Reference no: EM131657284

Question: The Jefferson County, Colorado, School District decided to refinance part of its bonded indebtedness by issuing refunding bonds. The School District selected two firms other than Moody's Investor Services, Inc. (hereinafter, "Moody"), to rate the bonds, even though it had used Moody's services in the past. When the School District brought the bonds to market, they initially sold well. Less than two hours into the sales period, however, Moody published an article about the bonds on its "Rating News," an electronically distributed information service sent to subscribers and news services. Moody stated in the article that even though it had not been asked to rate the bonds, it intended to assign a rating after the sale. The article went on to discuss the bonds and the School District's financial condition, concluding that "the outlook on the district's general obligation debt is negative, reflecting the district's ongoing financial pressure due in part to the state's [Colorado's] past underfunding of the school finance act as well as legal uncertainties and financial constraints under Amendment I." Amendment I, a then-recent change in the Colorado Constitution, required voter approval of certain tax increases. According to the School District, Moody's article adversely affected the sale of the bonds. Purchase orders ceased, several buyers canceled prior orders, and the School District found it necessary to reprice the bonds at a higher interest in order to sell them. As a result, the School District asserted, it suffered a net loss of more than $700,000. Contending the statement in Moody's article falsely indicated that the School District was not in a creditworthy financial condition, the School District sued Moody for injurious falsehood. The federal district court dismissed the School District's claim for failure to state a claim on which relief could be granted. The court based its ruling on a conclusion that Moody's statement, rather than being demonstrably false, was a protected statement of opinion. Was the district court's decision correct?