OHIO POLICE & FIRE PENSION FUND; Ohiо Public Employees Retirement System; State Teachers Retirement System of Ohio; School Employees Retirement Systems of Ohio; Ohio Public Employees Deferred Compensation Program v. STANDARD & POOR‘S FINANCIAL SERVICES LLC; The McGraw-Hill Companies, Inc.; Moody‘s Corp.; Moody‘s Investors Service, Inc.; Fitch, Inc.
No. 11-4203
United States Court of Appeals, Sixth Circuit
Decided and Filed: Dec. 3, 2012.
700 F.3d 829
Argued: Oct. 10, 2012.
One can of course conceive of a future scenario in which the plaintiffs decide to change their names to include one of the prohibited words. But the standing inquiry is not an “exercise in the conceivable“; it “requires . . . a factual showing of perceptible harm.” Summers v. Earth Island Inst., 555 U.S. 488, 499, 129 S.Ct. 1142, 173 L.Ed.2d 1 (2009) (alteration in original) (internal quotation marks omitted). That showing is wholly absent here.
The district court acknowledged as much, but nevertheless determined that the plaintiffs had standing by analyzing the question from a higher level of generality. Pointing to a number of casеs in which plaintiffs were found to have standing to challenge petition-filing deadlines and signature requirements before having actually filed a petition themselves, the court concluded that the plaintiffs in this case have standing to challenge the statute in question because it “clearly impacts a minor political party‘s ballot access” and, “in ballot access controversies, all relevant statutes impacting ballot access of minority political parties must be evaluated collectively.” Green Party, 882 F.Supp.2d at 993-94, 2012 WL 379774, at *29.
This ruling is erroneous. Each of the cases relied on by the district court involved challenges to filing deadlines and signature requirements that the plaintiffs were inevitably going to have to comply with in order to gain ballot access. See, e.g., Storer v. Brown, 415 U.S. 724, 94 S.Ct. 1274, 39 L.Ed.2d 714 (1974); Williams v. Rhodes, 393 U.S. 23, 89 S.Ct. 5, 21 L.Ed.2d 24 (1968); Stevenson v. State Bd. of Elections, 794 F.2d 1176 (7th Cir. 1986). Not one of these cases, howеver, holds that a plaintiff with standing to challenge certain requirements that affect its ability to get on the ballot also has standing to challenge other requirements that do not so affect its ability. We therefore conclude that the plaintiffs’ “prohibited names” challenge must be dismissed on remand for lack of subject-matter jurisdiction.
III. CONCLUSION
For all the reasons set forth above, we REVERSE the judgment of the district court and REMAND the case for further proceedings consistent with this Opinion.
Before: GILMAN, GIBBONS, and ROGERS, Circuit Judges.
OPINION
JULIA SMITH GIBBONS, Circuit Judge.
The plaintiffs to this action are five pension funds operated by the State of Ohio for public employees (the “Funds“). The Funds invested hundreds of millions of dollars in 308 mortgage-backed securities (“MBS“) between 2005 and 2008, all of which received a “AAA” or equivalent credit rating from one of the three major
I.
A.
MBS are “financial products whose value is derived from and collateralized by (i.e., ‘backed’ by) the revenue stream flowing from” a pool of residential or commercial mortgage loans. Compl. at ¶ 31. An MBS offering is initiated by an “arranger,” “typically an investment bank,” that buys mortgage loans from lenders and transfers those loans to an affiliated “bankruptcy remote trust” that is “immune from any bankruptcy the arranger might suffer and vice versa.” Id. ¶ 32. The trust then offers securities collateralized by this pool of mortgages to investors and uses the funds earned from the sale to cover the costs of acquiring mortgage loans and organizing the offer. Id. ¶ 33. As the owner of the mortgage loans, the trust is entitled to principal and interest payments made by mortgagees. Those payments are passed on to the purchasers of the securities in the form of principal and interest payments. Id.
