In re Universal

765 F.Supp.2d 512

In re VIVENDI UNIVERSAL, S.A. SECURITIES LITIGATION.

No. 02 Civ. 05571(RJH)(HBP).

United States District Court, S.D. New York.

Feb. 17, 2011.

MEMORANDUM OPINION AND ORDER

RICHARD J. HOLWELL, District Judge:

+-----------------+
¦TABLE OF CONTENTS¦
+-----------------+

BACKGROUND                                                              521
DISCUSSION                                                              525

   I.  Impact of Morrison v. National Australia   Bank on Plaintiffs'   525
       Claims

      A.   Overview of Morrison                                         525
      B.   Morrison Applied                                             527
      C.   Plaintiffs' Motion to Conform the Pleadings                  534

   II. Vivendi's Motion for Judgment as a Matter of Law Pursuant to     534
       Rule 50

      A.   Standard of Review                                           535
      B.   Material Misstatements and Omissions                         535
      C.   Scienter                                                     543

               Statements Not Specifically Attributable to Messier or
           1.  Hannezo                                                  544
           2.  Impact of the Messier and Hannezo Verdicts               546
           3.  Whether Vivendi is Entitled to a New Trial Based on the  550
               Alleged Inconsistency in the Verdict

                   Vivendi Waived Its Right to Object to the Verdict on
               (a) Inconsistency Grounds                                550
               (b) The Verdict is Not Inconsistent                      552

            4.  Loss Causation                                          555

               (a) Connection between the Fraud and the Events          556
                   Connection between the Events and Share Price
               (b) Declines                                             560
               (c) Whether the Misstatements Caused Inflation           561

               Effect of Jury's Finding of Zero Inflation on Certain
           5.  Dates during the Class Period                            563
           6.  Forward–Looking Statements                               567

                   The Challenged Statements Do Not Fall Within the
               (a) PSLRA'S “Safe Harbor”                                568
               (b) Waiver                                               570

            7.  Puffery                                                 572

  III. Vivendi's Motion for a New Trial Pursuant to Rule 59             573

      A.   Standard of Review                                           573
      B.   Compromise Verdict                                           574
           Alleged Failure to Identify Misstatements until the Close of
      C.   Evidence                                                     577
      D.   Verdict Form                                                 579
      E.   Plaintiffs' Summation                                        581

   IV. Class Plaintiffs' Motion for Entry of Final Judgment             583

CONCLUSION                                                              587
 

This is a securities fraud class action brought on behalf of shareholders of a French company, Vivendi Universal, S.A. (“Vivendi”) against Vivendi and its former Chief Executive Officer, Jean–Marie Messier and its former Chief Financial Officer, Guillaume Hannezo (collectively, “defendants”). The action was tried before a jury from October 2009 to January 2010. At the close of plaintiffs' case, all three defendants moved for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(a). The Court reserved decision on most aspects of defendants' Rule 50(a) motions and the case was submitted to the jury.¹ On January 29, 2010, the jury returned its verdict. The jury found that Vivendi had violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the Securities and Exchange Commission's Rule 10b–5 (collectively, “Section 10(b)”), but that neither Messier nor Hannezo had committed a primary or secondary violation of Section 10(b) or Section 20(a) of that Act. No judgment has yet been entered on the verdict.

Vivendi now renews its motion for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b), or, in the alternative, moves for a new trial pursuant to Federal Rule of Civil Procedure 59. Plaintiffs move for the entry of judgment, for an award of pre-judgment interest, and for approval of their proposal for post-verdict class notice and claims administration. This opinion sets forth the Court's ruling on these motions. It also addresses the impact of the Supreme Court's recent decision in Morrison v. National Australia Bank Ltd., ––– U.S. ––––, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010) on the action and modifies its class certification in light of that decision.

BACKGROUND

This action was originally brought in 2002 by U.S. and foreign shareholders of Vivendi who alleged that they purchased ordinary shares, or American Depository Receipts that represent those shares (hereinafter, “ADRs”),² at artificially inflated prices as a result of defendants' material misrepresentations and omissions between October 30, 2000 and August 14, 2002, inclusive (the “Class Period”), in violation of §§ 10(b) and 20(a) of the Exchange Act. 15 U.S.C. §§ 78j(b) and 78t(a). The ordinary shares in question traded primarily on the Paris Bourse, and did not trade on any U.S exchange. The ADRs were listed and traded on the New York Stock Exchange (“NYSE”). After the initial class action complaint was filed, a large number of related actions were filed and were consolidated by the Court into a single action, and a consolidated class action complaint was filed.

