Ohio Police & Fire Pension Fund et al v. Standard & Poor's Financial Services, LLC et al

Reply re the Ohio Funds' Response to Defendants' 57 Notice of Supplemental Authorities

S.D. OhioNovember 16, 2010

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO _____________________________________ OHIO POLICE & FIRE PENSION FUND, OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM, STATE TEACHERS RETIREMENT SYSTEM OF OHIO, SCHOOL EMPLOYEES RETIREMENT SYSTEM OF OHIO, and OHIO PUBLIC EMPLOYEES DEFERRED COMPENSATION PROGRAM, Plaintiffs, v. STANDARD & POOR’S FINANCIAL SERVICES LLC, THE MCGRAW-HILL COMPANIES, INC., MOODY’S CORP., MOODY’S INVESTORS SERVICE, INC., and FITCH, INC., Defendants. _____________________________________ : : : : : : : : : : : : : : : : : : : : : : Civil Action No. 2:09-cv-1054 Judge Graham THE RATING AGENCIES’ REPLY TO THE OHIO FUNDS’ RESPONSE TO THE RATING AGENCIES’ NOTICE OF SUPPLEMENTAL AUTHORITIES IN SUPPORT OF THEIR MOTION TO DISMISS Defendants Standard & Poor’s Financial Services LLC, The McGraw-Hill Companies, Inc., Moody’s Corp., Moody’s Investors Service, Inc., and Fitch, Inc. (the “Rating Agencies”) respectfully submit this reply to the Ohio Funds’ Response to the Rating Agencies’ Notice of Supplemental Authorities in Support of Their Motion to Dismiss. On October 28, 2010, the Rating Agencies submitted a notice of supplemental authority to bring to the Court’s attention four recent decisions relevant to the Court’s consideration of the Rating Agencies’ motion to dismiss (the “Notice”). The first three of those cases confirmed the preemptive effect of New York’s Martin Act (In re Beacon Assocs. Litig., Case: 2:09-cv-01054-JLG -TPK Doc #: 59 Filed: 11/16/10 Page: 1 of 5 PAGEID #: 1340 2 No. 09 Civ. 777, 2010 WL 3895582 (S.D.N.Y. Oct. 5, 2010)); and confirmed that the Rating Agencies’ credit rating opinions are, in fact, opinions and, thus, are not actionable as statements of fact (Rice v. Charles Schwab, et al., No. 8:10-cv-398 (DN 43) (C.D. Cal Oct. 22, 2010); In re Wells Fargo Mortgage-Backed Certificates Litig., 09 Civ. 1376 (DN 288) (N.D. Cal. Oct. 5, 2010)). On November 9, 2010, the Ohio Funds filed a response to the Rating Agencies’ Notice. With respect to those cases above, the Ohio Funds say nothing of substance other than the conclusory assertion that the “decisions offer no new insight to this Court.” (Response at 2.) The fourth case we cited in our Notice held that plaintiffs do not have standing where, as here, they have failed to allege a “cognizable injury.” NECA-IBEW & Welfare Fund v. Goldman Sachs & Co., 08 Civ. 10783, 2010 WL 4054149 (S.D.N.Y. Oct. 15, 2010). In response to that case, the Ohio Funds argue that our Notice presented a “new theory not previously raised [and] not properly before the Court” as to whether “the Ohio Funds failed to adequately plead damages or injury.” (Response at 2.) This is not accurate. Despite the Ohio Funds’ assertion to the contrary, in Section III.C.3 of the Motion to Dismiss, the Rating Agencies did raise Plaintiffs’ failure to adequately plead a cognizable injury, arguing that: Plaintiffs have failed to provide any supporting information about how, if at all, the securities they purchased have “lost value.” (See, e.g., Compl. ¶ 102 (referencing “$83 million in losses thus far” on securities allegedly purchased by one Plaintiff (emphasis added)); id. ¶ 103 (stating that those securities have “lost value”); see also id. ¶¶ 112-13, 122-23, 132-33, 142-43 (identical allegations for remaining Plaintiffs).) Nowhere in the Complaint is there any allegation that Plaintiffs have sold their