Arrangers can increase or decrease the risk investors assume when purchasing MBS by altering one of two features of the capital structure of these investments. Id. ¶ 34. First, arrangers can adjust the “overcollateralization” of the securities, which is the amount by which the principal balance of the mortgage pool exceeds the principal balance of the issued securities. Id. ¶ 35. This creates a “buffer” zone before mortgage defaults result in losses for investors. Id. Second, arrangers can change the “excess spread” of the securities, whiсh is the difference between the interest received on the mortgages and the interest paid out to investors. Id. The excess spread can be applied toward delinquent interest payments or used to build up loss reserves. Id. The degree to which securities incorporate these risk-prevention features is known as “credit enhancement.” Arrangers can further apportion risk by issuing multiple classes, or “tranches,” of securities collateralized by the same underlying asset pool. Id. Tranches are prioritized by their level of credit enhancement. Id. Accordingly, investors in the lowest tranche have the lowest up-front costs, but they also bear the lowest level of credit enhancement and would have all losses of payments and interest allocated to them before investors in the next highest tranche could be affected. Id. By contrast, the Funds paid premium prices for “AAA“-rated funds in the highest tranche, which provided the greatest amount of credit enhancement. Id. ¶¶ 113, 38, 100.
B.
It was the role of the Agencies to assess how much risk investors assumed when
The Funds allege that between 2005 and 2008, this “issuer pаys” system compromised the integrity of the credit rating process. Id. ¶ 52. In an effort to attract the significant rating fees paid by MBS arrangers, the Agencies “became intimately involved in the issuance of [MBS]” by assisting arrangers in structuring their securities to achieve certain credit ratings, turning the process into a form of negotiation and placing the Agencies in the position of “rating their own work.” Id. ¶¶ 56, 65, 80. Nonetheless, the Agencies continued to publicize the objectivity, independence, and analytical rigor of their rankings, despite privately acknowledging the “latent conflict of interest” in their business model. Id. ¶¶ 43-51, 66. In addition, the desire to attract business led the Agencies to lower their rating standards. Id. ¶¶ 82-93. They preferred older, more forgiving debt models over more up-to-date ones that might result in the rejection of аn arranger‘s proposed capital structure. Id. ¶ 85. Analysts would also perform “out of model” corrections to achieve a certain rating for a security that computer models did not justify. Id. ¶¶ 92-93. The Funds allege that the Agencies did not properly disclose the weaknesses of the Agencies’ ratings, that the Agencies knew investors like the Funds would rely on the accuracy of their ratings in making investment decisions, and that the Agencies’ failure to make proper disclosures caused the significant losses the Funds experienced when the MBS market collapsed. Id. ¶¶ 97-101.
The complaint describes these practices at a high level of generality. It draws its allegations from publicly available reports, newspapers, and magazines explaining problems with the Agencies’ business model from 2005 to 2008. Althоugh the complaint includes an exhaustive appendix of the 308 MBS the Funds purchased, no fact alleged in the complaint is connected to any particular rating given by an Agency for a security the Funds purchased during the period in question.
C.
The complaint contains three counts: (1) common-law negligent misrepresentation; (2) violation of
II.
A district court‘s order granting a Rule 12(b)(6) motion receives de novo review on appeal. Courie v. Alcoa Wheel & Forged Prods., 577 F.3d 625, 629 (6th Cir. 2009). We must “construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and drаw all reasonable inferences in favor of the plaintiff.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007). Despite this liberal pleading standard, we “may no longer accept conclusory legal allegations that do not include specific facts necessary to establish the cause of action.” New Albany Tractor, Inc. v. Louisville Tractor, Inc., 650 F.3d 1046, 1050 (6th Cir. 2011). Rather, the complaint has to “plead[] factual content that allows the court to draw the reasonable inference that the defendant[s are] liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). If the Funds do “not nudge[] their claims across the line from conceivable to plausible, their complaint must be dismissed.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).
Because the district court exercised diversity jurisdiction, this court must “apply [New York and Ohio] substantive law to the state-law claims presented,” as interpreted by their respective state supreme courts. Beverage Distribs., Inc. v. Miller Brewing Co., 690 F.3d 788, 792 (6th Cir. 2012). If thosе courts have not ruled on a particular issue, “this [c]ourt must predict how [they] would rule, by looking to all relevant data, including state appellate decisions.” Id. (quoting Kessler v. Visteon Corp., 448 F.3d 326, 330 (6th Cir. 2006) (internal quotation marks omitted)).
III.