In February 2003, defendants moved to dismiss on various grounds. Of particular relevance here, defendants argued that this Court lacked subject matter jurisdiction over any claims brought by “foreign-cubed” class members— i.e., foreign shareholders who purchased their shares of Vivendi, a foreign company, on foreign exchanges. The Court, in a decision by Judge Baer, rejected that argument. In re Vivendi Universal, S.A. Sec. Litig., 381 F.Supp.2d 158, 169–70 (S.D.N.Y.2003) (“ Vivendi I ”). Judge Baer held that the Court had subject matter jurisdiction over those claims under the “conduct test” which was one of two tests—the conduct and effects tests—long in use in the Second Circuit to determine whether a court could exercise subject matter jurisdiction over foreign securities transactions. Id., see also Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 171 (2d Cir.2008). ³ Under the “conduct test,” subject matter jurisdiction existed “if activities in this country were more than merely preparatory to a fraud and culpable acts or omissions occurring here directly caused losses to investors abroad.” Morrison, 547 F.3d at 171 (citations omitted). The determination as to whether American activities “directly” caused losses to foreigners was fact-specific, and “depend[ed] on what and how much was done in the United States and on what and how much was done abroad.” Id. (citation omitted).

Applying that test, Judge Baer concluded that the Court had subject matter jurisdiction over claims by foreign plaintiffs who purchased Vivendi shares on foreign exchanges, in large part due to the fact that Messrs. Messier and Hannezo had engaged in significant conduct in the United States related to the alleged fraud—in particular, they moved their headquarters to New York and split their time between the U.S. and France during the crucial time period in which investors claimed to have been misled. Vivendi I, 381 F.Supp.2d at 169–70. Judge Baer's decision on subject matter jurisdiction was affirmed by this Court on reconsideration. In re Vivendi Universal, S.A. Sec. Litig., No. 02 Civ. 5571(RJH), 2004 WL 2375830, at *3–7 (S.D.N.Y. Oct. 22, 2004) (“ Vivendi II ”).

After defendants' motion to dismiss was denied, and after some discovery had occurred, plaintiffs moved to certify a class consisting of Vivendi shareholders from the United States and various European countries. Defendants raised numerous objections to class certification, including, most prominently, an objection to the inclusion of foreign shareholders in the class. This Court considered the requirements for class certification set forth in Federal Rule of Civil Procedure 23(b)(3) and on May 21, 2007, certified a single class consisting of “all persons from the United States, France, England, and the Netherlands who purchased or otherwise acquired ordinary shares or American Depositary Shares of Vivendi Universal, S.A. between October 30, 2000 and August 14, 2002.” ⁴ In re Vivendi Universal, S.A. Sec. Litig., 242 F.R.D. 76, 109 (S.D.N.Y.2007) (“ Vivendi III ”). Defendants filed a motion for partial reconsideration of the class certification opinion, which was denied on March 31, 2009. In re Vivendi Universal, S.A. Sec. Litig., No. 02 Civ. 5571(RJH), 2009 WL 855799 (S.D.N.Y. Mar. 31, 2009) (“ Vivendi IV ”).

Meanwhile, the parties had been conducting fact and expert discovery. In August 2008, defendants filed various motions for full or partial summary judgment on numerous grounds. A principle contention was that plaintiffs allegedly had failed to prove loss causation, a required element of plaintiffs' claims. The Court carefully considered defendants' arguments, including those relating to loss causation, and denied defendants' motion. In re Vivendi Universal S.A. Sec. Litig., 634 F.Supp.2d 352 (S.D.N.Y.2009) (“ Vivendi V ”). Thereafter, Class Plaintiffs' claims were set down for trial in the fall of 2009.

On October 5, 2009, a jury trial began in this Court on Class Plaintiffs' claims that Vivendi, Mr. Messier, and Mr. Hannezo violated Section 10(b), and that Mr. Messier and Mr. Hannezo also...