California Public Employees' Retirement System v. Moody's Investors Service, Inc.
California Court of Appeals
172 Cal. Rptr. 3d 238 (2014)
The Rating Agencies (defendants), who both helped structure certain investment vehicles and were paid based on their sales, assigned those vehicles their highest AAA rating despite having access to detailed non-public information about their risk, while publishing liability disclaimers alongside the rating; CalPERS (plaintiff), which limited its investments to highly rated products, relied on the AAA rating to invest, and lost hundreds of millions when the investments collapsed. CalPERS sued for negligent misrepresentation, the trial court denied the Rating Agencies' motion to dismiss, and they appealed.
Whether a professional opinion, such as a credit rating, issued by a party with superior, non-public knowledge of the subject matter can be treated as an assertion of fact for purposes of a negligent misrepresentation claim.