[A]ny person that, by a written or printed circular, prospectus, or advertisement, offers any security for sale, or receives the profits accruing from such sale, is liable, to any person that purchased the security relying on the circular, prospectus, or advertisement, for the loss or damage sustained by the relying person by reason of the falsity of any material statement contained thеrein or for the omission of material facts. . . .
“When interpreting legislation, courts must give the words used in statutes their plain and ordinary meaning, unless legislative intent indicates otherwise.” Coventry Towers, Inc. v. City of Strongsville, 18 Ohio St.3d 120, 18 Ohio St.3d 120, 480 N.E.2d 412, 414 (1985). Particularly in the context of business and finance, the “plain and ordi-
The Agencies’ rating fees were fixed costs of an MBS issue. As the complaint notes, the Agencies’ entitlement to a fee vested when their ratings issued. The fees did not vary based on the amount by which revenues exceeded expenditures, or the amount of shares sold. One MBS offering document that the Funds rely upon heavily in their briefing is illustrative of this relationship:
[T]he net proceeds from the sale of the Offered Certificates will be applied by the Depositor to pay for the acquisition of the Mortgage Loans from the Seller, as well as to pay the costs of structuring and issuing the securities, which generally consists of legal, accоunting and rating agency fees. . . .
Id. ¶ 119(e). Even though the arrangers contemplated using monies generated by the sale of the securities to satisfy the costs of retaining the Agencies, payments to the Agencies were part of “the costs of structuring and issuing the securities,” similar to “legal” and “accounting” fees. Accordingly, these fees lacked the contingent quality that is characteristic of profits.
The Funds argue that the Agencies “receive[d] the profits” from the sale of MBS merely because they were paid out of the “proceeds” or “net proceeds” of MBS sales. But this argument confuses the source of payment with the manner in which the amount of payment is determined. Because the Agencies were not entitled to what remained of the “proceeds” of MBS sales “after expenses [were] paid,” Santos, 553 U.S. at 517, 128 S.Ct. 2020, it is not relevant that they were paid out of “proceeds” or “net proceeds,” and the district court was correct to reject this argument.
The amicus curiae argues “profit” can mean “benefit, advantage, or pecuniary gain,” and that under this definition, the Agencies are liable. “Profit” can bear this meaning in certain usages. Webster‘s Revised Unabridged Dictionary 1144 (1913) (“Accession of good; valuable results; useful consequences; benefit; avail; gain; as, an office of profit.“). But this is not an appropriate definition in the context of this statute, for two reasons. First, the use of a definite article in front of “profits,” and the requirement that “the profits accru[e] from such sale,” suggest that the word “profits” is referring to the definite quantity of “revenue minus expenses,” and not to any “gain” or “benefit” arising from a securities sale. Second, in the context of a securities-fraud statute, it would be unusu-
This distinction between sharing profits and paying business expenses has been recognized in dicta by a leading Ohio case interpreting this section of the “blue sky” laws. In Federated Management Co. v. Coopers & Lybrand, 137 Ohio App.3d 366, 738 N.E.2d 842, 858 (2000), the defendant bank received a “referral fee” consisting of a percentage of “the proceeds the underwriter received from” the sale of debt notes issued by a solid waste management company. The bank argued that these pаyments, which “were based directly on the [n]ote [o]ffering,” were “akin to fees earned by attorneys and printers who worked for an underwriter.” Id. In concluding that the bank had “profited from the sale of the securities,” the Ohio Court of Appeals rejected this argument:
Attorneys who perform services for underwriters in connection with a securities offering . . . receive their fee regardless of whether the securities actually went up for sale. Here, [the bank] received its fees because the underwriter received its fees, and the underwriter received its fee (a fee that was directly based upon the price of the [n]otes) because the [n]ote [o]ffering actually occurred. [The bank] received profits accruing from the sale of securities. . . .
Id.
