State v. Moody's Investors Serv., Inc., S–14–0236.
| Decision Date | 11 May 2015 |
| Docket Number | No. S–14–0236.,S–14–0236. |
| Citation | 349 P.3d 979,2015 WY 66 |
| Parties | The STATE of Wyoming, by and through the State Treasurer of Wyoming and the State of Wyoming Retirement System, Appellant (Plaintiff), v. MOODY'S INVESTORS SERVICE, INC., McGraw–Hill Companies, Inc., and Standard & Poor's Financial Services, LLC, Appellees (Defendants). |
| Court | Wyoming Supreme Court |
Representing Appellant: David P. Hersh, Special Assistant Attorney General, Burg, Simpson, Eldredge, Hersh & Jardine, P.C., Englewood, Colorado; William L. Simpson, Special Assistant Attorney General, and Larry B. Jones, Special Assistant Attorney General, Burg, Simpson, Eldredge, Hersh & Jardine, P.C., Cody, Wyoming. Argument by Mr. Hersh.
Representing Appellees: Floyd Abrams, Susan Buckley, and Peter J. Linken, Cahill, Gordon & Reindel, LLP, New York, New York; James J. Coster, Joshua M. Rubins, and Glenn C. Edwards, Satterlee, Stephens, Burke & Burke, LLP, New York, New York; Patrick R. Day and Isaac N. Sutphin, Holland & Hart, LLP, Cheyenne, Wyoming; Ryan J. Schwartz, Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Day.
Before BURKE, C.J., and HILL, KITE, and FOX, JJ., and RUMPKE, D.J.
[¶ 1] The State of Wyoming appeals the district court's decision granting Appellees Moody's Investors Service, Inc., McGraw–Hill Companies, Inc., and Standard & Poor's Financial Services, LLC's (hereinafter the “Rating Agencies”) motion to dismiss for lack of personal jurisdiction.1 Finding no error, we affirm the district court's decision.
[¶ 2] Appellant presents two issues on appeal, stated as follows:
Appellees present a single issue on appeal:
Whether the district court properly dismissed the claims against Defendants–Appellees The McGraw–Hill Companies, Inc., Standard & Poor's Financial Services LLC, and Moody's Investors Service, Inc. (collectively the “Rating Agencies”), pursuant to Wyo. R. Civ. P. 12(b)(2), on the grounds that Plaintiff–Appellant State of Wyoming failed to establish a prima facie case of personal jurisdiction over the Rating Agencies.
We conclude this appeal presents only one issue, which the Court restates as follows:
Did the district court err in dismissing the State's claims against the Rating Agencies for lack of personal jurisdiction?
[¶ 3] The facts are largely undisputed. Instead, the parties dispute which facts are relevant to the personal jurisdiction determination and the legal import of those relevant facts. The following facts are undisputed and relevant to the court's personal jurisdiction inquiry.
[¶ 4] On July 7, 2011, Appellant State of Wyoming, by and through the State Treasurer of Wyoming and the State of Wyoming Retirement System (hereinafter the “State”) filed this action in Laramie County against Appellees, the Rating Agencies, and Fitch, Inc.2 The State alleged that the Rating Agencies were liable for hundreds of millions of dollars in investment losses on mortgage-backed securities during the 2007–2008 financial crisis. Specifically, the State alleged that it pursued certain investments relying on the Rating Agencies' fraudulent ratings of the securities as safe, “investment grade” securities. The complaint presented eight separate claims for relief against the Rating Agencies: fraud, fraudulent concealment, negligence or reckless conduct, negligent misrepresentation, civil conspiracy, unjust enrichment, violation of the Wyoming Securities Act, and aiding and abetting in violation of the Wyoming Securities Act. On October 24, 2011, the State filed an amended complaint wherein it set forth the same eight claims separately against each of the three Rating Agencies.
