Gamco Investors v. Vivendi Universal
Filing
126
OPINION AND ORDER: Based on the findings of fact and conclusions of law stated above, I hold that Vivendi has rebutted the fraud on the market presumption of reliance. The Clerk of the Court is directed to enter judgment in Vivendis favor and close this case. (Signed by Judge Shira A. Scheindlin on 2/27/2013) Filed In Associated Cases: 1:03-cv-05911-SAS, 1:09-cv-07962-SAS(ft)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------x
GAMCO INVESTORS, INC.,
Plaintiff,
v.
OPINION AND ORDER
03 Civ. 5911 (SAS)
VIVENDI, S.A. (sued as VIVENDI
UNIVERSAL, S.A.),
Defendant.
GAMCO GLOBAL SERIES FUNDS, INC.,
GABELLI CAPITAL ASSET FUND, THE
GABELLI VALUE FUND, INC., THE
GABELLI ASSET FUND, THE GABELLI
GLOBAL MULTIMEDIA TRUST, INC.,
and THE GABELLI EQUITY TRUST,
INC.,
09 Civ. 7962 (SAS)
Plaintiffs,
v.
VIVENDI, S.A.,
Defendant.
--------------------------------x
SHIRA A. SCHEINDLIN, U.S.D.J.:
I.
INTRODUCTION
Plaintiffs bring this securities fraud action under Section 1 O(b) of tbe
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.1 They
allege that a number of material misstatements and omissions made by defendant
Vivendi, S.A. (“Vivendi”) artificially inflated the price of Vivendi American
Depositary Shares (“ADS’s”), and that plaintiffs were harmed when they relied on
this inflated price in connection with Vivendi ADS’s that they purchased on the
New York Stock Exchange (“NYSE”) during the period running from October 30,
2000 through August 14, 2002 (the “Relevant Period”).
Vivendi is collaterally estopped from denying any of the elements of
plaintiffs’ Section 10(b) claim save for reliance; plaintiffs are entitled to the fraud
on the market presumption of reliance; and neither truth on the market nor
allegations of no price impact are available as defenses to that presumption.2
Moreover, the parties agree that: (1) during the Relevant Period, plaintiffs did not
possess non-public corrective information about Vivendi’s misstatements;3 (2) the
plaintiffs did not directly rely on Vivendi’s material misstatements;4 (3) during the
1
The Court has subject matter jurisdiction over this Section 10(b) claim
under 28 U.S.C. § 1331, and venue is proper.
2
See GAMCO Investors, Inc. v. Vivendi, S.A. (“SJ Op.”), 2013 WL
132583, at *1 (S.D.N.Y. Jan. 10, 2013); Joint Pre-Trial Order (“JPTO”) at 21-22.
3
See JPTO at 13.
4
See Plaintiffs’ Trial Memorandum of Law (“Pl. Mem.”) at 1.
2
Relevant Period, the market for Vivendi ADS’s was efficient;5 and (4) if plaintiffs
are entitled to damages, such damages shall total $3,544,917.68, exclusive of any
applicable pre-judgment interest.6
In short, the only issue in this case is whether Vivendi can rebut the
fraud on the market presumption of reliance. Moreover, Vivendi must attempt this
rebuttal without arguing that the market for Vivendi ADS’s was inefficient, that
there was no price impact, that the truth about Vivendi’s misstatements was known
to the market, or that the plaintiffs were in possession of corrective non-public
information. A bench trial on this narrow issue was held from February 18, 2013
to February 19, 2013. The following findings of fact and conclusions of law are
made under Rule 52(a) of the Federal Rules of Civil Procedure (“FRCP”). In
reaching these findings and conclusions, I heard the evidence, observed the
demeanor of the witnesses, and considered the arguments and submissions of
counsel. For the following reasons, judgment shall be entered in favor of Vivendi.
5
See JPTO at 3. More specifically, the parties stipulate that, during the
Relevant Period, the market for Vivendi ADS’s was efficient under the factors set
forth in Cammer v. Bloom, 711 F. Supp. 1264 (D.N.J. 1989). See 2/18/13 Trial
Transcript (“Tr.”) at 149:1-7.
6
See JPTO at 13. But cf. id. at 13 n.2 (stating that this stipulation is
contingent on the prospective judgment in the Vivendi class action not being
reversed, modified, or vacated on appeal).
3
II.
FINDINGS OF FACT 7
A.
The Parties
1.
Plaintiffs
The plaintiffs in this case are a number of companies that, during the
Relevant Period, were subsidiaries of Gabelli Asset Management, Inc. (“GBL,”
and collectively with its subsidiaries, the “Gabelli Family”).8 GBL was founded by
Mario Gabelli, who served as the Chairman, Chief Executive Officer, and Chief
Investment Officer (“CIO”) of GBL during the Relevant Period.9 During the
Relevant Period, plaintiff GAMCO Investors, Inc. (“GAMCO”), a wholly owned
subsidiary of GBL, was a registered investment advisor providing managed
account services to a broad array of clients.10 In essence, GAMCO functioned as
an investment advisor and asset management service for institutional investors and
7
Familiarity with the prior proceedings in this case is assumed.
8
See JPTO at 3.