The Funds attempt to analogize the case before us to Federated Management because, in both cases, thеre was a “causal connection” between the securities offerings and their fees. This is an oversimplification. Because the bank in Federated Management agreed to take a percentage of sales proceeds as its referral fee, the fee was contingent on the “profitability” of the securities offering. By contrast, even though the Agencies were paid out of the proceeds of MBS sales, their fees were fixed business costs that would have to be satisfied regardless of whether the securities “actually went up for sale.” In this respect, the Agencies are more akin to the attorneys and accountants described in Federated Management, a similarity the prospectus quoted above implies by grouping “rating agency” fees with “legal” and “accounting” fees. Accordingly, Federated Management supports the conclusiоn that ratings fees cannot be considered “profits” for purposes of
The Funds also rely upon Baker v. Conlan, 66 Ohio App.3d 454, 585 N.E.2d 543 (1990). In that case, a corporation served as a general partner of a limited partnership that intended to purchase a horse for breeding and sell its offspring. 585 N.E.2d at 544. After selling shares in the limited partnership to investors, the venture collapsed. Id. at 545. The corporation, along with its director, was found liable under
Two remaining arguments in support of the Funds’ interpretation of the statute need be addressed only briefly. First, the Funds cannot circumvent the statute by arguing that profits from previous MBS sales were used to pay the Agencies’ rating fees. This claim contradicts the Funds’ consistent allegations that arrangers paid the Agencies for their work on a particular security out of the funds generated by offering that security for sale. But even if the complaint suppоrted this about-face, the statute creates liability only when the plaintiff purchased “the security” sold under false pretenses, and the defendant received profits from “such sale,” not from sales of unrelated securities offered on a previous occasion.
IV.
The second statute under which the Funds seek relief, entitled “Remedies of рurchaser in unlawful sale,” provides:
[E]very sale or contract for sale made in violation of Chapter 1707. of the Revised Code, is voidable at the election of the purchaser. The person making such sale or contract for sale, and every person that has participated in or aided the seller in any way in making such sale or contract for sale, are jointly and severally liable to the purchaser. . . .
The Funds primarily rely upon the Agencies’ alleged violation of
A.
We look first to the Funds’ assertion that the Agencies can be held liable for the arrangers’ violations of Ohio law. The complaint does not allege that any entity other than the Agencies committed securities fraud, even in conclusory terms. The best the Funds can do is to argue that the complaint alleges arrangers “took advantage of the ‘issuer-pays’ model to pressure the Rating Agencies into assigning false or misleading ratings to the subject MBS,” but that is not the equivalent of claiming that the arrangers actually made material misrepresentations or omissions in written form, in violation of
B.
We also reject the Funds’ attempt to save their rescission remedy by claiming the Agencies violated
No person shall knowingly make or cause to be made any false representation concerning a material and relevant fact, in any oral statement or in any prospectus, circular, description, application, or written statement, for [the] purpose[ of] [s]elling аny securities in this state. . . .
V.
The final theory of liability under which the Funds seek relief against the Agencies is common-law negligent misrepresentation. The parties disagreed below about whether Ohio or New York common law governed the claims, but the district court found that under the law of either state, the claims failed. OPFPF, 813 F.Supp.2d at 879. In Ohio, negligent misrepresentation is defined as follows:
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability
for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
Delman v. City of Cleveland Heights, 41 Ohio St.3d 1, 534 N.E.2d 835, 838 (1989) (emphasis omitted) (quoting Restatement (Second) of Torts § 552(1) (1965)). A similar definition maintains under New York law.2 The district court correctly held that the Funds lacked a viable claim under either Ohio or New York law because they (1) did not properly allege a duty owed by the Agencies to the Funds, and (2) the ratings were not actionable misrepresentations.
A.
The district court found that the Funds failed to plead a duty of care under New York law, although it did not discuss New York cases in any detail. The point needs little discussion. New York law “strictly limits negligent misrepresentation claims to situations involving actual privity of contract between the parties or a relationship so close as to approach that of privity.” Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 114 (2d Cir. 2012) (internal quotation marks omitted) (quoting In re Time Warner Inc. Secs. Litig., 9 F.3d 259, 271 (2d Cir. 1993)); see also Ossining Union Free Sch. Dist. v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 541 N.Y.S.2d 335, 539 N.E.2d 91, 94 (1989). In Anschutz, the Second Circuit dismissed negligent misrepresentation claims under New York law against the Agencies similar to those made by the Funds in this case. Id. at 114-15 (“[Plaintiff] has alleged no relationship or contact with the Rating Agencies that could remotely satisfy the New York standard.“). In this case, as in Anschutz, there are no allegations of contacts between the Funds and the Agencies establishing a relationship “so close as to approach that of privity.” We adopt the Second Circuit‘s reasoning and affirm the district court‘s holding that the Agencies did not owe the Funds a duty of care under New York law.
