123 F. Supp. 3d 424
S.D.N.Y.2015Background
- SAM seeks damages as a member of the class in a securities fraud action against Vivendi; Vivendi moves for summary judgment on SAM’s reliance and damages claims.
- Class Period: October 30, 2000 to August 14, 2002; SAM began purchasing Vivendi ADSs in June 2002, after several corrective disclosures had already been disseminated.
- SAM is a value investor guided by a price-value ratio (PVR) and intrinsic-value assessments, relying on assets, liquidity, and management rather than market price.
- Thompson, SAM’s analyst, was central to SAM’s Vivendi investments; SAM ultimately held over 45% of Vivendi’s ADSs by end of 2002 and continued purchases post-Period.
- This court’s analysis centers on Basic and Halliburton II; the court previously applied GAMCO but now must assess whether SAM was indifferent to the fraud and thus not entitled to the fraud-on-the-market presumption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reliance on market price presumption | SAM relied on intrinsic value, not market price | SAM was indifferent to market price; Basic presumption rebutted | SAM cannot rely on Basic presumption; Vivendi summary judgment granted |
| Damages after lack of reliance | If reliance proved, SAM would be entitled to damages | Damages depend on reliance; post-discovery issues irrelevant if reliance absent | Damages not awarded due to lack of reliance; remand possible only if reliance found |
| Effect of Halliburton II on GAMCO holding | Halliburton II preserves Basic for class actions; value investors may rely | Halliburton II allows rebuttal of reliance; Basic not overturned | Halliburton II does not overrule Basic; individualized rebuttal permitted; SAM not entitled to presumption here |
Key Cases Cited
- Basic Inc. v. Levinson, 485 U.S. 224 (Supreme Court 1988) (presumption of reliance in efficient markets is rebuttable)
- Halliburton Co. v. Erica P. John Fund (Halliburton II), 134 S. Ct. 2398 (Supreme Court 2014) (reaffirms Basic; price impact may rebut presumption)
- GAMCO Investors, Inc. v. Vivendi, S.A., 927 F. Supp. 2d 88 (S.D.N.Y. 2013) (rebuttal of Basic presumption in a sophisticated investor context)
- Acticon AG v. China North East Petroleum Holdings, Ltd., 692 F.3d 34 (2d Cir. 2012) (limits on offsetting damages by post-disclosure gains; bounce-back framework)
- Carlisle Ventures, Inc. v. Banco Espanol de Credito, 176 F.3d 601 (2d Cir. 1999) (earlier damages approach predating PSLRA; pre-PSLRA rules)
- Levine v. Seilon, Inc., 439 F.2d 328 (2d Cir. 1971) (pre-PSLRA loss requirement considerations)
- Dura Pharmaceuticals Inc. v. Broudo, 544 U.S. 336 (Supreme Court 2005) (inflated purchase price not itself the injury; connection to loss)