Matt Taibbi writes in 'You F--ked Up, You Trusted Us': Talking Ratings Agencies With Chris Hayes:

In that case, the Second Circuit ruled that the plaintiffs suing S&P could not make a fraud claim based upon the company's reassurances in its Code of Conduct of its "objectivity, integrity and independence."

Moreover, the Court said, plaintiffs could not make a claim based on a public statement by S&P touting its "credibility and reliability," or another saying, "[S&P] has a longstanding commitment to ensuring that any potential conflicts of interest do not compromise its analytical independence."

Why, you might ask, could one not make a fraud claim based upon those statements? Because, the Second Circuit ruled, those statements were transparently not meant to be taken seriously.

The Court found . . . that "generalizations about [S&P's] business practices and integrity" were "so generalized that a reasonable investor would not depend on [those statements]. . . ."

Does Matt Taibbi reflect the court's judgement truthfully? Did the court rule that no reasonable investor would take seriously the statements of S&P touting its credibility and reliability?


In Boca Raton Firefighters and Police Pension Fund v. Bahash et al. (Robert Bahash was CFO of McGraw-Hill Companies that included S&P), it was claimed that S&P "made material misstatements touting the integrity, independence, and surveillance". The district court dismissed the complaint.

This dismissal was appealed to the US Court of Appeals for the 2nd Circuit. They affirmed the district court's judgement. Here, they explain some of their precedent:

However, we will not credit mere business “puffery,” which we have defined in this context as “statements [that] are too general to cause a reasonable investor to rely upon them.” Id. at 206. For instance, generalizations about a company’s business practices and integrity may be “so general that a reasonable investor would not depend on [those statements].”
Boca Raton Firefighters & Police Pension Fund v. Bahash, 506 F. App’x 32 (2d Cir. 2012)

They further apply that precedent to the case at hand:

The statements alleged in the Fund’s complaint regarding McGraw-Hill’s integrity and credibility and the objectivity of S&P’s credit ratings are the type of mere “puffery” that we have previously held to be not actionable.

The plaintiffs attempted to revive the proceedings in 2013 with new evidence. The district court denied the motion, and the US Court of Appeals for the 2nd Circuit affirmed. Boca Raton Firefighters and Police Pension Fund v. Bahash (2d Cir. 2014)

The court said:

Alleged new evidence showing that, for example, S&P slowed the roll out of a new ratings model that might negatively affect CDO ratings, S&P analysts discussed that CDO issuers were upset by subprime RMBS ratings downgrades, or S&P may have been concerned about market share and profits, does not alter the “generic, indefinite nature” of the statements at issue or demonstrate why they are false. As the District Court correctly observed, these statements are too general to cause a reasonable investor to rely upon them as a guarantee that ratings would not be made without regard to profits, market share, or client feedback.

Plaintiffs filed for a writ of certiorari with the United States Supreme Court that proposed the following question:

Whether a verifiably false factual statement about a matter of obvious importance to a company can nevertheless constitute inactionable “puffery” under the federal securities laws?

That petition was denied on November 2, 2015.

A small distinction that may or may not be meaningful. You ask about whether the court ruled that the claims "aren't supposed to be taken seriously" (supposed by whom?). Matt also said those statements were not "meant to be taken seriously". However, "serious"-ness wasn't part of the language any court used. The focus was on the puffery standard, which revolved around whether reasonable investors would "rely on" the statements. It was held that a reasonable investor would not, particularly because of the "generic, indefinite nature" of the claims.

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