9
See id.; Pl. Mem. at 3. Somewhat confusingly, GBL changed its name
in 2005 to GAMCO Investors, Inc., which, during the Relevant Period, was the
name of a separate entity that is a plaintiff in this case. See 2/18/13 Trial
Transcript (“Tr.”) (Direct Examination of Douglas Jamieson (“Jamieson Direct”))
at 116:6-12. The companies in question will be referred to by their Relevant
Period names, except where otherwise noted.
10
See JPTO at 3.
4
high net-worth individuals.11
During the same period, Gabelli Funds, LLC, another subsidiary of
GBL, managed plaintiffs GAMCO Global Series Funds, Inc., Gabelli Capital Asset
Fund, The Gabelli Value Fund, Inc., The Gabelli Asset Fund, The Gabelli Global
Multimedia Trust, Inc., and The Gabelli Equity Trust, Inc. (collectively, the
“Mutual Fund Plaintiffs,” and collectively with GAMCO, the “Plaintiffs”).12 The
Mutual Fund Plaintiffs were a group of proprietary mutual funds within the Gabelli
Family.13
Finally, throughout the Relevant Period, Gabelli & Company, Inc.
(“Gabelli & Co.”) was an indirect subsidiary of GBL, with Gabelli Securities, Inc.
interposed in the middle.14 It served as “the research arm of GBL[,]” in which
capacity it “performed research for GAMCO and the Mutual Fund Plaintiffs.”15
Specifically, during the Relevant Period, investment analysts
employed by Gabelli & Co. performed research for the benefit of, among others,
portfolio managers at GAMCO and the Mutual Fund Plaintiffs, and reported the
11
See 2/18/13 Tr. (Jamieson Direct) at 117:5-22.
12
See id. at 118:10-119:12.
13
See id. at 118:14-17.
14
See id. at 120:10-17.
15
JPTO at 3.
5
results of this research, — as well as recommendations as to whether to buy, sell,
or hold securities — at daily morning meetings held by GBL.16
2.
Defendant17
Defendant Vivendi is a French multimedia company that listed ADS’s
on the NYSE during the Relevant Period. Beginning in the late 1990s, it engaged
in a series of mergers and acquisitions, including a three-way merger between
Vivendi, The Seagram Company Ltd., and Canal Plus, S.A. that was announced on
October 30, 2000. As a result of this activity, Vivendi took on significant debt,
and eventually faced a liquidity crisis. The material misstatements and omissions
during the Relevant Period all relate to Vivendi’s alleged attempts to cover up this
liquidity crisis.
In the class action, plaintiffs’ expert witness, Dr. Blaine Nye,
identified January 7, 2002, May 3, June 21, June 24, July 2, July 3, July 10, July
15, and August 14, 2002 as dates on which corrective disclosures revealed
16
See 2/18/13 Tr. (Jamieson Direct) at 122:6-8.
17
Certain facts found in this section are drawn from the opinion In re
Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512 (S.D.N.Y. 2011). The
Court takes judicial notice of these facts under Federal Rules of Evidence
201(b)(2). These facts are not materially in dispute for the purposes of this motion,
although both parties continue to preserve all objections for appeal.
6
Vivendi’s true liquidity condition and alleged fraud.18 By August 14, 2002, these
corrective disclosures had completely revealed Vivendi’s true liquidity condition,
and the full extent of the alleged fraud.19 I will therefore refer to the period
running from January 7, 2002 to August 14, 2002 as the “Corrective Disclosure
Period.”
B.
The Witnesses
Five witnesses testified at the trial: Andrew Rittenberry, Douglas
Jamieson, Bruce Alpert, Anthony Hartswell Woodson III,20 and Mario Gabelli.
After graduating from Columbia Business School in 2000, Rittenberry worked as
an investment analyst for Gabelli & Co. from July 2000 to early 2004.21 In this
capacity, he was assigned to follow the media industry, i.e., keep track of trends
and monitor GBL’s holdings in the industry, and communicate his findings to
18
See JPTO at 3.
19
See id.
20
The parties stipulated that Woodson was unavailable for trial within
the meaning of FRCP 32(a)(4). See JPTO at 14 n.3. As a result, his testimony was
received through a videotaped deposition played in court during the first day of the
trial. This presentation allowed the Court to evaluate Woodson’s demeanor. The
parties subsequently submitted a transcript of Woodson’s deposition for the
Court’s review.
21
See 2/18/13 Tr. (Direct Examination of Andrew Rittenberry
(“Rittenberry Direct”)) at 30:3-31:1.
7
portfolio managers in the Gabelli Family.22 During the Relevant Period, he was the
only analyst at Gabelli & Co. who followed Vivendi.23
Like Rittenberry, Jamieson graduated from Columbia Business
School before starting his career at the Gabelli Family in 1981.24 During the
Relevant Period, Jamieson was employed as the Chief Operating Officer of
GAMCO, in which capacity he continues to serve today (although GAMCO’s
name has since changed).25
After earning a Master’s degree in Business Administration from
Rensselaer Polytechnic Institute in 1974, Alpert worked as an auditor for
PriceWaterhouse for eight years, before leaving to serve as Vice-President and
Treasurer of Smith Barney’s mutual funds for two years.26 Since 1988, Alpert has
served as the Chief Operating Officer of Gabelli Funds, LLC; and during the
Relevant Period, he was the President and Treasurer of the Mutual Fund
22
See id. at 31:2-20.
23
See id. at 33:3-5.
24
See id. (Jamieson Direct) at 115:1-5.
25
See id. at 115:14-115:3.
