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S&P fails to keep Connecticut ratings case in federal court

(Reuters) - Standard & Poor's suffered a legal defeat late on Wednesday when a Connecticut federal judge said that state's lawsuit accusing the credit rating agency of inflating its ratings to win business belongs in state court, not federal court.

In his decision, U.S. District Judge Stefan Underhill said S&P and its parent McGraw-Hill Cos waited too long to try to move the lawsuit, which began in March 2010.

He rejected the defendants' argument that the February 5, 2013 filing against them of 13 similar lawsuits by other states in other jurisdictions started the clock on a new 30-day period in which they could move the Connecticut case.

Connecticut Attorney General George Jepsen said he is pleased with the decision, and that the state is "prepared to litigate the matter in Connecticut Superior Court, where it belongs."

S&P spokeswoman Catherine Mathis said: "The timeliness grounds for the ruling do not apply to the more recently filed actions by other state attorneys general."

The case is Connecticut v. McGraw-Hill Cos et al, U.S. District Court, District of Connecticut, No. 13-00311.

(Reporting by Jonathan Stempel in New York and Aruna Viswanatha in Washington, D.C.; Editing by Dan Grebler)