Plaintiffs’ attorneys looking to file new private lawsuits against Standard & Poor’s Financial Services following the U.S. government’s decision to take legal action against the rating agency will face statute of limitations hurdles, Berman DeValerio Partner Todd A. Seaver told a legal publication.
In an article published Feb. 5 by Law360, Mr. Seaver said that the clock was ticking for many of the legal claims at the heart of the recently filed Department of Justice complaint, which addressed wrongdoing that took place in the run-up to the credit crisis of 2008. Many of those misdeeds occurred more than five years ago and could be time-barred, depending on the specific claim and jurisdiction.
“This summer will probably be the last time period in which any new suits can be filed and, depending on the legal claim, reasonably expect to survive,” Mr. Seaver said.
The Justice Department filed its civil complaint against S&P on Feb. 4 in California federal court, alleging that the rating agency knowingly gave high ratings to mortgage securities from 2004 to 2007, causing the investors who bought the products to suffer.
Though the article quoted some attorneys as saying that the DOJ’s case could strengthen existing lawsuits, Mr. Seaver did not address Berman DeValerio’s own rating agency case, CalPERS v. Moody’s. In that case, the California Public Employees’ Retirement System, or CalPERS, alleges that the major rating agencies issued unjustifiably high ratings for opaque Structured Investment Vehicles they knew contained risky subprime mortgages.
Commenting on the DOJ case, Mr. Seaver said it was unlikely that S&P would succeed with its long-held legal argument that its ratings are constitutionally protected free speech, like editorial opinions. That is because S&P and other agencies are accused of structuring the complex financial products they later rated, a relatively recent development.
“It’s been really the last 15 years that [S&P parent company McGraw-Hill Cos. Inc.] and Moody’s have been in the structured finance business, and that is where the First Amendment really falls away,” Seaver told the publication. “They’re not giving an editorial opinion here, they’re helping to put together these securities and then they’re rating them.”
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