26
See id. (Direct Examination of Bruce Alpert (“Alpert Direct”)) at
131:22-132:7.
8
Plaintiffs.27
Woodson worked for a company in the Gabelli Family — likely GBL
— from November of 1993 to February 28, 2006.28 From April 2001 through
December 2004, Woodson managed GBL’s London office; for the rest of his
tenure at GBL, he served as a Senior Vice President.29 In this capacity, and during
the Relevant Period, he managed investment accounts on behalf of GAMCO
clients, and served as the portfolio manager of certain GBL mutual funds that
invested in convertible bonds.30
Mario Gabelli founded Gabelli & Company on January 1, 1977, and
he has worked for the Gabelli Family ever since.31 In his capacity as CIO during
the Relevant Period, Gabelli had ultimate responsibility for the investments made
by the Gabelli Family, although portfolio managers serving under Gabelli
generally made the day-to-day decisions as to which securities to buy, sell, or
27
See id. at 132:17-19; 133:25-134:10.
28
See 8/3/06 Deposition of Anthony Hartswell Woodson III (“Woodson
Dep.”) at 6:17-7:16.
29
See id. at 7:17-24.
30
Id. at 17:19-20:16; 25:12-23.
31
See 2/19/13 Tr. (Direct Examination of Mario Gabelli (“Gabelli
Direct”)) at 159:1-10.
9
hold.32
A few words on Gabelli’s demeanor and credibility are warranted.
Gabelli appeared ill at ease with answering direct questions candidly, as if he took
his oath subject to the reservation that he be permitted to define “the truth.”
Consistent with this understanding, Gabelli interpreted simple questions as
invitations to philosophize, prevaricate, and palaver.33 He would not directly
answer whether he had read or endorsed an article that appeared in Cigar
Afficionado under his name.34 Similarly, when asked whether the December 31,
32
See id. at 159:16-19; Woodson Dep. at 20:4-16.
33
See, e.g., 2/19/13 Tr. (Gabelli Direct) at 193:16-24 (“Q. [Referring to
an article written by Mario Gabelli] Does that [passage] suggest that the [] public
market price might not be an accurate reflection of intrinsic value, depending upon
investor psychology? A. On a given day, the market knows everything that exists
to the degree that that price in the public market reflects that, that would reflect all
of the elements. For example, when President Eisenhower got assassinated — not
assassinated, had a heart attack, the market dropped sharply. And it reflected that
dynamic.”); id. at 227:18-228:6 (Redirect Examination of Mario Gabelli (“Gabelli
Redirect”)) (“Q. Do you actually remember what determinations preceded your
decision to purchase Vivendi stock during the [R]elevant [P]eriod? A. The mosaic
that I follow, as a race car driver or a pilot and a checklist, if I were a pilot there
would be a checklist. I don’t have a checklist on my desk. But trained as a
professional, there are things that I ask daily/weekly in terms of the portfolio and
the security that we select: What is the price in the public markets? [H]ow much
do I want to own for this client? [A]nd so on. Those are the elements, if you’re
asking me what I would look at. Q. Could you answer my question. A. I thought I
did.”).
34
See id. at 191:7-23 (discussing Defendant’s Exhibit (“DX”) Z at
00000033-35) (pin citations to exhibits refer to their Bates numbers) (article
10
2000 Annual Report of the Gabelli Asset Fund bore his signature,35 he stated that
“[i]t is a facsimile of one of the many signatures that I use that are on file for
me[,]”36 and then affected surprise that the contents of a document bearing his
signature might be imputed to him.37
Gabelli’s attitude is fairly encapsulated by an answer he gave when
confronted with his deposition testimony during the trial:
Q
[Reading a passage from Gabelli’s deposition transcript]
Was that answer true at the time you gave it?
A.
There were many questions prior to that, and I tend to talk
a lot and explain a lot. Obviously, I’m not going to say this
is not true, but I don’t know the context in which it’s true
prepared for Cigar Afficionado Magazine, under Mario Gabelli’s name, affixed to
December 31, 2001 Annual Report of The Gabelli Asset Fund) (“The Court: Do
you know if this is the text of an article you wrote for Cigar Afficionado? The
Witness: You know, I can’t remember, but my name is on it, and I have had help
preparing and editing articles in the past. And this may be one of those. Q: By
allowing your name to be put on it, did you adopt it as yours? A: I don’t
understand the question. The Court: Well, by letting it be published as an article
by Mario J. Gabelli, did you acknowledge it as yours? The Witness: I never wrote
to anyone telling them it’s not something I can live with. I probably didn’t read it
after it was published anyway. The Court: That’s not the question. The Witness: I
know. The Court: If it says ‘by Mario Gabelli,’ do you understand and accept that
it’s yours? The Witness: I have never refuted that it was mine.”).
35
See 12/31/2000 DX D, at 00000017.
36
2/19/13 Tr. (Gabelli Direct) at 199:12-13.
37
See id. at 199:14-200:2.
11
or not true.38
During summations, Plaintiffs’ counsel stated: “I would ask that you accept
[Gabelli] as a person who wants to be precise and that he is trying to be precise in a
very important case.”39 Having observed Gabelli’s demeanor and heard his
testimony, I find that he was not driven by a desire for precision on the witness
stand. Instead, his testimony amounted to motivated hairsplitting by an interested
witness. In short, I find that Gabelli’s testimony was not credible.
C.
