California Public Employees’ Retirement System (CalPERS) brought action against credit rating agencies for negligent misrepresentation after CalPERS lost $1 billion in structured investment vehicles, rated “AAA” by agencies, that subsequently collapsed. The Superior Court denied anti-strategic lawsuit against public participation (SLAPP) motion. Agencies appealed and CalPERS cross-appealed.
The Court of Appeal held that:
- Negligent misrepresentation cause of action arose from an act in furtherance of agencies’ right of petition or free speech;
- Ratings potentially were representations of material fact giving rise to negligent misrepresentation liability;
- Agencies potentially lacked a reasonable ground for believing the credit ratings to be true;
- Agencies potentially intended through their ratings to influence CalPERS or a class to which CalPERS belonged; and
- CalPERS potentially relied upon credit rating agencies’ alleged misrepresentations.