Vivendi Fails to Upset Verdict on Antifraud Liability

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The U.S. District Court for the Southern District of New York Feb. 12 denied Vivendi Universal S.A.'s bid to overturn a $900 million-plus jury verdict holding it liable for securities fraud and other causes of action based on a share-for-share merger transaction with plaintiff Liberty Media Corp. (Liberty Media Corp. v. Vivendi Universal S.A., S.D.N.Y., 03 Civ. 2175 (SAS), 2/12).

Among other specifics, Vivendi contended that Liberty failed to prove reliance on alleged misrepresentations regarding its financial status, but Judge Shira Scheindlin disagreed.

She said a “reasonable jury could have inferred that if Vivendi had accurately stated its liquidity risks … the Merger Agreement, at least in the form it ultimately took, would not have been signed.”

Allegedly, Vivendi and two former executives made material misstatements about the French media conglomerate's finances, causing its stock to trade at artificially high levels between 2000 and 2002.

The controversy prompted the filing of numerous lawsuits, including Liberty's claims that it was misled into signing a merger agreement in which Liberty exchanged its shares in a French media company for Vivendi securities.

In June 2012, a jury found Vivendi liable for securities fraud and breach of warranty under New York law. In seeking to overturn the verdict, Vivendi contended that Liberty's trial evidence “was legally insufficient on both liability and damages.”

Denying the motion, the court rejected various challenges to Liberty's' expert testimony. It also said Vivendi's challenge to the jury's finding of 1934 Securities Exchange Act Section 10(b) reliance “depends on the false premise that … Liberty needed to prove that someone with the authority to … close the transaction personally reviewed” the 25 alleged misrepresentations.

The plaintiffs were represented by Macey R. Stokes, Baker Botts LLP, Houston; and R. Stan Mortenson, Michael L. Calhoon, and Alexander M. Walsh, Baker Botts LLP, Washington.

The defendants were represented by Daniel Slifkin, Cravath Swaine & Moore LLP, New York; and James P. Quinn and Penny P. Reid, Weil Gotshal & Manges LLP, New York.

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