Plaintiffs’ Decision to Buy Vivendi ADS’s
1.
Plaintiffs’ Investment Philosophy
Plaintiffs’ investment philosophy is to “identify companies with
dominant industry positions that are selling at substantial discounts to their
intrinsic Private Market Values [(“PMV”])[,]”40 and then find “a catalyst or an
event that will surface value and attract investor attention.”41 The PMV of a
company is the price that an informed industrialist would be willing to pay for it, if
38
Id. (Gabelli Redirect) at 226:10-15.
39
Id. (Plaintiffs’ Summation) at 233:22-24.
40
DX J (3/31/01 Gabelli Asset Management Inc. PowerPoint
Presentation) at 134.0011.
41
Id. at 134.0017.
12
each of its segments were valued independently in a private market sale.42 It is
separate and distinct from the company’s market capitalization, i.e., the public
market price of its shares times the number of shares outstanding, which, according
to the Gabelli Family philosophy, can be irrational and sentimental, thereby
providing value-based investors an opportunity to make a profit.43
GBL invests in a company when its PMV is substantially higher than
its market capitalization, and there is a “catalyst,” i.e., “some dynamic that is going
to . . . cause the market price to rise to the level of” PMV.44 The PMV of a
company, and whether a catalyst exists, are determined using techniques that are
proprietary to GBL.45 This determination involves using “historical knowledge
and experience[,]” “industry knowledge” and “creative thinking” to identify “what
the possibilities could be for a company, to unlock its intrinsic value.”46 The
42
See Woodson Dep. at 145:5-7.
43
See id. at 145:7-21. See also DX Z at 00000033 (“It is our, and every
prudent investor’s job to try to determine the intrinsic value of an individual
company or the market as a whole . . . . Whether stocks trade at, above, or below
intrinsic value is a function of investor psychology. Mr. Market is the code name
the traditional value investor uses to personify investor psychology.”).
44
2/18/13 Tr. (Rittenberry Direct) at 43:4-14. See Woodson Dep. at
149:14-22.
45
See Woodson Dep. at 86:17-87:8
46
Id. at 86:24-87:21.
13
Gabelli Family equates a company’s PMV with its “intrinsic value.”47
During the Relevant Period, Rittenberry — the only analyst at GBL
following Vivendi — calculated the PMV of Vivendi using the proprietary
techniques that he learned at Gabelli & Co.48 Based on Rittenberry’s calculation of
Vivendi’s PMV, during the Relevant Period, Vivendi securities were trading at a
substantial discount to Vivendi’s PMV per ADS.49 Mario Gabelli personally asked
for and reviewed Rittenberry’s calculation of Vivendi’s PMV during the Relevant
47
See, e.g., DX N (5/12/01 Gabelli Asset Management, Inc. PowerPoint
presentation, Sixteenth Annual Meeting held at the Pierre Hotel, New York City) at
0042-0044 (describing GBL’s “investment process” as “identify[ing] [the] intrinsic
value of each business”); id. at 0049 (a graph entitled “PMV vs. Mr. Market”
showing that GBL’s investment strategy is to buy shares when their public market
value is below their PMV per share); DX AZ (7/26/06 Gabelli promotional
materials sent to investors) at 0009 (“Our goal is to identify companies in the
public market that are selling at differences to their intrinsic or private market
values”); DX BE (12/27/12 print-out from GAMCO website) (“GAMCO Investors,
Inc. is best known for its research-driven, value-oriented equity investing expertise
. . . investing in undervalued companies that have a high probability of achieving
their intrinsic or private value over time.”); Woodson Dep. at 77:17-24 (“[E]very
analyst [at GBL] typically does an in-depth analysis of the companies that they’re
covering by constructing an Excel type based spreadsheet [i.e., PMV] which
analyzes the different business segments of the firm in order to establish what we
think its intrinsic value is[.]”); 2/18/13 Tr. (Jamieson Direct) at 123:6-12 (“Q. And
undervalued in this context means that the public stock price of a company was
trading below its intrinsic value, correct? A. Yes. Q. And that intrinsic value was
represented by GAMCO’s calculation of that company’s [PMV], right? A. Yes.”).
48
See 2/18/13 Tr. (Rittenberry Direct) at 47:15-17.
49
See DX AU (01/11/01 print-out of Rittenberry spreadsheet calculating
Vivendi’s PMV).
14
Period.50 Rittenberry also sent his estimation of Vivendi’s PMV to Marc Gabelli, a
portfolio manager at Gabelli, and Vicent Roche, a trader at Gabelli, on April 5,
2001.51 And Woodson relied on Rittenberry’s analysis of Vivendi’s PMV in his
decision to purchase high-yield Vivendi bonds, from which I infer that senior
management at Vivendi trusted Rittenberry’s analysis.52 This inference is
strengthened by the fact that, during the Relevant Period, Plaintiffs repeatedly used
Vivendi in presentations to shareholders and actual and prospective customers as
an illustration of a company whose securities traded at a substantial discount to its
PMV.53
Based on his calculation of Vivendi’s PMV, and the spread between
that PMV and the market price of Vivendi securities, Rittenberry consistently gave
a “buy” or “hold” recommendation on Vivendi securities during the Relevant
Period.54 Rittenberry was aware of the liquidity crisis at Vivendi in 2002, but, by
50
See DX X (2001 print-out of Rittenberry spreadsheet calculating
Vivendi’s PMV, containing handwritten notes by Gabelli); 2/19/13 Tr. (Gabelli
Redirect) at 229:19-230:2; 2/18/13 Tr. (Rittenberry Direct) at 61:2-21.
