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State v. The McGraw-Hill Companies Inc.

Superior Court of Maine, Kennebec

November 26, 2014



M. Michaela Murphy, Justice


Defendants, McGraw-Hill Companies, Inc., n/k/a/ 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 "Plaintiff) Complaint for lack of personal jurisdiction. The Defendants argue that the State of Maine has no specific jurisdiction over the Defendants, as the State's cause 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 2001 and continued through 2011 to Maine consumers in violation of the Maine Unfair Trade Practices Act. The State further avers that the allegations in the Complaint fulfill the State's prima facie burden of establishing that tins court has personal jurisdiction over the parties and asks that if this court fails to find personal jurisdiction, the State, in the alternative, be allowed to conduct discovery relevant to the Defendants' motion and file an amended Complaint.


Plaintiff, State of Maine, filed the subject Complaint on February 5, 2013, in Kennebec County Superior Court, pursuant to 5 M.R.S.A § 207 ("UTPA"). (Compl. ¶ 1.) Defendant McGraw-Hill is a New York corporation with its principal place of business at 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. (Compl. ¶ 2.) Defendant S&P is a Delaware limited liability company and a 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 on a broad range of securities. Id.

In 2001, S&P rated various structured finance products. (Compl, ¶ 5.) Said products included various Residential Mortgage Backed Securities ("RMBS") and Collateralized Debt Obligations ("CDO") which comprised many mutual 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 and vowed to such behavior in its Code of Conduct, (Compl. ¶ 26.) However, the Plaintiff believes that the Defendants' use of the "Issuer Pays Model" compromised S&P's independence and integrity.[1](Compl. ¶ 34.) This established a conflict of interest because the revenues earned came from batiks and other entities whose securities it rated. (Compl. ¶ 36.) Said conflict was not disclosed to the public. (Compl. ¶ 37.) The State further alleges that S&P knew that its analytical models could not assess certain complex securities with the requisite accuracy, yet it continued to rate these products. (Compl. ¶ 40.)


The question of jurisdiction is always fundamental, and is a question of law. See Lindner v. Barry, 2002 WL 1974091, at *2 (Me. Super. Aug. 9, 2002) (citing 20 Am Jur. 2d Courts § 54). "The proper exercise of personal jurisdiction in Maine hinges on the satisfaction of two requirements: 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 jurisdiction pursuant to the long-arm statute [must comply) with constitutional due process requirements, " Jackson v. Weaver, 678 A.2d 1036, 1038 (Me. 1996).

"Maine's jurisdictional reach is coextensive with the Due Process Clause of the Constitution, " Murphy v. Keenan, 667 A.2d 591, 593 (Me. 1995) (citing U.S. Const, amend. XIV, § 1; Interstate Food Processing Corp. v. Petterilo Foods, Inc., 622 A.2d 1189, 1191 (Me. 1993); Frazier v. Bankamerka Int'l, 593 A.2d 661, 662 (Me. 1991); Calurl v. Rypkema, 570 A.2d 830, 831 (Me. 1990), cert, denied, 498 U.S. 818 (1990); Tyson v. Whilaker & Son, Inc., 407 A.2d 1, 2-3 (Me. 1979)). Due process in the exercise of jurisdiction over an out-of-state defendant requires the satisfaction of the following three-pronged test: (1) Does the forum state have a legitimate interest in the subject matter of the action? (2) Should the defendant by his conduct reasonably have anticipated litigation in the forum state? and (3) Would the exercise of jurisdiction comport with "traditional notions of fair play and substantial justice[?]” Murphy, 667 A.2d at 593 (citations omitted); see also Foreside Common Dev. Corp. v. Bleisch, 463 A, 2d 767, 769 (Me. 1983). "The burden of establishing (hat jurisdiction is proper under the first two prongs falls on the plaintiff; once the plaintiff has met that burden, it is up to the defendant to show that jurisdiction is improper under the third prong." Eke. Media Int'l v. Pioneer commc'ns of Am., 586 A.2d 1256, 1258-59 (1991) (citing Rypkema, 570 A.2d at 831 n.2) (emphasis in original).

"Facts regarding jurisdictional questions may be determined by reference to affidavits, by a pretrial evidentiary hearing, or at trial when the jurisdictional issue is dependent upon a decision on the merits." Dorf v. Complastik Corp., 1999 ME 133, ¶ 6, 735 A.2d 984 (citing Federal Deposit Ins. Corp. v. Oaklawn Apartments, 959F.2d 170, 174 (10th Cir. 1992)). The Method chosen by the trial court in determining said motion dictates the evidentiary showing necessary for the a plaintiff to survive a defendant's Motion to Dismiss. Id. (citing Bolt v. Gar-Tec Prods., Inc., 967 F.2d 671, 675 (1st Cir.1992)). When the court determines a motion to dismiss for lack of personal jurisdiction prior to trial, without holding an evidentiary hearing, "[t]he plaintiff's showing in opposition to the motion 'must be made on specific facts set forth in the record, ...'" Id. ¶ 13 (citing Suttie v. Sloan Sates, Inc., 1998 ME 121, ¶ 5, 711 A.2d at 1286). This means the Plaintiff' must go beyond the pleadings and make affirmative proof" United Eke. Radio and Mach. Workers of Am. v. 163 Pleasant St. Corp., 987 F.2d 39, 44 (1st Cir. 1993) (quoting Bolt, 967 F.2d at 675). This showing may be made by affidavit or otherwise. See Serras v. First Tennessee Bank Nat'l Assoc, 875 F.2d 1212, 1214 (6th Cir, 1989).

However, when:

The court proceeds only upon the pleadings and affidavits of (he parties, the plaintiff 'need only make a prima facie showing that jurisdiction exists, ' and the plaintiffs written allegations of jurisdictional facts should be construed in its favor." Determining personal jurisdiction based on initial affidavits alone, without additional evidence, is a "useful means of screening out cases in which personal jurisdiction is obviously tacking, and those in winch the jurisdictional challenge is patently bogus, " Moreover, it prevents defendants from defeating personal jurisdiction merely by filing a written affidavit opposing the jurisdictional facts alleged by the plaintiff.

Dorf v. Complastik Corp., 1999 ME 133, ¶¶ 4-16, 735 A.2d 984 (citations omitted). In this case, the hearing is non-testimonial, meaning the court proceeds only upon the pleadings and affidavits of the parties, and the plaintiff "need only make a prima facie showing that jurisdiction exists ..." Rypkema, 570 A, 2d at 832 ...

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