German Court Gives Investors Permission To Sue S&P Over Lehman Ratings
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A German higher regional court has overturned a ruling from a lower court judge, which had prevented investors in Germany from filing a lawsuit against credit rating agency Standard & Poor’s for its positive assessment of Lehman Brothers securities just prior to the company’s collapse in 2008.
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A German higher regional court has overturned a ruling from a lower court judge, which had prevented investors in Germany from filing a lawsuit against credit rating agency Standard & Poor’s for its positive assessment of Lehman Brothers securities just prior to the company’s collapse in 2008.
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In April this year, the lower court blocked a lawsuit against S&P by a German pensioner – who had lost 30,000 euros ($40,000) from Lehman securities – on the grounds that the court had no jurisdiction over the American-based credit ratings agency.
However, the Frankfurt higher regional court found that the lower court did have jurisdiction over the case as S&P has assets in Germany, while the person bringing the suit was a German citizen.
[quote]“The lower court now has to rehear the issue and cannot deny jurisdiction for the same reasons,” said Ingo Noehre, a spokesman for the Frankfurt higher regional court, to Bloomberg on Monday. “Whether S&P is liable for damages in the end wasn’t at issue in today’s ruling and needs to be determined by the lower court.”[/quote]The higher regional court’s ruling could be a breakthrough for other disgruntled Lehman investors in Germany, with more lawsuits against S&P to be expected in the near future now that the door has been open.
Credit rating agencies had come under fire in the immediate aftermath of the 2008 financial crisis, for their alleged failure to foresee the financial crisis and for granting top rankings to mortgage bonds that fell in value after home-loan defaults.
According to a spokesman from German law firm KWAG, who brought the suit on behalf of the German pensioner, their client had purchased the Lehman securities based on S&P’s favourable ratings, while other German investors have also tried to sue S&P in the country after a US court ruled that the ratings companies could not be held liable because their ratings were protected speech.
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An S&P spokeswoman has declined to comment on the case, despite requests by Bloomberg and Reuters.
