GAMCO Investors, Inc. v. Vivendi, S.A.
927 F. Supp. 2d 88
S.D.N.Y.2013Background
- Plaintiffs are Gabelli Family affiliates (GBL and its subsidiaries) suing Vivendi under Section 10(b) and Rule 10b-5 for misstatements/omissions during Oct 30, 2000–Aug 14, 2002.
- Plaintiffs claim Vivendi’s liquidity crisis was concealed, inflating Vivendi ADS prices on NYSE during the Relevant Period.
- Plaintiffs used a proprietary PMV metric to assess intrinsic value, which purportedly exceeded market price, guiding purchases.
- Defendant Vivendi contends the market price reflected public information and thus the market price was a valid proxy for value; plaintiffs relied on PMV, not price.
- The court held the fraud-on-the-market presumption applies but is rebuttable; here Vivendi rebutted it, requiring judgment for Vivendi.
- Trial was a bench trial on the narrow issue of reliance, with findings of fact and conclusions of law entered in favor of Vivendi.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Vivendi rebutted the fraud-on-the-market presumption. | Gabelli sought to rely on PMV; market price reflected inflation but plaintiffs claim reliance on market price. | Vivendi can show plaintiffs would have transacted regardless of the inflated price; nonreliance. | Vivendi rebutted the presumption; judgment for Vivendi. |
| Whether the market for Vivendi ADS was efficient during the Relevant Period. | Market efficiency supported reliance through the presumption. | Efficiency not sufficient if rebuttal evidence shows nonreliance. | Court treated efficiency as established for purposes of the presumption but still found rebuttal evidence sufficient. |
| Whether the plaintiffs relied on the market price as an accurate measure of intrinsic value. | Plaintiffs relied on price as the driving factor in purchases. | PMV determined intrinsic value; price was only a comparator. | Court found plaintiffs did not rely on market price as an intrinsic value proxy; reliance rebutted. |
Key Cases Cited
- Basic v. Levinson, 485 U.S. 224 (Supreme Court 1988) (establishes fraud-on-the-market presumption; presumption rebuttable)
- Cammer v. Bloom, 711 F. Supp. 1264 (D.N.J. 1989) (establishes market-efficiency criteria for 10(b) claims)
- In re Salomon Analyst Metromedia Litig., 544 F.3d 474 (2d Cir. 2008) (class certification/materiality considerations in market-based reliance cases)
- Black v. Finantra Capital, Inc., 418 F.3d 203 (2d Cir. 2005) (limits of reliance in market-price-based rebuttals; jury findings permissible)
- IPO Sec. Litig. (In re Initial Public Offering), 471 F.3d 24 (2d Cir. 2006) (class certification and reliance principles in market-based fraud claims)
- Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179 (U.S. 2011) (clarifies materiality and reliance concepts in securities fraud)