Ratings agencies have been prime targets for litigation as their conflicts of interest contributed to the global market meltdown. But they have always defended their actions, hiding under the First Amendment of the US Constitution protecting freedom of speech.

As Nathan Koppel wrote in The Wall Street Journal earlier this year, ratings agencies claimed their service was simply "opinion" and therefore protected.

Koppel wrote: "Courts in the past have held that rating firms are protected against claims that they issued ratings that either were too high or to low. To get around the Constitution, judges have ruled, a plaintiff would have to show that a rating firm not only made false statements, but also did so with "actual malice" - a high legal hurdle. A Houston federal judge in 2005, for example, dismissed claims that rating firms misstated Enron Corp.'s financial condition partly because the plaintiff didn't allege the firms acted with malice."

The agencies claim what they were doing was no different from what newspapers or academics do.

But of course, ratings agencies are not newspapers or academics because their "opinion" influences markets and investors.

Now it looks like the agencies will have trouble running that line with reports that California's giant public pension fund CalPERS is suing them for issuing "wildly inaccurate" rankings on investments that it says cost pensioners "perhaps more than $1 billion."

It will be fascinating to watch how this plays out in court. No doubt, the ratings agencies will argue that CalPERS should have done its own due diligence but it remains to be seen whether that defense would hold. And if CalPERS wins, we can expect more litigation, potentially sending the agencies to the wall.