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The People of the State of Illinois v. the Mcgraw-Hill Companies

May 2, 2013

THE PEOPLE OF THE STATE OF ILLINOIS, PLAINTIFF,
v.
THE MCGRAW-HILL COMPANIES, INC. AND
STANDARD & POOR'S FINANCIAL SERVICES LLC, DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:

MEMORANDUM OPINION AND ORDER

In January 2012, Illinois' Attorney General filed suit on the State's behalf against Standard & Poor's Financial Services LLC (S&P) and the McGraw-Hill Companies, Inc. in Illinois state court. The State alleged that defendants had misrepresented the claimed independence and objectivity of S&P's analysis of structured finance securities, in violation of the Illinois Consumer Fraud and Deceptive Practices Act (ICFA), 815 ILCS 505/2, and the Illinois Uniform and Deceptive Trade Practices Act (UDTPA), 815 ILCS 510/2(a)(5), (7) & (12). On March 6, 2013, defendants removed the case to federal court, contending that this Court has original jurisdiction under 28 U.S.C. § 1331. The State has moved to remand the case to state court. For the reasons stated below, the Court grants the motion to remand.

Background

McGraw-Hill is the parent company of S&P, an entity that operates as a credit rating agency for a broad range of securities. On January 25, 2012, the State filed suit against the defendants in the Circuit Court of Cook County, Illinois. In the lawsuit, the State alleged that the defendants had consistently misrepresented that S&P's credit analysis of structured finance securities was objective, independent, and uninfluenced by its own or its clients' financial interests, in violation of the ICFA and the UDTPA. The State's allegations and claims mirrored those in lawsuits that the attorneys general of Connecticut and Mississippi had filed in 2010 and 2011.

On April 23, 2012, defendants moved to dismiss the State's complaint on a variety of grounds. Defendants' arguments included contentions that the State's claims are preempted by the Credit Rating Agency Reform Act of 2006 (CRARA), 15 U.S.C. § 78o-7, and are barred by the First Amendment to the United States Constitution. The state court denied defendants' motion to dismiss the case on these bases.

On February 5, 2013, the attorneys general of fourteen other states filed their own separate lawsuits against the defendants in various state courts, also alleging violations of state consumer protection and unfair trade practices laws. That same day, the Illinois Attorney General issued a press release lauding her state counterparts and the U.S. Attorney General (who had also filed suit) for "joining her" via their lawsuits. Just under thirty days later, on March 6, 2013, defendants removed the present case to this Court.

The State has moved to remand this case to Illinois state court. It contends that defendants' notice of removal was untimely and that it fails to meet the requirements for establishing federal-question jurisdiction under Grable & Sons Metal Prods. Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 313 (2005).

Discussion

A defendant may remove to federal court a state court civil action over which a federal court has original jurisdiction. 28 U.S.C. § 1441(a). The removing party bears the burden of establishing federal jurisdiction. This Court construes the removal statute narrowly, resolving any doubt in favor of the plaintiff's choice of a state court forum. Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 758 (7th Cir. 2009).

I. Timeliness of notice

Ordinarily, a notice of removal must be filed within thirty days after the defendant receives a copy of the initial pleading in a case. 28 U.S.C. § 1446(b)(3). Defendants contend, however, that the State's complaint did not describe a removable case and that the case became removable only later, in February 2013. They rely on a provision of the removal statute that provides as follows:

If the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.

Id.

Defendants argue that the Illinois Attorney General's February 5, 2013 press release and the State's subsequent responses to interrogatories and requests for admission constitute "other papers" from which it could first be ascertained that the case was removable. Specifically, defendants assert that the press release, which announced a coordinated "wave of litigation" attacking the independence of S&P's credit rating process, first revealed to defendants a nationwide effort by multiple states to (defendants say) regulate S&P's national conduct. This task, they argue, was delegated exclusively to the Securities and Exchange Commission (SEC) under CRARA. As a result, defendants contend, the states' purported regulatory efforts, and thus this and the other cases, substantially implicate significant federal issues. Defendants further contend that the State's discovery responses, served on February 19 and 20, 2013, mirrored the allegations from one or more the ...


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