State of Maine v. McGraw-Hill Companies, Inc.

CourtSuperior Court of Maine
DecidedNovember 26, 2014
DocketKENcv-14-49
StatusUnpublished

This text of State of Maine v. McGraw-Hill Companies, Inc. (State of Maine v. McGraw-Hill Companies, Inc.) is published on Counsel Stack Legal Research, covering Superior Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State of Maine v. McGraw-Hill Companies, Inc., (Me. Super. Ct. 2014).

Opinion

ENTERED JAN 1 4 2015

STATE OF MAINE BUSINESS AND CONSUMER COURT KENNEBEC, ss. Location: Portland Docket No.: BCD-CV-14-49 MN\M- J

I. INTRODUCTION

Defendants, McGraw-Hill Companies, Inc., n/klnJ McGraw-Hill Financial, Inc. ("McGraw-

Hill") and Standard & Poor's Financial Services, LLC ("S&P") (collectively "Defendants") move

this court to dismiss the State of Maine's ("State of Maine, or "PlaintifC') Complaint for lack of

pet·sonal jurisdiction. The Defendants argue that the State of Maine has no specific j\ll'isdictlon over

the. Defendants, as the State's ca\lse of action does not arise from the Defendants' conduct within

the forum state.

The State alleges in its Complaint that the Defendants directed misleading statements about

S&P's independence and objectivity over a period of time that began in 200 l and continued through

20 II to Maine consumel's in violation of the Maine Unfnh· Trade Practices Act. The State fmther

avers that the allegations in the Complaint fulfill the State's pl'ima flicle bmden of establishing that

tlus court bas personal jurisdiction over the pm1ies and asks that if this court fails to fmd personal

jurisdiction, the State, in the alternalive, be allowed to conduct discovet')' relevant to the

Defendants' motion and file an amended Complaint. Il. STATEMENT OF FACTS

Plaintiff, State of Mai.ue, filed the subject Complflint on Febmary 5, 2013, in Kennebec

County Superior Comt, pursuant to 5 M.R.S.A § 207 ("UTPA"). (Campi. ~ 1.) Defendant

McGraw-Hill is a New York corpornlion wi(h its principal place ofbllsiness nt 122 Avenue of the

Americas, New York, NY 10020. McGraw-Hill is registered with the Maine Secretary of State to

conduct business within the State of Maine. (Corupl. V2.) Defendant S&P is a Delaware limited

liability company aud n wholly owned subsidiary of McGraw-Hill. (Compl. ~ 3) Within the S&P

business unit is Standard & Poor's Rating Services ("SPRS"). SPRS operates as a credit rating

agency that assigns credit ratings onn broad range of securities. !d.

In 200 I, S&P t·ated val'ious structured finance products. (Compl. V5.) Said products

included various Residelllial Mortgage Backed Secmities ("RMBS") and Collateralized Debt

ObHgntions (''CDO") which comprised many mutunl funds and pension funds of Maine residents,

retirees, and workers. (Compl. ~ 18.) Objectivity and independence are material to the services

provided by S&P. (Compl. ~ 23.) As a result, S&P advertised its objectivity and independence aud

vowed to sllch behavior in irs Code of Conduct. (Com pl. ~ 26.) Howeve1·, the Plaintiff believes that

the Defendnnts' use of the "Issuer Pays Model" compromised S&P's independence IUtd integrity.'

(Com pl. ~ 34.) This established a conflict of interest because the revennes eamed came fi·om banks

and other entities whose securities it mted. (Campi.~ 36.) Said conflict was not disclosed to the

public. (Compl. ~ 37.) The State fmther alleges that S&P knew that its analytical models cotlld not

assess certain complex securities with the requisite accuracy, yet it continued to rate these products.

(Campi. ~ 40.)

1 Under the Issuer Pays Model, the issuer of sccuJ'ities pays c1·edit rating Rgencies to rate the investments. (Compl. ,135.)

