a spokesman for S&P, said his company was also pleased it succeeded in getting the case dismissed. Fitch had no comment.
Cordray has been nominated by the White House to be director of the Consumer Financial Protection Bureau.
