Public Employees' Retirement System v. Moody's Investors Service, Inc.
226 Cal. App. 4th 643
Cal. Ct. App.2014Background
- CalPERS sues Moody’s and S&P for negligent misrepresentation tied to SIV ratings that CalPERS relied on to purchase notes.
- SIVs were structured finance vehicles with high-rated notes; ratings were used in private placements to QIBs/QPs like CalPERS.
- Rating Agencies allegedly aided in structuring SIVs and published ratings with high confidence despite flawed methodologies.
- Trial court found anti-SLAPP applicability; denied strike motion finding probability of prevailing on merits for negligent misrepresentation.
- Rating Agencies appeal; CalPERS cross-appeals on scope of anti-SLAPP and exclusion of six exhibits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arising from protected speech | CalPERS argues claim arises from non-protected commercial activity, not protected speech. | Rating Agencies contend claim arises from their speech in public/institutional rating context. | Court: claim falls within anti-SLAPP scope; further prong analysis warranted. |
| Actionability of ratings | Ratings are actionable professional opinions due to special knowledge in SIVs. | Ratings are nonactionable opinions/predictions about future events. | Ratings may be actionable as statements of present financial health based on special knowledge. |
| Reasonable basis for ratings | Rutledge/Chen/Carelus declarations show lack of reasonable basis for ratings. | Disclaimers and methodology support reasonable basis. | Prima facie showing of no reasonable basis accepted at this stage. |
| Duty and intent to influence | Rating Agencies intended to influence CalPERS via ratings in private SIV transactions. | No specific intent; ratings were general market evaluations. | Evidence supports a duty to CalPERS under Bily framework; intent to influence found. |
| Justifiable reliance | CalPERS relied on ratings due to access restrictions and expertise gaps in SIVs. | Disclaimers negate reliance; sophistication undermines justifiable reliance. | Justifiable reliance shown on record; not precluded at this stage. |
Key Cases Cited
- City of Cotati v. Cashman, 29 Cal.4th 69 (Cal. 2002) (two-prong anti-SLAPP test; de novo review on appeal)
- Navallier v. Sletten, 29 Cal.4th 82 (Cal. 2002) (protects prong analysis; public issue scope)
- Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP, 133 Cal.App.4th 658 (Cal. App. 2005) (evidentiary burden; defense burden shifting under anti-SLAPP)
- Bily v. Arthur Young & Co., 3 Cal.4th 370 (Cal. 1992) (duty to intended beneficiaries; factors for liability of professionals)
- Anschutz Corp. v. Merrill Lynch & Co., 785 F.Supp.2d 799 (N.D. Cal. 2011) (actual malice standard not always required for private ratings)