51
See 2/18/13 Tr. (Rittenberry Direct) at 63:2-20; DX K (4/5/01 e-mail
from Rittenberry to Marc Gabelli and Vincent Roche).
52
See Woodson Dep. at 238:17-239:20.
53
See DX G, N, T.
54
See 2/18/13 Tr. (Rittenberry Direct) at 72:7-20; 83:23-24; 84:10-17.
15
reducing the market price for Vivendi ADS’s without affecting its PMV, this crisis
only strengthened Rittenberry’s “buy” or “hold” recommendation.55 Rittenberry’s
“buy” or “hold” recommendation on Vivendi securities was further strengthened
by his view that the liquidity problems at Vivendi were a short-term concern,
which would not trouble a longer-term investor like Mario Gabelli.56
I find that Rittenberry’s conclusion that Vivendi’s liquidity crisis was
a short-term concern that made it a more attractive investment, by reducing the
public market price of Vivendi securities without reducing its PMV, was shared by
the Gabelli Family, including Mario Gabelli. On July 1, 2002, Mario Gabelli
commented that Vivendi had “a wonderful array of assets,” and that “Vivendi is a
good business[;]” on June 25, 2007, Gabelli testified that his “view of [Vivendi’s]
assets has not changed;”57 and at the trial, he testified that he is “still buying”
55
See id. (Rittenberry Direct) at 85:10-86:10; id. (Cross-Examination of
Rittenberry) at 90:17-21 (“The Court: If the price was inflated and you stripped
that inflation out, the market value would be even lower and the discount would be
bigger, between the private market and the market price, right? The Witness:
Yes.”). See also DX AB (2/1/01 e-mail from Rittenberry to Ken Egusa, analyst at
Gabelli & Co. tasked with analyzing certain Japanese companies) (indicating that
Rittenberry was aware that Vivendi had liquidity issues).
56
See 2/18/13 Tr. (Rittenberry Direct) at 86:11-87:1 (testifying that
Mario Gabelli is a long-term investor, and that, during the Relevant Period, he
believed that the liquidity problems at Vivendi were a short-term problem).
57
6/25/07 Deposition of Mario Gabelli at 190:22-194:23.
16
Vivendi securities.58 Further, “the intrinsic value [of a company] from the
perspective of GAMCO and the [M]utual [F]und [P]laintiffs is represented by their
calculations of [PMV][,]”59 and only Rittenberry calculated Vivendi’s PMV during
the Relevant Period.
Consistent with Rittenberry’s recommendations and calculation of
Vivendi’s PMV, Plaintiffs doubled or tripled their holdings in Vivendi ADS’s
during the Corrective Disclosure Period.60 Plaintiffs have argued that these postdisclosure purchases were driven by Vivendi’s hiring of a new CEO, Jean–Rene3
Fourtou.61 This argument has no basis in the record: no witness credibly testified
in support of it; there is no discernible relationship between Plaintiffs’ transactions
and Fourtou’s appointment as CEO on July 4, 2002; and Fourtou’s appointment is
not discussed in a contemporaneous record of Rittenberry’s recommendations as to
58
2/19/13 Tr. (Gabelli Redirect) at 223:6.
59
Id. (Jamieson Direct) at 119:22-25. Accord id. at 128:17-129:23
(testifying that GAMCO and the Mutual Fund Plaintiffs used PMV, supplemented
by earnings per share and free and clear cash flow, to make investment decisions);
id. (Alpert Direct) at 134:23-135:20 (verifying that the Mutual Fund Plaintiffs and
GAMCO utilized the spread between PMV and market price to make investment
decisions).
60
See JPTO at 7-11.
61
See 2/18/13 Tr. (Plaintiffs’ Opening Argument) at 10:6-10.
17
Vivendi.62
Plaintiffs’ Corrective Disclosure Period purchases of Vivendi ADS’s
reinforce my finding that Vivendi’s liquidity crisis was irrelevant to Plaintiffs’
decision to purchase Vivendi securities during the Relevant Period. One example
is particularly telling. On July 1, 2002, Moody’s downgraded Vivendi to junk
status; the next day, Standard & Poor’s downgraded Vivendi to one notch above
junk status.63 That same day, on July 2, 2002, Mario Gabelli caused Plaintiffs to
purchase 312,000 Vivendi ADS’s, despite having “learned about what happened at
Vivendi with Messier [Vivendi’s then-CEO] and the challenges with regards to
what he said publicly on liquidity . . . .”64
In sum, I find that, throughout the Relevant Period: (1) Plaintiffs were
value-based investors who utilized a propriety metric known as PMV to evaluate
the intrinsic value of Vivendi securities; (2) the calculation of PMV relied upon by
Plaintiffs to evaluate Vivendi was significantly higher than Vivendi’s market price;
(3) the market price of Vivendi securities factored into Plaintiffs’ investment
decision only as a comparator with PMV; and (4) the liquidity crisis at Vivendi
62
See DX V (8/20/02 GBL Morning Meeting Notes) at 0003.
63
In re Vivendi Universal, S.A. Sec. Litig., 634 F. Supp. 2d 352, 358
(S.D.N.Y. 2009).
64
2/19/13 Tr. (Gabelli Redirect) at 222:23-25.