2 lii.STANDARD OF REVIEW

The question of jllrisdiction is always fundamental, and is a question of law. See Lindner v.

Bal'ly, 2002 WL 1974091, at *2 (Me. Super. Aug. 9, 2002) (citing 20 Am Jur. 2d Courts§ 54).

"The proper exercise of personal jmisdiction in Maine hinges on the satisfaction of two

req\1irements: first ... the Maine Long-Arm statute, 14 M.R.S.A. § 704-A ... [must confer]

personal jurisdiction on the court; and second ... the exercise of j\ll'isdiction pmsmmt to the long-

arm statute [must comply] with constitutional due process req\tirements." Jackson v. Wectver, 678

A.2d l 036, 1038 (Me. 1996).

"Maine's jurisdictiomllreach is coextensive with the Due Process Clause of the

Constitution." Mw1Jhy v. Keenan, 667 A.2d 591, 593 (Me. 1995) (citing U.S. Const. amend. XIV, §

I; Interstate Food Processing Corp. v. Pellerito Foods, Inc., 622 A.2d 1189, 1191 (Me. 1993);

Frazier v. Bankamerlca fll/ 1/, 593 A.2d 661, 662 (lvfe. 1991 ); Cal uri v. Rypkema, 570 A.2d 830, 831

(Me. 1990), cert, denie(/, 498 U.S. 818 ( 1990); Tyson v. Whitaker & Son, Inc., 407 A.2d I, 2-3 (Me.

1979)). Due process ln the exercise of jul'isdiction ove1· m1 out-of-state defendant requires the

satisfaction of the following three-pronged test: (I) Does the forum stnte have n legitimate interest

in the subject mntter of the action? (2) Should the defendant by his conduct rensouably have

anticipated litigation in the forum state? Hnd (3) Would the exercise of jurisdiction comport with

"traditional notions of fnir play and subshmtial justice[?]" J'vlurphy, 667 A.2d at 593 (citations

omitted); see also Foreside Common Dev. C01p. v. Bleisch, 463 A.2d 767, 769 (Me. 1983). "The

bmdcn of establishing that jmisdiction is proper under the ftrst two prongs falls on the plaintiff;

once the plaintiff has met that bmden, it is up to the defendant to show that jmisdiction is ;mproper

undet· the third prong." Elec. Medi(l/nt'l v. Pioneer commc 'ns ofAm., 586 A.2d 1256, 1258-59

( 1991) (citing Rypkema, 570 A.2d nt 831 n.2) (emphasis in ot·iginal).

3 "Facts regarding jurisdictional questions may be determined by reference to affidavits, by a

pretrial evidentiary hearing, or nt trial when the j\ll'isdictional issue is dependent upon a decision on

the merits." DOJfv. Complastik C01p., 1999 ME 133, ~ 6, 735 A.2d 984 (citing Federal Deposit

Ins. Co!]J. v. Oak/awn Apartments, 959 F.2d 170, 174 (1Oth Cir.l992)). The Method chosen by the

trinl cou1·t in determining said motion dictates the evidentiary showing necessnry for the a plaintiff

to survive a defendant's Motion to Dismiss. !d. (citing Bolt v. Ga!'-Tec Prods., Inc., 967 F.2d 671,

675 (1st Cir.l992)). When the court determines a motion to dismiss for lack ofpersonnljurisdiction

prior to trial, without holding nn evidentiary henl'ing, "[t]he plainti.frs showing in opposition to the

motion 'must be mnde on specific facts set forth in the record .... "' !d. ~ 13 (citing Sullie v. Sloan

Sales, Inc.. 1998 'NIB 121, ~ 5, 711 A.2d at 1286). This means the Plaintiff'must go beyond the

pleadings and make affirmative proof."' United Elec. Ra(/lo and JVfach. Workers ofAm. v. 163

Pleasant St.

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