Determining whether a duty of care exists under Ohio law is not as straightforward. Ohio cases generally agree that speakers do not owe a duty of care to the “extensive, faceless, and indeterminable investing public-at-large.” Federated Mgmt., 738 N.E.2d at 856. “[L]iability may be imposed for negligent misrepresentation only if the disseminator of the information intends to supply it to a specific person or to a limited group of people.” Amann v. Clear Channel Commc‘ns, Inc., 165 Ohio App.3d 291, 846 N.E.2d 95, 100 (2006); see also Picker Int‘l, Inc. v. Mayo Found., 6 F.Supp.2d 685, 689 (N.D. Ohio 1998) (“A core requirement [of negligent misrepresentation claims] is a special relationship under which the defendant supplied information to the plaintiff for the latter‘s guidance in its business transactions.“). For instance, accountants owe a duty of care not merely to their clients, but to any “third party [that] is a member of a limited class whose reliance on the accountant‘s representation is specifically foreseen.” Had- don View Inv. Co. v. Coopers & Lybrand, 70 Ohio St.2d 154, 436 N.E.2d 212, 215 (1982) (finding limited partners were owed a duty of care by an accounting firm their general partner hired to perform accounting work); see also Picker, 6 F.Supp.2d at 689 (“Usually the defendant is a professional . . . who is in the business of rendering opinions to others for their use in guiding their business, and the plaintiff is a member of a limited class.“). By contrast, “a newspaper reader” is not part of a “special limited class . . . of foreseeable persons,” and therefore, newspaper reporting is beyond the reach of a negligent misrepresentation claim. Gutter v. Dow Jones, Inc., 22 Ohio St.3d 286, 490 N.E.2d 898, 900 (1986); see also Amann, 846 N.E.2d at 100-01 (holding that radio show listeners are not a “limited class” under Haddon View).
Ohio courts have applied Haddon View in contexts where third parties closely linked to a person in privity with the defendant could reasonably be expected to rely on information the defendant provided to that person. See Merrill v. William E. Ward Ins., 87 Ohio App.3d 583, 622 N.E.2d 743, 748-49 (1993) (insurer owed duty of care to beneficiaries of a life insurance contract); Perpetual Fed. Sav. & Loan v. Porter & Peck, Inc., 80 Ohio App.3d 569, 609 N.E.2d 1324, 1327 (1992) (finding issue of material facts at to whether appraisal agency owed duty of care to bank that loaned money in reliance on a property appraisal report prepared for the bank‘s mortgage broker); but see Floor Craft Floor Covering, Inc. v. Parma Comm. Gen. Hosp. Ass‘n, 54 Ohio St.3d 1, 560 N.E.2d 206, 208-10 (1990) (refusing to acknowledge a duty of care in a contractor‘s suit against an architect when there was no privity of contract between them, distinguishing Haddon View). In practice, the rule appears to work in much the same way that New York‘s rule of privity or “near-privity” works. That is not surprising, since Haddon View borrowed its analytic framework from New York cases. See Haddon View, 436 N.E.2d at 213-14 (discussing Ultramares Corp. v. Touche, Niven & Co., 255 N.Y. 170, 174 N.E. 441 (1931) (Cardozo, J.), and White v. Guarente, 43 N.Y.2d 356, 401 N.Y.S.2d 474, 372 N.E.2d 315 (1977)).
Although the Funds claim that thеy are part of a “limited class,” Compl. ¶ 158, the complaint proves otherwise. Of the 308 MBS the Funds purchased, 254 of them were publicly available securities any investor could have acquired. This is precisely the sort of claim for representations made to the “faceless” investing public that Ohio courts reject. The claim is not salvaged by the Agencies’ alleged role in structuring funds, the creation of “pre-sale” reports containing ratings that were used by arrangers to market MBS, or the contingent relationship between providing a desired rating and receiving rating fees. None of these considerations changes the fundamental reason for the failure of this claim: there is no “special relationship” between the Funds and the Agencies.