18
was irrelevant to Plaintiffs’ investment decisions, except to the extent that each
corrective disclosure made Vivendi a more attractive investment, by increasing the
spread between Vivendi’s PMV and its market price.
II.
APPLICABLE LAW
A.
The Fraud on the Market Presumption Under Section 10(b)
“[R]eliance upon [a] misrepresentation or omission” is an element of a
private securities fraud claim brought under Section 10(b) and Securities and
Exchange Commission Rule 10b–5.65 To prove reliance, the plaintiff must show
that but for the misstatement or omission, she would not have transacted in the
security.66 “The traditional (and most direct) way a plaintiff can demonstrate
reliance is by showing that he was aware of a company’s statement and engaged in
a relevant transaction — e.g., purchasing common stock — based on that specific
65
Ashland Inc. v. Morgan Stanley & Co., Inc., 652 F.3d 333, 337 (2d
Cir. 2011) (quoting Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552
U.S. 148, 157 (2008)). Accord Erica P. John Fund, Inc. v. Halliburton Co., —
U.S. — , 131 S.Ct. 2179, 2184 (2011).
66
See ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 106 (2d
Cir. 2007) (“Transaction causation [i.e. reliance] only requires allegations that but
for the claimed misrepresentations or omissions, the plaintiff would not have
entered into the detrimental securities transaction.”) (quotation marks and citations
omitted). Cf. Stoneridge Inv. Partners, LLC, 552 U.S. at 160 (“[R]eliance is tied to
causation, leading to the inquiry whether respondents’ acts were immediate or
remote to the injury”).
19
misrepresentation.”67
In Basic v. Levinson the Supreme Court held that an investor who
bought or sold securities in an efficient market may avail herself of the
presumption that she “relied on the integrity of the price set by the market . . . .”68
The Court reasoned that “[b]ecause most publicly available information is reflected
in [the] market price, an investor’s reliance on any public material
misrepresentations, therefore, may be presumed for purposes of a Rule 10b-5
action.”69 As long as the “plaintiffs can show that the alleged misrepresentation
was material and publicly transmitted into a well-developed market, then reliance
will be presumed . . . .”70
The fraud on the market presumption announced in Basic allowed
plaintiffs to proceed with securities fraud claims without having to show that they
were personally aware of, and relied on, a company’s misrepresentations. Through
67
Erica P. John Fund, Inc., 131 S.Ct. at 2185.
68
485 U.S. 224, 227 (1988). Similarly, reliance on omissions may be
presumed when the omissions are material and the issuer had a duty to disclose.
See Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 153-54 (1972).
69
Basic, 485 U.S. at 247. Accord Hevesi v. Citigroup Inc., 366 F.3d 70,
77 (2d Cir. 2004).
70
In re Salomon Analyst Metromedia Litig., 544 F.3d 474, 483 (2d Cir.
2008).
20
this rule, the Supreme Court sought to alleviate the difficult evidentiary issues and
problems with class certification that commonly arise in securities fraud actions.71
However, because the purpose of federal securities law is “not to provide investors
with broad insurance against market losses, but to protect them against those
economic losses that misrepresentations actually cause[,]” the fraud on the market
theory of reliance was made rebuttable.72
The Second Circuit has consistently stated that “[t]he . . .
fraud-on-the-market theory involves two rebuttable presumptions that permit a
finding of . . . reliance . . . : ‘that (1) misrepresentations by an issuer affect the price
of securities traded in the open market, and (2) investors rely on the market price of
securities as an accurate measure of their intrinsic value.’”73 This formulation
71
See Erica P. John Fund, Inc., 131 S.Ct. at 2185 (noting that the
holding of Basic was made in response to the evidentiary issues posed by modern
impersonal markets, as well as the difficulty of class certification where direct
proof of reliance was required).
72
Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 345 (2005) (citing Basic,
485 U.S. at 251-52 (White, J., joined by O’Connor, J., concurring in part and
dissenting in part) (“A nonrebuttable presumption of reliance – or even worse,
allowing recovery in the face of affirmative evidence of nonreliance, – would
effectively convert Rule 10b-5 into a scheme of investor’s insurance.”) (quotation
marks and citations omitted)).
73
In re Am. Int’l Grp., Inc. Sec. Litig., 689 F.3d 229, 234 n.3 (2d Cir.
2012) (quoting Teamsters Local 445 Freight Div. Pension Fund v. Bombardier
Inc., 546 F.3d 196, 200 n.4 (2d Cir. 2008) (quoting Hevesi, 366 F.3d at 77)).
21
flows directly from Basic itself, which supports its holding with a line of cases that
analogize the efficient market price of a security to an investor’s “‘unpaid agent,’”
who performs the role that the investor would play in a face-to-face transaction,
“‘informing him that given all the information available to it, the value of the stock
is worth the market price.’”74
In order to invoke the fraud on the market presumption, “plaintiffs
must demonstrate that the alleged misrepresentations were publicly known[,] . . .
that the stock traded in an efficient market, and that the relevant transaction took
place between the time the misrepresentations were made and the time the truth
was revealed.”75 If the plaintiff makes this showing, the burden shifts to the
defendant to rebut the presumption of reliance.76
74
Basic, 485 U.S. at 244 (quoting In re LTV Sec. Litig., 88 F.R.D. 134,
143 (N.D. Tex. 1980)). The court in In re LTV Securities Litigation goes on to
state that: “If the investor did not rely on such agent, there has been no reliance.
