In re Vivendi, S.A. Secs. Litig.
838 F.3d 223
2d Cir.2016Background
- Vivendi transformed from a French utilities company into a global media conglomerate through massive acquisitions (2000–2002), incurring heavy debt and growing liquidity strain.
- Internally, executives (including CFO Hannezo and Treasurer Dupont‑L’Hôtelain) repeatedly warned of "tense" or "dangerous" liquidity and possible downgrade or insolvency; publicly Vivendi made optimistic statements about EBITDA growth, cash flow, and a "very strong balance sheet."
- A wave of events in 2002 (asset sales, Moody’s and S&P downgrades, management change, public disclosures of refinancing needs) precipitated a dramatic stock price decline.
- Plaintiffs (a large investor class) sued under §10(b)/Rule 10b‑5 and §20(a), alleging 57 specific misstatements (later presented to the jury) between Oct. 30, 2000 and Aug. 14, 2002 that misled about Vivendi’s liquidity risk; trial ran in 2009–2010 and the jury found Vivendi liable on 56 statements.
- District court denied most post‑trial JMOL motions and admitted Plaintiffs’ expert (an event‑study economist) to quantify inflation and damages; Vivendi appealed various legal and evidentiary rulings; plaintiffs cross‑appealed class‑certification and Morrison issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plaintiffs presented a discrete statement‑by‑statement case vs. a unitary omission theory | Plaintiffs argued affirmative statements (and half‑truths) were misleading about liquidity; they identified specific statements at trial/closing | Vivendi argued plaintiffs pursued a generalized "liquidity omission" theory and thus failed to plead/try specific false statements required by Rule 10b‑5 | Court: Plaintiffs presented and were tried on affirmative misstatements; jury instructions and verdict form required statement‑by‑statement findings; no reversible error |
| Actionability: opinion, puffery, or forward‑looking safe harbor (PSLRA) defenses | Plaintiffs: many statements contained present‑tense factual implications (e.g., "very strong balance sheet") or omitted material facts about liquidity | Vivendi: many statements were non‑actionable opinion, puffery, or protected forward‑looking projections with meaningful cautionary language or immaterial | Court: opinion argument waived; puffery and safe‑harbor were factual issues for jury — sufficient evidence supported jury that statements were actionable and not protected |
| Materiality of the "liquidity risk" theory (are statements too amorphous to support liability) | Plaintiffs: liquidity risk (ability to meet obligations) is concrete; multiple related statements could be false/misleading in context | Vivendi: liquidity risk is amorphous; using it to tie 56 disparate statements is impermissible | Court: liquidity risk was sufficiently concrete here; evidence supported finding each statement materially false or misleading in context |
| Admissibility of expert event‑study testimony (Nye) for loss causation/damages | Plaintiffs: Nye's event study measured actual inflation (due to market not knowing truth) and modeled inflation trajectory for damages | Vivendi: Nye's model fails because many alleged misstatements did not cause price increases; reliance requires price impact; "inflation‑maintenance" theory is legally improper | Court: District court did not abuse discretion. Event study measuring actual inflation is reliable and relevant; maintaining inflation (preventing dissipation) can have price impact; testimony admissible |
| Loss causation: must risk materialize (e.g., bankruptcy) or is disclosure/market revelation sufficient? | Plaintiffs: market revelations and rating actions disclosed the truth about liquidity risk and caused losses; corrective disclosures need not precisely mirror fraud | Vivendi: because risk never materialized into bankruptcy/default, Plaintiffs cannot show loss causation | Court: Loss causation may be established by revelation of the truth (corrective disclosures or events that reveal concealed risk); jury had sufficient evidence tying Vivendi’s misstatements to stock declines on specific disclosure dates |
| Cross‑appeal: class certification exclusions and Morrison extraterritoriality | Plaintiffs: district court wrongly excluded some foreign shareholders and improperly dismissed claims of US purchasers of ordinary shares | Defendants: court properly considered foreign recognition issues and applied Morrison to exclude certain US ordinary‑share purchasers | Court: Affirmed — district court did not abuse discretion on superiority/preclusive‑effect concerns; Vivendi did not forfeit Morrison defense and American ordinary‑share claims outside §10(b) were properly dismissed |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (establishes fraud‑on‑the‑market/rebuttable reliance presumption)
- Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (no broad affirmative duty to disclose; half‑truths can be actionable)
- Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (opinion‑statement actionability and disclosure of basis of opinions)
- Fait v. Regions Financial Corp., 655 F.3d 105 (opinion‑statements are not per se inactionable)
- Halliburton Co. v. Erica P. John Fund, Inc., 563 U.S. 805 (rebuttable presumption of reliance; price‑impact inquiry)
- FindWhat Investor Group v. FindWhat.com, 658 F.3d 1282 (supports inflation‑maintenance theory against categorical rejection)
- Glickenhaus & Co. v. Household International, Inc., 787 F.3d 408 (distinguishes actual inflation and fraud‑induced inflation; supports event‑study approach)
- Lentell v. Merrill Lynch & Co., 396 F.3d 161 (loss causation requires that loss result from materialization of risk or revelation of truth)
- Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (discusses loss causation and corrective disclosure concept)