Conceding the weakness of their claim аs a whole, the Funds focus on the fifty-four remaining securities mentioned in the complaint. These MBS were “private placements,” securities offered only to “qualified institutional buyers” that “own[ ] and invest[ ] on a discretionary basis at least $100 million in securities.” Anegada Master Fund, Ltd. v. PXRE Grp. Ltd., 680 F.Supp.2d 616, 621 (S.D.N.Y. 2010). The complaint does not plead such a distinction, but the district court ruled that even if it did, the distinction would not be sufficient to cure the complaint‘s defects. We agree. The Haddon View rule is a narrow exception to the general principle that privity limits the scope of liability for pro-
As the district court held, there is no sound basis under either Ohio or New York law for concluding that the Agencies owed a duty of care to the Funds in this case.
B.
The district court was also correct to dismiss the negligent misrepresentation claims because the complaint does not plausibly allege actionable misrepresentations. Under Ohio law, “‘[an actionable] misrepresentation generally must relate to an existing or pre-existing fact which is susceptible of knowledge.‘” Kondrat v. Morris, 118 Ohio App.3d 198, 692 N.E.2d 246, 251 (1997) (quoting Platsis v. E.F. Hutton & Co., 642 F.Supp. 1277, 1293 (W.D. Mich. 1986)). A statement “is actionable only when an affirmative false statement has been made.” Leal v. Holtvogt, 123 Ohio App.3d 51, 702 N.E.2d 1246, 1261 (1998). New York law imposes a similar requirement. Schwalb v. Kulaski, 29 A.D.3d 563, 814 N.Y.S.2d 696, 698 (2006). So defined, credit ratings are not actionable misrepresentations. As we noted in an analogous context, “[a] credit rating is a predictive opinion, dependent on a subjective and discretionary weighing of complex factors,” and there is “no basis upon which we could conclude that the credit rating itself communicates any provably false factual connotation.” Compuware Corp. v. Moody‘s Investors Servs., Inc., 499 F.3d 520, 529 (6th Cir. 2007) (concluding that a credit rating was insufficient to establish a defamation claim under Michigan law because the rating did not “connote[] actual, objectively verifiable facts“); see also Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762, 776 (1st Cir. 2011) (“That a high rating may be mistaken, a rater negligent in the model employed or the rating company interested in securing more business may be true, but it does not makе the report of the rating false or misleading.“).
The Funds argue that although this general rule is correct, a “fraudulently made” opinion could nonetheless be considered actionable. Ohio cases support the proposition that some opinions are “actionable,” but do not provide specifics. See Link v. Leadworks Corp., 79 Ohio App.3d 735, 607 N.E.2d 1140, 1145 (1992); Davish v. Arn, 32 Ohio Law Abs. 646, 655 (Ohio Ct.App. 1940). By contrast, some cases applying New York law specifically recognize that “statements of opinion may support” a negligent misrepresentation claim “when a plaintiff alleges that the defendant did not genuinely or reasonably believe the opinions at the time the defendant made them.” Eaves v. Designs for Fin., Inc., 785 F.Supp.2d 229, 256 (S.D.N.Y. 2011). In such a case, the misrepresentation is not the opinion, but is the speaker‘s assertion that he or she believes the opinion, which is a question of existing or pre-existing fact. Fait v. Regions Fin. Corp., 655 F.3d 105, 112 (2d Cir. 2011) (“Requiring plaintiffs to allege a speaker‘s disbelief in, and the falsity of, the opinions or beliefs expressed ensures that their allegations con-
The district court assumed that this exception to the general rule on liability for opinions applied to negligent misrepresentation claims under both Ohio and New York law, but nonetheless found that the Funds had not sufficiently alleged an actionable misrepresentation because “the complaint fail[ed] to allege that the Agencies did not believe their ratings.” OPFPF, 813 F.Supp.2d at 883. We agree. Based on publicly available information dеscribing the Agencies’ business practices, the Funds draw the inference that the Agencies did not believe in the correctness of their ratings with respect to any MBS the Funds purchased over a three-year period. That inference is an unreasonable one. General criticism of business practices does not provide a basis for concluding that the Agencies made actionable misrepresentations on any particular occasion. This is precisely the sort of complaint the Supreme Court‘s recent Rule 8 jurisprudence is designed to preclude. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (“[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct,” a complaint is subject to dismissal for failure to state a claim).
