917 F. Supp. 2d 246
S.D.N.Y.2013Background
- GAMCO filed an amended complaint alleging Vivendi violated Section 10(b) with respect to GAMCO's open-market ADR purchases during Oct 30, 2000—Aug 14, 2002.
- Class Action verdict found Vivendi acted recklessly with respect to fifty-seven misstatements about liquidity risk.
- The court previously held Vivendi cannot contest materiality or the truth-on-the-market defense, and GAMCO may rely on fraud-on-the-market presumption.
- Vivendi introduced evidence of GAMCO's access to meetings, calls, and research that could imply a reasonable doubt about GAMCO’s reliance on market price.
- GAMCO argued PMV was the primary valuation metric; Vivendi argued PMV may be independent of market price and that GAMCO relied on market price.
- The court denied GAMCO's motion for summary judgment, finding material questions of fact about GAMCO’s reliance and whether GAMCO would have traded at the same prices absent the misstatements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reasonableness of GAMCO's reliance | GAMCO relied on market price via fraud-on-the-market presumption. | GAMCO’s access to meetings/research undermines reasonableness of reliance. | Material fact questions exist; reliance not conclusively reasonable. |
| Whether GAMCO would have purchased at the same prices absent the misstatements | GAMCO would have bought at the same prices if misstatements existed; market price reflected truth. | GAMCO would not have purchased at those prices if true liquidity information were known; PMV was the driver. | Material fact questions preclude summary judgment. |
| Post-disclosure purchases and their effect on reliance | Post-disclosure purchases do not defeat fraud-on-the-market reliance. | Post-disclosure buys may show reliance on market price did not hold after disclosures. | Facts presented raise issues about whether post-disclosure trades rebut presumed reliance. |
| Truth-on-the-market defense applicability | Vivendi cannot rely on truth-on-the-market to rebut presumption due to collateral estoppel. | Even with estoppel, issue-specific factual questions remain about market impact. | GAMCO's motion denied; truth-on-the-market defense remains unavailable but factual disputes persist. |
Key Cases Cited
- Basic v. Levinson, 485 U.S. 224 (U.S. 1988) (fraud-on-the-market presumption and market price reliance)
- Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179 (U.S. 2011) (reliance and scienter in 10b-5 cases; price impact presumed in efficient market)
- In re Salomon Analyst Metromedia Litig., 544 F.3d 474 (2d Cir. 2008) (discusses reliance and price-manipulation theories in analysis)
- Ashland Inc. v. Morgan Stanley & Co., Inc., 652 F.3d 333 (2d Cir. 2011) (reliance standards and market effects in 10b-5 context)
- Teamsters Local 445 Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196 (2d Cir. 2008) (discusses presumption and reliance in securities class actions)
- Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (U.S. 2008) (direct/indirect involvement in fraud; limits on aiding and abetting theories)