Jessica M. Karmasek Jun. 19, 2013, 1:45pm

WASHINGTON (Legal Newsline) -- The U.S. Judicial Panel on Multidistrict Litigation has transferred 15 lawsuits filed against The McGraw-Hill Companies Inc. and subsidiary Standard & Poor's Rating Services to a federal court in New York.

The panel filed its three-page transfer order June 6.

"On the basis of the papers filed and hearing session held, we find that these actions involve common questions of fact, and that centralization of all actions in the Southern District of New York will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation," wrote Kathryn H. Vratil, acting chairman of the six-member panel and chief judge of the U.S. District Court for the District of Kansas.

The panel said the actions involve "common factual questions," including that the credit ratings agency "intentionally misrepresented" that its analysis of structured finance securities was independent, objective or unaffected by the existence of, or potential for, a business relationship with the issuer of a security.

"Plaintiffs disclaim that their suits question S&P's methodology in rating a security or challenge the correctness of such rating; rather, the crux of the state allegations is that, by misrepresenting factors it considered when analyzing structured finance securities, S&P misleadingly offered a product materially different from what it purported to provide the marketplace," Vratil explained.

"The factual overlap among the actions is unsurprising, given that most actions were filed in state court on the same day in February 2013; additionally, the complaints in each action are highly similar, if not identical in some respects.

"Centralization will eliminate duplicative discovery; prevent inconsistent pretrial rulings on the pending motions to remand as well as other pretrial motions, if necessary; and conserve the resources of the parties, their counsel and the judiciary."

The 15 lawsuits -- filed in state federal courts by the attorneys general of Arizona, Arkansas, Colorado, Delaware, the District of Columbia, Idaho, Iowa, Maine, Mississippi, Missouri, North Carolina, Pennsylvania, South Carolina, Tennessee and Washington -- now will be overseen by New York Southern District Judge Jesse M. Furman.

The states had argued that moving the lawsuits to New York, where the credit ratings agency is based, would inconvenience them, and that transfer is unnecessary in light of the "historic cooperation" among state attorneys general.

"We respectfully disagree that these considerations weigh against centralization in these circumstances," Vratil wrote. "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 among all actions.

"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."

The panel also noted the irony of the states' "cooperation" argument.

"Relatedly, the plaintiffs' promises of cooperation are belied by their filing of 15 separate, albeit similar, briefs regarding the relatively narrow issue of centralization," Vratil wrote.

"Judicial efficiency will be enhanced by allowing a single judge -- as opposed to 15 -- to rule on the remand motions and other pretrial matters, if necessary."

Most of the 15 lawsuits were filed on the same day in February that the U.S. Department of Justice filed its own lawsuit against Standard & Poor's.

The DOJ alleges that the credit ratings agency's misconduct involved structured finance securities backed by subprime mortgages that were at the heart of the nation's financial crisis.

In its suit, the government contends Standard & Poor's inflated mortgage investment ratings and set them up for a crash.

In particular, it claims the agency -- from September 2004 through October 2007 -- "knowingly and with the intent to defraud, devised, participated in and executed a scheme to defraud investors" in certain mortgage-related securities.

It also claims Standard & Poor's falsely represented that its ratings were "objective, independent, uninfluenced by any conflicts of interest."

The DOJ suit is being overseen by a judge for the U.S. District Court for the Central District of California.

From Legal Newsline: Reach Jessica Karmasek by email at

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