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Defamation: Credit Rating Publication


1. Compuware Corps. v. Moody’s Investor Services, Inc., decided by the United States Court of Appeals for the Sixth Circuit on August 23, 2007, decided a matter of first impression involving credit ratings for publicly-held companies. The case (No. 05-1851) found in favor of Moody’s and against Compuware holding:

1.1. Actual malice must be established for Compuware to be entitled to trial on the defamation claim.

1.2. Actually malice was also required to entitle Compuware to a trial on its breach of contract claim.

1.3. Reckless disregard of a statement’s truth is a component of the actual malice standard.

2. Compuware argued Moody’s exhibited actual malice by assigning analysts to study and review the company’s financial condition, who had a conflict of interest. The conflict was unproven, and merely an allegation, so it was insufficient for Compuware to prevail.

3. The Court held that Compuware could not maintain a claim because the credit rating itself was defamatory. “A defamation claim against a media defendant cannot derive from ‘a statement of opinion relating to matters of public concern [that] does not contain a provably false factual connotation.

4. The breach of contract claim presented a particular challenge to the Sixth Circuit Court of Appeals. Generally, malice is not required to establish a contractual breach. Here, the Court concluded the actual malice standard otherwise applicable to defamation claims did apply to the breach of contract claim. No explicit contractual provision was identified as breached, and an implied covenant to perform skillfully and diligently in the credit rating work was rejected as a “backdoor attempt to recover damages for the harm allegedly caused by Moody’s protected expression of its opinion of Compuware’s financial condition.

August, 2007

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