McDaniel v. McGraw-Hill Companies Inc et al

Filing 28

TRANSFER ORDER transferring the case to the Southern District of New York to be included in MDL No. 2446 (In Re: Standard & Poor's Rating Agency Litigation). Signed by Kathryn H. Vratil, Acting Chairman of the Panel on 6/7/13. (kpr)

Case MDL No. 2446 Document 106 Filed 06/06/13 Page 1 of 5

UNITED STATES JUDICIAL PANEL
on
MUL TIDISTRICT LITIGATION

IN RE: STANDARD & POOR'S RATING
AGENCY LITIGATION

MDL No. 2446

TRANSFER ORDER

Before the Panel:* Pursuant to 28 U.S.C. § 1407, defendants The McGraw-Hill Companies,
Inc., and Standard & Poor's Financial Services LLC (collectively S&P) seek centralization of actions
challenging S&P's representations about its impartiality and objectivity in the rating of structured
fmance securities in the Southern District of New York. This litigation currently consists of
seventeen state law consumer fraud and securities actions brought by the attorneys general of fifteen
states and two related declaratory judgment actions brought by S&P that are pending in fifteen
districts, as listed on Schedule A. 1

All fourteen state plaintiffs and the District of Columbia oppose centralization. Several
plaintiffs suggest that the Panel defer its transfer decision until the judges assigned to the individual
cases rule on their pending motions to remand to state court. Plaintiffs that alternatively specifY a
transferee district suggest centralization in either the District of Connecticut or the District of
Delaware.
Defendants Moody's Corp. and Moody's Investors Service, Inc. (collectively Moody's) in
the Southern District of Mississippi action oppose transfer of the action to the extent that transfer
would include the claims against Moody's. If the Panel centralizes the litigation, Moody's requests
separation and remand of the claims against it. Mississippi opposes separation and remand of the
claims against Moody's.
On the basis of the papers filed and hearing session held, we find that these actions involve
common questions of fact, and that centralization of all actions in the Southern District ofNew York
will serve the convenience of the parties and witnesses and promote the just and efficient conduct of
this litigation. The actions involve common factual questions surrounding plaintiffs' general
allegations that S&P (through statements by executives and the S&P code of conduct, among other
sources) intentionally misrepresented that its analysis ofstructured fmance securities was independent,
objective, or unaffected by the existence of, or potential for, a business relationship with the issuer

• Judge John G. Heyburn II did not participate in the decision ofthis matter.
1

S&P's motion originally included a District of Connecticut action and a Northern District
of Illinois action, both of which were remanded to state court during the pendency of the Section
1407 motion.

A CERTIFIED COPY

RUBY J. KRAJICK, CLERK

BY

.Jh{)!Jtio f)! p,&
Deputy lerk

Case MDL No. 2446 Document 106 Filed 06/06/13 Page 2 of 5

-2of a security. Plaintiffs disclaim that their suits question S&P's methodology in rating a security or
challenge the correctness of such rating; rather, the crux of the state allegations is that, by
misrepresenting factors it considered when analyzing structured finance securities, S&P misleadingly
offered a product materially different from what it purported to provide the marketplace. The factual
overlap among the actions is unsurprising, given that most actions were filed in state court on the
same day in February 2013; additionally, the complaints in each action are highly similar, if not
identical in some respects. Centralization will eliminate duplicative discovery; prevent inconsistent
pretrial rulings on the pending motions to remand as well as other pretrial motions, if necessary; and
conserve the resources of the parties, their counsel, and the judiciary.
Plaintiffs oppose centralization and argue, inter alia, that the Panel has never centralized
litigation of this type, that transfer to a distant forum will inconvenience the states, and that transfer
is unnecessary in light of the historic cooperation among state attorneys general. We respectfully
disagree that these considerations weigh against centralization in these circumstances. Even though
we have never centralized litigation comprised solely of sovereign enforcement actions such as these,
centralization is appropriate in light of the significant factual overlap among all actions. The
inconvenience to S&P of litigating in numerous different districts, as well as state courts, is high, and
centralization allows for all parties to obtain substantial efficiencies in dealing with common issues.
If the actions were properly removed to federal court- a question which we are neither empowered
nor inclined to answer- then S&P could be subjected to conflicting pretrial schedules and, perhaps,
discovery and other dispositive motion rulings. There is also the risk, despite plaintiffs' current
assurances of cooperation, that they may individually seek overlapping discovery or relitigation of
rulings with which they disagree in the various courts. Relatedly, the plaintiffs' promises of
cooperation are belied by their filing of fifteen separate, albeit similar, briefs regarding the relatively
narrow issue of centralization. Judicial efficiency will be enhanced by allowing a single judge- as
opposed to fifteen - to rule on the remand motions and other pretrial matters, if necessary.
Several states suggest deferring our decision pending rulings on the remand motions. We
deny this request. If the various courts disagree as to the existence of federal question jurisdiction
over the cases, delaying our decision may cause the very conflicting results and obligations and undue
expenditure of judicial resources that centralization would help to avoid.
We deny Moody's request that the claims against it be separated and remanded to the
Southern District ofMississippi. Transfer ofthe entirety of the Southern District ofMississippi action
will avoid conflicting rulings on the pending motion to remand. If the case remains in federal court
after the remand issue is resolved, the transferee judge can suggest Section 1407 remand of the claims
against Moody's at that time. If the action were against Moody's only, the question of whether it
should be included in the MDL would be closer, given our typical reluctance to transfer actions
involving parallel similar conduct involving separate and competing defendants. In its briefs, Moody's
also argues that transfer of the Southern District of Mississippi action is barred by CAFA's "mass
action" provision. CAF A's "mass action" provision, however, permits transfer where a "majority of
the plaintiffs in the action request transfer pursuant to section 1407." 28 U.S.C. § 1332(d)(11 )(C)(i).
Mississippi expressly requested transfer, if the Panel was inclined to centralize the litigation, and