Thus a defendant should be able to attack such an investor’s claim in much the
same way he would in a face-to-face transaction — being allowed to offer proof
that the reliance was upon matters extraneous to the market (to rebut the
presumption).” 88 F.R.D. at 143-44.
75
Erica P. John Fund, Inc., 131 S.Ct. at 2185 (quotation marks and
citations omitted).
76
Until recently, plaintiffs in this Circuit also had to show materiality in
order to proceed with a class action on a fraud on the market theory. See In re
Salomon Analyst Metromedia Litig., 544 F.3d at 481. A misstatement is material
when “there [is][] a substantial likelihood that the disclosure of the omitted fact
would have been viewed by the reasonable investor as having significantly altered
22
Basic states that: “[a]ny showing that severs the link between the
alleged misrepresentation and either the price received (or paid) by the plaintiff, or
[her] decision to trade at a fair market price, will be sufficient to rebut the
presumption of reliance.”77 In addition to stating this general rule, Basic also
provides two examples of circumstances where the presumption may be rebutted:
(1) when the falsity of the misstatements is already known to the market, such that
there is no price impact; and (2) when the investor would have transacted in the
security regardless of what was known or not known about the issuer or its stock.78
The first example — sometimes termed “truth on the market” —
could be classified as a mode of negating fraud entirely, rather than rebutting the
fraud on the market theory.79 Similarly, a showing that the market in question was
the total mix of information made available.” Basic, 485 U.S. at 231–32 (quotation
marks and citations omitted). Today, the Supreme Court decided Amgen Inc. v.
Connecticut Ret. Plans and Trust Funds, which holds that proof of materiality is
not a precondition to class certification. No. 11–1085, 568 U.S. —, 2013 WL
691001 (Feb. 27, 2012).
77
Basic, 485 U.S. at 248.
78
See id.
79
See Daniel R. Fischel, Efficient Capital Markets, the Crash, and the
Fraud on the Market Theory, 74 C ORNELL L. R EV. 907, 918-19 (1988) (“In the first
situation where the market price is not artificially inflated because the truth
becomes known from other sources, it is inaccurate to suggest that the presumption
of reliance is rebutted. In fact, the example has nothing to do with reliance.
Investors do not rely any less on the market price because that price has not been
artificially inflated. It would be more accurate to characterize this situation as one
23
not efficient does not really ‘rebut’ the presumption, but rather shows that it does
not apply in the first place: reliance on the price set by an efficient market is
impossible when the market is not efficient.80 These arguments — i.e., truth on the
market and market inefficiency — are susceptible to proof on a class-wide basis.81
True rebuttals of the presumption — i.e., arguments that the investors
in question did not in fact “rely on the market price of securities as an accurate
measure of their intrinsic value”82 — often “require an individualized inquiry into
the buying and selling decisions of particular class members[,]”83 and as such are
less susceptible to proof on a class-wide basis. In short, a class may be certified
despite the presence of members who allegedly did not rely on the integrity of the
where no fraud on the market occurred.”).
80
Cf. In re Initial Public Offerings (“IPO”) Sec. Litig., 471 F.3d 24, 42
(2d Cir. 2006).
81
See In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d at 584.
Cf. Amgen Inc. et al., No. 11–1085, 568 U.S. —, 2013 WL 691001, slip op. at 17
(“Materiality thus differs from the market-efficiency and publicity predicates in
this critical respect: While the failure of common, classwide proof on the issues of
market efficiency and publicity leaves open the prospect of individualized proof of
reliance, the failure of common proof on the issue of materiality ends the case for
the class and for all individuals alleged to compose the class.”).
82
In re Am. Int’l Grp., Inc. Sec. Litig., 689 F.3d at 234 n.3 (quotation
marks and citations omitted).
83
In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d at 584.
24
market.84 When this occurs, questions of individual reliance will call for
individualized proof, which may be taken at separate trials after the class-wide trial
has completed.85
This case turns entirely on whether Vivendi has successfully rebutted
Plaintiffs’ reliance on the misrepresentations and omissions that were incorporated
into the market price of Vivendi ADS’s. In addressing how individual reliance
may be rebutted, the Basic court explained:
Petitioners also could rebut the presumption of reliance as to
plaintiffs who would have divested themselves of their Basic
shares without relying on the integrity of the market. For
example, a plaintiff who believed that Basic’s statements [falsely
disclaiming the possibility of a merger] were false and that Basic
was indeed engaged in merger discussions, and who consequently
believed that Basic stock was artificially underpriced, but sold his
shares nevertheless because of other unrelated concerns, e.g.,
84
See, e.g., In re Lehman Bros. Sec. & ERISA Litig., No. 08 Civ. 5523,
2013 WL 440622, at *2 (S.D.N.Y. Jan. 23, 2013) (“Tracking an index for an
efficient market is sufficient reliance for the purpose of class certification”)
(citations omitted); In re WorldCom, Inc. Sec. Litig., 219 F.R.D. 267, 282
(S.D.N.Y. 2003) (rejecting argument that institutional investor named plaintiffs
were atypical and subject to unique defenses, because “[m]aking careful
investment decisions does not disqualify an investor from representing a class of
defrauded investors or from relying on the presumption of reliance”). Cf. Maywalt
v. Parker & Parsley Petroleum Co., 147 F.R.D. 51, 54 (S.D.N.Y. 1993) (“[T]he
Second Circuit has directed district courts to apply Rule 23 according to a liberal
rather than a restrictive interpretation and has explicitly noted its preference for
class certification in securities cases.”) (citations omitted).
