FREE SPEECH & RATINGS AGENCIES

I mentioned below that that credit ratings can't be held liable because they have the full protection of the 1st Amendment. Today, I found a paper by Frank Partnoy that revises that claim in two footnotes:


97. See Wakeman, supra note 78, at 393-94. In contrast, recent suits against rating agencies, most of which have been settled, reflect the failure of the credit rating agencies to anticipate defaults or other credit problems. These suits include class action litigation related to the Washington Public Power Supply System default in 1983, and the Executive Life bankruptcy in 1991. See, e.g., Francis A. Bottini, Jr. An Examination of the Current Status of Rating Agencies and Proposals for Limited Oversight of Such Agencies, 30 SAN DIEGO L. REV. 579, 584-95 (1993); Cantor & Packer, supra note 74, at 4. On June 11, 1996, Orange County, California, filed a complaint in the U.S. Bankruptcy Court for the Central District of California, alleging breach of contract, professional negligence, and aiding and abetting breach of fiduciary duty by S&P. County of Orange v. McGraw-Hill Cos., No. SA 94-22272 JR (June 11, 1996). On March 17, 1997, the district court upheld in part the bankruptcy court’s denial of the motion to dismiss. See District Court Case No. SACV 96-0765-GLT (filed Mar. 18, 1997). McGraw-Hill settled
the case in June 1999 by agreeing to pay Orange County $140,000, a fraction of the $860.7 million paid by other defendants in related litigation brought by the county. See Orange County Litigation Ends with Settlement of McGraw Hill Suit, PROF. LIABILITY LITIG. REP., Aug. 1999, at 11.


413. See supra note 97. Judge Gary L. Taylor dismissed some of the claims on March 18, 1997, ruling that the First Amendment protected publishers from professional negligence actions. See Professional Negligence Against Standard & Poor’s Dismissed by Judge Taylor, DERIVATIVES LITIG REP., Apr. 14, 1997, at 6. However, on March 16, 1998, Judge Taylor denied S&P’s motion for partial summary judgment, holding that S&P’s constitutionally protected speech was “not absolutely privileged.” See In re: County of Orange, debtor, County of Orange v. McGraw Hill Cos. Inc., D.C. Calif., SA CV 96-765 GLT, Bankruptcy No: SA 94-22272 JR, 3/16/98); see also Orange County May Proceed With Claims Against Standard and Poor’s, 30 BNA 444, Mar. 20, 1998. As previously noted, S&P settled the case with a payment of $140,000 to Orange County. See supra note 97.