U.S. District Judge Jesse M. Furman ruled on Tuesday in favor of a dozen states in financial-crisis related lawsuits against Standard & Poor’s Rating Services.
Due to the ruling, the cases will now be heard on a state-by-state basis, a hit to S&P (MHFI), which had called for them to be merged into one.
“The State Cases arise solely under state law and Congress has not authorized federal courts to hear such cases,” according to the Tuesday court filing quoted in a report in the Wall Street Journal.
The states allege that S&P misrepresented its bond ratings, calling them objective and independent, when in fact the grades it gave were influenced by the issuers who pay the rating firm to rate their deal, the report said.
The S&P, however, says it is an independent and objective rating service.
“We believe that there’s more value in a well-formed point of view than any collection of data,” the company writes on its website. “That’s why we strive to have our ratings based on more clearly defined methodology, more transparently sourced data and more clearly articulated analyses.”
A spokesman for the firm said, “As the opinion states clearly, this ruling concerns only whether these matters will be litigated in federal or state court and not the substance of the claims. We are committed to fully defending against these meritless claims upon their remand to the state courts.”
Earlier, S&P was censured by the European Securities and Markets Authority for wrongly announcing in 2011 that France’s credit rating had been downgraded.