District courts addressing similarly amorphоus claims of misrepresentation against the Agencies concur in this view. In re Lehman Bros. Secs. & ERISA Litig., 684 F.Supp.2d 485, 495 (S.D.N.Y. 2010) (dismissing complaint containing allegations similar to those made in this case because they did not “support an inference that the [Agencies] did not actually hold the opinion about the sufficiency of the credit enhancements to justify each rating at the time each rating was issued“), aff‘d, 650 F.3d 167 (2d Cir. 2011); Tsereteli v. Residential Asset Securitization Trust 2006-A8, 692 F.Supp.2d 387, 395 (S.D.N.Y. 2010) (finding allegations that the Agencies “used out-of-date models” and “did not verify the loan information provided to them” were “insufficient to support an inference that the . . . Agencies did not actually believe that the ratings they had assigned were supported by the factors they said they had considered.“). Moreover, the many non-binding authorities upon which the Funds rely on appeal all involve complaints that pled specific faсts suggesting the Agencies believed a particular opinion they provided was improper. See Anschutz Corp. v. Merrill Lynch & Co., 785 F.Supp.2d 799, 825 (N.D. Cal. 2011) (“Plaintiff‘s allegations here are much more detailed and specific than the ones at issue in . . . the cases relied on by the [Agencies],” including In re Lehman Bros.); Abu Dhabi Comm. Bank v. Morgan Stanley & Co., 651 F.Supp.2d 155, 178-79 (S.D.N.Y. 2009) (summarizing complaint‘s allegations regarding Agencies’ knowledge of credit issues with a single “structured investment vehicle” the plaintiffs purchased); In re Nat‘l Century Fin. Enterp., Inc., Inv. Litig., 580 F.Supp.2d 630, 643, 648 (S.D. Ohio 2008) (detailing multiple “red flags” associated with two offerings of investment notes by a particular company that were sufficient to give rise to a negligent misrepresentation claim); LaSalle Nat‘l Bank v. Duff & Phelps Credit Rating Co., 951 F.Supp. 1071, 1075-80 (S.D.N.Y. 1996) (finding plaintiffs properly pled negligent misrepresentation when complaint included extensive allegations of misconduct by the ratings agency connected with a single bond offering, including the failure
Even if we presume that a credit rating can serve as an actionable misrepresentation, the Funds’ complaint does not contain allegations that would permit a reasonable inference of wrongdoing. Accordingly, the Funds’ negligent misrepresentation claims may be dismissed for failure to satisfy this element, as well.
VI.
Finally, the district court‘s dismissal of the complaint with prejudice was proper. The Funds argue that even if their complaint cannot survive a Rule 12(b)(6) motion, the district court erred by not giving the Funds leave to amend the complaint. We review “a district court‘s decision to dismiss a complaint with prejudice for an abuse of discretion.” United States ex rel. Bledsoe v. Comm. Health Sys., Inc., 342 F.3d 634, 644 (6th Cir. 2003). The Funds never sоught leave to amend before the district court, despite ample opportunity to do so. See
There is no reason to deviate from that rule here. The Funds rely upon Bledsoe, where we concluded that the district court‘s entry of judgment with prejudice without permitting an amended complaint was improper, despite the plaintiff‘s failure to file a motion to amend. Bledsoe, 342 F.3d at 644-45. But Bledsoe was an unusual case because the district court‘s final order gave plaintiff notice, for the first time, that a heightened pleading standard applied to his claims. Id. There was no evidence in the record of “undue delay, bad faith or dilatory motive” on the plaintiff‘s part, and the plaintiff‘s disclosures to the government prior to filing his qui tam suit showed that he could meet the heightened pleading standard. Id. By contrast, in this case, there are no extenuating circumstances justifying a departure from the principle that “it is not the district court‘s role to initiate amendments.” Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 438 (6th Cir. 2008). The Funds’ claims fail as a matter of law under established pleading standards. Accordingly, the district court did not abuse its discretion in dismissing the complaint with prejudice.
VII.
For the foregoing reasons, we affirm the judgment of the district court.