The 2nd Circuit Court of Appeals in New York ruled in favor of the nation's largest credit ratings agencies in a recent decision, saying the firms cannot be held liable "as underwriters or control persons" in litigation stemming from the securitization of mortgages. The case is an important marker for Standard & Poor's, Fitch Ratings and Moody's Investors Service when considering the role the ratings agencies played in the securitization of mortgages has been the subject of much debate. The circuit court's holding affirmed the findings of the U.S. District Court for the Southern District of New York, which dismissed class-action complaints from several funds that wanted to hold Standard & Poor's, a subsidiary of The McGraw Hill Companies Inc., Moody's and Fitch liable for alleged misstatements and omissions in securities offerings. The original plaintiffs filed separate suits that were later consolidated and dismissed by the 2nd Circuit. The original plaintiffs included International Union of Operating Engineers-Employers Construction Industry Retirement Trust, the New Jersey Carpenters Health Fund, the Boilermakers-Blacksmith National Pension Trust, the Wyoming State Treasurer and Wyoming Retirement System and Vaszurele Limited. The plaintiffs alleged the rating agencies violated provisions of securities acts by giving tranches containing mortgage loans triple-A ratings, which generally signifies those batches of securities are the least likely to default, according to court records. The plaintiffs also claimed ratings agencies are underwriters since they helped structure securities transactions to achieve desired ratings. The 2nd Circuit ruled against this, saying "the plain language of the statute limits liability to persons who participate in the purchase, offer, or sale of securities for distribution. While such participation may be indirect as well as direct, the statute does not reach further to identify as underwriters persons who provide services that facilitate a securities offering, but who do not themselves participate in the statutorily specified distribution-related activities." Write to: Kerri Panchuk.