Represented by Berman DeValerio, the California Public Employees’ Retirement System (CalPERS) reached a settlement with the credit rating agency Moody’s (defendants Moody’s Corp. and Moody’s Investors’ Services, Inc.), whereby Moody’s will pay CalPERS $130 million to settle CalPERS’ claim that “Aaa” ratings on three structured investment vehicles (SIVs) were negligent misrepresentations under California law. CalPERS previously settled with co-defendant McGraw Hill Companies, Inc. (“Standard & Poor’s” or “S&P”) for $125 million, which brings CalPERS’ total recovery in this case to $255 million.
The settlement closes out a six-and-a-half-year litigation, and it comes less than two months before a four-week trial was set to commence in San Francisco Superior Court. CalPERS’ complaint was filed in July 2009 against Moody’s, Standard & Poor’s and Fitch after the pension fund sustained losses from investments in three SIVs–arguably the largest, most complex and most opaque structured finance securities ever marketed. The complaint, brought under California common law, claimed that the rating agencies made “negligent misrepresentations” by assigning the SIV senior notes their highest credit ratings.
In addition to obtaining a substantial recovery for investment losses, this case was groundbreaking in that (a) the settlements rank as the largest known recoveries from Moody’s and S&P in a private lawsuit for civil damages, and (b) it resulted in a published appellate court opinion finding that that rating agencies can, in certain circumstances, be liable for negligent misrepresentations under California law for their ratings of privately-placed securities.
More information about this case can be found here.
*In August 2017, our firm name changed to Berman Tabacco. Case references and content published before that date may refer to the firm under our prior name, Berman DeValerio.