[¶ 5] Moody's is a Nationally Recognized Statistical Rating Organization (NRSRO), which publishes credit ratings on all manner of debt. Moody's is a Delaware corporation and maintains an office and its principal place of business in New York City, New York. At the time the State filed its complaint, McGraw–Hill was an information services provider serving the financial services, education, and business information markets. Before November 2010, McGraw–Hill had three principal divisions: Education, Information & Media, and Financial Services. McGraw–Hill's Financial Services division, operating under the “S & P” brand, provided independent credit ratings, indices, risk evaluation, investment research and data. McGraw–Hill is a New York corporation. Its wholly owned subsidiary, S & P, is a Delaware corporation. Both McGraw–Hill and S & P have their principal places of business in New York. The analysts who provided the ratings for securities purchased by the State were based in New York and Illinois.
[¶ 6] There are no allegations in the Amended Complaint that the Rating Agencies had a physical presence in Wyoming. Likewise, there are no allegations in the Amended Complaint that any of the Rating Agencies sold the Asset Backed Securities (ABS), Residential Mortgage Backed Securities (RMBS), and Collateralized Debt Obligations (CDO) securities to the State. Instead, the securities were “created, marketed, and sold” by various investment institutions. The Rating Agencies were paid by the issuers of the securities who actually sold the securities to the State. The Rating Agencies' fees were contingent on the independent actions of third-parties, namely the investment banks that sold the securities to the State. The gravamen of the Amended Complaint is that the Rating Agencies provided false credit ratings, which the State relied upon in purchasing the ABS, RMBS, and CDOs from investment banks.
[¶ 7] On November 10, 2011, the Rating Agencies, and Fitch, Inc., jointly moved to dismiss the State's amended complaint under Rule 12(b)(6) on the grounds that it was barred by the doctrine of res judicata and for failure to successfully plead a basis for liability. The Rule 12(b)(6) motion was supported by an affidavit of counsel requesting the district court take judicial notice of the two class action complaints, and ensuing consolidated class actions, filed by the State in the Southern District of New York on March 27, 2009, and June 29, 2009.
[¶ 8] Also on November 10, 2011, Moody's, McGraw–Hill, and S & P simultaneously moved to dismiss this action for lack of personal jurisdiction. The State opposed the Rating Agencies' motions arguing that the amended complaint and attachments thereto established the required prima facie showing of personal jurisdiction. The district court permitted limited discovery on the issue of personal jurisdiction. While the court did not hold an evidentiary hearing, it did hear legal argument from the parties on the motions on September 28, 2012.
[¶ 9] On December 13, 2013, the district court granted the Rating Agencies' motion to dismiss all claims against them for lack of personal jurisdiction. The district court recognized that this Court, like the United States Supreme Court, distinguishes between specific and general jurisdiction. The court held the Rating Agencies did not have sufficient contacts with Wyoming to rise to the level required by the Due Process Clause, International Shoe, and its progeny. As to specific jurisdiction, the court determined the Rating Agencies had not purposely availed themselves of the benefits and protections of the laws of the State of Wyoming, had not specifically targeted Wyoming, and could not reasonably have foreseen being hauled into a Wyoming state court. The court also concluded that it lacked general jurisdiction over the Rating Agencies because their contacts with the State of Wyoming did not rise to a continuous and systematic level. Finally, the district court concluded that allegations of violations of Wyoming's securities law in and of themselves did not trigger the court's jurisdiction over the Rating Agencies.
[¶ 10] Because the district court's decision did not resolve all of the claims in the action, the State moved for entry of a final judgment pursuant to Wyoming Rule of Civil Procedure 54(b) in order to appeal the jurisdictional ruling. On May 14, 2014, the court entered its Rule 54(b) certification order finding there was no just reason to delay review of the dismissal of fewer than all of the Defendants. On June 19, 2014, the court entered a final judgment in favor of the Rating Agencies. The State timely appeals.
[¶ 11] This Court recently summarized the standard for cases dismissed on the mixed question of law and fact of in personam jurisdiction, clarifying that the procedural path the district court chose to follow determined the plaintiff's burden of proof and the standard applied on appeal:
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Court Summaries
...Wyoming, by and through the State Treasurer of Wyoming and the State of Wyoming Retirement System v. Moody’s Investors Service, Inc. et al. 2015 WY 66 S-14-0236 May 11, 2015 This case relates to personal jurisdiction. Te State of Wyoming fled a lawsuit against Moody’s Investors Service, Inc......