On July 31, Justice Anil Singh, a Manhattan Commercial Division judge, dismissed a $1 billion suit filed against various credit ratings agencies alleging fraud connected to the sale of residential mortgage-backed securities prior to the 2008 financial crisis. According to the court, New York’s six-year statute of limitations barred the lawsuit, which was brought by a group of administrators of an offshore fund established by Bear Stearns Asset Management.
The complaint alleged that the investors lost $1 billion when the ratings agencies failed to downgrade the bonds as the 2008 crisis began. The court rejected their argument that New York’s “continuing harm” doctrine extending the six-year limitations period, finding that the defendants owed no duty to the offshore fund.
The plaintiffs had claimed that the agencies had an ongoing obligation to update their analysis, thereby delaying the accrual of their fraud claim. The ratings agencies had no duty to the offshore funds, according to the opinion, because they invested all of their assets in the U.S.-based master fund, and the ratings were issued to that particular fund.