Credit-rating agencies have long turned to the First Amendment to fend off suits over their role in promoting securities that turn out to be not so credit worthy. The agencies’ free speech arguments have been a reliable protection against suits in the past, but that defense didn’t completely hold up in a decision issued on Wednesday.

The case involves a $5.86 billion structured investment vehicle called Cheyne Finance (now known as SIV Portfolio), which collapsed in August 2007 when the true value of the assets behind Cheyne’s notes became clear. Two institutional plaintiffs, King County, Wash., and Abu Dhabi Commercial Bank, alleged that Standard & Poor’s Ratings Services and Moody’s Investors Service gave false and misleading ratings to notes issued by Cheyne, which were disseminated to potential investors.

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