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-3CAP A's "mass action" provision is no bar to transfer of the Southern District of Mississippi action
here.
On balance, we are of the opinion that the Southern District ofN ew York is an appropriate
transferee forum for this litigation. This district provides a convenient and accessible forum for this
litigation. Importantly, S&P has its principal place of business in this district, and the witnesses and
evidence relating to the states' claims may be found there. New York is also where some of the
alleged misconduct occurred: several statements about S&P's independence and objectivity appear
to have been made in New York, as were S&P's ratings of structured fmance products.
IT IS THEREFORE ORDERED that pursuant to 28 U.S.C. § 1407, the actions listed on
Schedule A are transferred to the Southern District ofNew York and, with the consent of that court,
assigned to the Honorable Jesse M. Furman for coordinated or consolidated pretrial proceedings.

PANEL ON MULTIDISTRICT LITIGATION

KathrYTI H. Vratil
Acting Chairman
W. Royal Furgeson, Jr.
Marjorie 0. Rendell
Lewis A. Kaplan

Paul J. Barbadoro
Charles R. Breyer

Case MDL No. 2446 Document 106 Filed 06/06/13 Page 4 of 5

IN RE: STANDARD & POOR'S RATING
AGENCY LITIGATION

MDL No. 2446

SCHEDULE A

District of Arizona
State of Arizona, ex rel. Thomas C. Home v. The McGraw-Hill Companies Inc., et al.,
C.A. No. 2:13-00463
Eastern District of Arkansas
State of Arkansas, ex rel. Dustin McDaniel v. The McGraw-Hill Companies, Inc., et al.,
C.A. No. 4:13-00117
District of Colorado
State of Colorado, ex rel. John W. Suthers v. The McGraw-Hill Companies, Inc., et al.,
C. A. No. 1:13-00572
District ofDelaware
State of Delaware v. The McGraw-Hill Companies, Inc., et al., C.A. No. 1:13-00363
District of District of Columbia
District of Columbia v. The McGraw-Hill Companies, Inc., et al., C.A. No. 1:13-00292
District ofldaho
State ofldaho, ex rel. Lawrence Wasden v. The McGraw-Hill Companies, Inc., et al.,
C.A. No. 1:13-00108
Southern District oflowa
State oflowa, ex rel. Thomas J. Miller v. The McGraw-Hill Companies, Inc., et al.,
C.A. No. 4:13-00111
District ofMaine
State of Maine v. The McGraw-Hill Companies, Inc., et al., C. A. No. 1:13-00067

Case MDL No. 2446 Document 106 Filed 06/06/13 Page 5 of 5

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Southern District ofMississippi
State of Mississippi, ex rel. Jim Hood v. The McGraw-Hill Companies, Inc., et al.,
C.A. No. 3:11-00343
Western District ofMissouri
State of Missouri, ex rel. Chris Koster, et al. v. The McGraw-Hill Companies, Inc.,
et al., C.A. No. 4:13-00221
Eastern District ofNorth Carolina
State ofNorth Carolina, ex rel. Roy Cooper v. The McGraw-Hill Companies, Inc., et al.,
C.A. No. 5:13-00163
Middle District ofPennsylvania
Commonwealth o fPennsylvania by Attorney General Kathleen G. Kane v. The McGraw-Hill
Companies, Inc., et al., C.A. No. 1:13-00605
District of South Carolina
The McGraw-Hill Companies, Inc., et al. v. Alan Wilson, C.A. No. 3:13-00322
State of South Carolina, ex rel. Alan Wilson v. The McGraw-Hill Companies, Inc., et al.,
C. A. No. 3:13-00596
Middle District ofTennessee
The McGraw-Hill Companies, Inc., et al. v. Robert E. Cooper, Jr., C.A. No. 3:13-00089
State of Tennessee, ex rel. Robert E. Cooper, Jr., Attorney General and Reporter v. The
McGraw-Hill Companies, Inc., et al., C.A. No. 3:13-00193
Western District of Washington
State ofWashington v. The McGraw-Hill Companies, Inc., et al., C.A. No. 2:13-00398