securities at a loss (or that they have sold them at all), or even that they have been unable to sell the securities. Indeed, Plaintiffs do not even allege, with any particularity, what their loss is—stating instead simply that the securities have “lost value” and providing a minimum amount of their losses “thus far.” (See, e.g., Compl. ¶¶ 102-03.) (Rating Agencies’ Memo. of Law at 38.) In the reply in further support of their motion to dismiss, the Rating Agencies further asserted that “[s]etting aside the cause of [Plaintiffs’ Case: 2:09-cv-01054-JLG -TPK Doc #: 59 Filed: 11/16/10 Page: 2 of 5 PAGEID #: 1341 3 alleged] losses, Plaintiffs have not even adequately alleged the existence of losses;” and that “Plaintiffs do not even allege that any of the fixed income securities they purchased have defaulted.” (Reply Br. at 51, n. 37.) As in NECA-IBEW, such a failure to adequately plead a cognizable injury, warrants dismissal of the Ohio Funds’ claims here. See, e.g., 2010 WL 4054149, at *4 (noting that dismissal was warranted because plaintiffs, inter alia, “failed to provide factual enhancement” for their conclusory assertion that plaintiffs had suffered “market value” losses). Dated: November 16, 2010 Floyd Abrams (admitted pro hac vice) S. Penny Windle (admitted pro hac vice) Tammy L. Roy (admitted pro hac vice) CAHILL GORDON & REINDEL LLP 80 Pine Street New York, New York 10005 Telephone: (212) 701-3000 Facsimile: (212) 269-5420 Counsel for Defendants The McGraw-Hill Companies, Inc. and Standard & Poor’s Financial Services LLC James J. Coster (admitted pro hac vice) Joshua M. Rubins (admitted pro hac vice) SATTERLEE STEPHENS BURKE & BURKE LLP 230 Park Avenue, 11th Floor New York, New York 10169 Telephone: (212) 818-9200 Facsimile: (212) 818-9606 Counsel for Defendants Moody’s Corp. and Moody’s Investors Service, Inc. Respectfully submitted, By: /s/ Drew H. Campbell Drew H. Campbell (0047197) BRICKER & ECKLER LLP 100 South Third Street Columbus, Ohio 43215-4291 Telephone: (614) 227-2319 Facsimile: (614) 227-2390 Trial Counsel for Defendants The McGraw-Hill Companies, Inc. and Standard & Poor’s Financial Services LLC By: /s/ Michael H. Carpenter Michael H. Carpenter Jeffrey A. Lipps CARPENTER LIPPS & LELAND LLP 280 Plaza, Suite 1300 280 North High Street Columbus, Ohio 43215 Telephone: (614) 365-4100 Facsimile: (614) 365-9145 Trial Counsel for Defendants Moody’s Corp. and Moody’s Investors Service, Inc. Case: 2:09-cv-01054-JLG -TPK Doc #: 59 Filed: 11/16/10 Page: 3 of 5 PAGEID #: 1342 4 Martin Flumenbaum (admitted pro hac vice) Roberta A. Kaplan (admitted pro hac vice) Julia Tarver Mason (admitted pro hac vice) Tobias J. Stern (admitted pro hac vice) PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP 1285 Avenue of the Americas New York, New York 10019 Telephone: 212-373-3000 Facsimile: 212-757-3990 Counsel for Defendant Fitch, Inc. By: /s/ Thomas D. Warren Thomas D. Warren BAKER & HOSTETLER LLP 3200 National City Center 1900 East 9th Street Cleveland, Ohio 44114-3485 Telephone: (216) 621-0200 Facsimile: (216) 696-0740 Trial Counsel for Defendant Fitch, Inc. Case: 2:09-cv-01054-JLG -TPK Doc #: 59 Filed: 11/16/10 Page: 4 of 5 PAGEID #: 1343 CERTIFICATE OF SERVICE I certify that on the 16th day of November, 2010, the foregoing was filed electronically. Notice of this filing will be sent to all parties by operation of the Court’s electronic filing system. Parties may access this filing through the Court’s system. /s/ Thomas D. Warren One of the attorneys for the Defendant Rating Agencies Case: 2:09-cv-01054-JLG -TPK Doc #: 59 Filed: 11/16/10 Page: 5 of 5 PAGEID #: 1344