85
See In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d at 58485 (collecting cases).
25
potential antitrust problems, or political pressures to divest from
shares of certain businesses, could not be said to have relied on
the integrity of a price he knew had been manipulated.86
This quote illustrates that the fraud on the market presumption is rebuttable when
the plaintiff traded “without relying on the integrity of the market.”87 Equivalently,
in the Second Circuit’s formulation, the presumption is rebutted if the plaintiff did
not “rely on the market price of [the] securit[y] as an accurate measure of [its]
intrinsic value.”88
III.
CONCLUSIONS OF LAW
Even before Basic, one court held that “given the force of the [fraud
on the market] presumption (carrying a burden of proving a purchase would have
been made even if the truth were known)[,]” attempts to rebut the presumption
“would likely be futile in the vast number of cases.”89 In part, this is because “[t]he
finding of materiality by its very nature establishes that the information omitted
would have been considered important by investors generally. It thus will be only
the unusual case in which compatible findings of materiality and nonreliance can
86
Basic, 485 U.S. at 249.
87
Id.
88
In re Am. Int’l Grp., Inc. Sec. Litig., 689 F.3d at 234 n.3 (quotation
marks omitted).
89
In re LTV Sec. Litig., 88 F.R.D. at 143.
26
be made.”90 And much of the force of Justice White’s dissent in Basic springs
from his concern that the majority’s opinion “allows investors to recover who can
show little more than that they sold stock at a lower price than what might have
been[,]” because “in practice . . . rebuttal is virtually impossible in all but the most
extraordinary case.”91
Based on the findings of fact set forth above, I conclude that this is
just such an extraordinary case. As the Supreme Court recently explained, the
fraud on the market presumption of reliance arises because, in an efficient market:
[I]t is reasonable to presume that most investors — knowing that
they have little hope of outperforming the market in the long run
based solely on their analysis of publicly available information —
will rely on the security’s market price as an unbiased assessment
of the security’s value in light of all public information. Thus,
courts may presume that investors trading in efficient markets
indirectly rely on public, material misrepresentations through their
reliance on the integrity of the price set by the market.92
The Supreme Court has also stated that: “[r]eliance . . . upon the defendant’s
deceptive acts is an essential element of the § 10(b) private cause of action . . .
90
duPont v. Brady, 828 F.2d 75, 78 (2d Cir. 1987) (discussing the
Affiliated Ute presumption).
91
Basic, 485 U.S. at 256 & n.7 (White, J., joined by O’Connor, J.,
concurring in part and dissenting in part) (citations omitted).
92
Amgen Inc. et al., No. 11–1085, 568 U.S. —, 2013 WL 691001, slip
op. at 5.
27
because proof of reliance ensures that there is a proper connection between a
defendant’s misrepresentation and a plaintiff’s injury.”93 To prove reliance, the
plaintiff must show that “but for the claimed misrepresentations or omissions, [she]
would not have entered into the detrimental securities transaction.”94 Here,
Plaintiffs did not rely on the inflated market price of Vivendi ADS’s as an
“unbiased assessment of [their] value[.]”95 By the same token, it cannot be said
that but for Vivendi’s misstatements and omissions about its liquidity condition,
Plaintiffs would not have transacted in Vivendi ADS’s.
Quite the contrary: PMV, the metric that Plaintiffs used to determine
the intrinsic value of Vivendi ADS’s, is completely independent of liquidity
concerns and market price. There is no indication in the record that Plaintiffs
would have viewed Vivendi as a less attractive investment if Vivendi had fully
disclosed its liquidity condition at all relevant times. In fact, in this counterfactual
scenario, because Plaintiffs’ estimation of Vivendi’s “intrinsic value” — as
measured by PMV — would be unchanged, and, through the irrational whims of
93
Erica P. John Fund, Inc., 131 S.Ct. at 2184 (quotation marks and
citations omitted).
94
ATSI Commc’ns, Inc., 493 F.3d at 106 (quotation marks and citations
omitted).
95
Id.
28
“Mr. Market,” the price of Vivendi ADS’s would have been lower, Plaintiffs
would have seen Vivendi as a more attractive investment. And they did: during the
Corrective Disclosure Period, Plaintiffs doubled or tripled their holdings in
Vivendi securities.
In other words, but for the alleged misrepresentations and omissions,
Plaintiffs would have been more likely to invest in Vivendi. Accordingly, it is
more likely than not that during the Relevant Period, Plaintiffs did not “rely on the
market price of [Vivendi] securities as an accurate measure of their intrinsic
value.’”96 Vivendi has therefore carried its burden and rebutted the fraud on the
market presumption.
This holding is sharply limited to its unusual facts, and should not be
taken to suggest that sophisticated institutional investors or value-based investors
are not entitled to the fraud on the market presumption in general. As courts in this
Circuit have routinely held, the use of sophisticated investment models does not
foreclose a finding of material reliance on market price.97 Similarly, one can
imagine a case where an investor, like the Plaintiffs here, used the market price of a
security merely as a comparator with a private method of valuation, but in which
96
In re Am. Int’l Grp., Inc. Sec. Litig., 689 F.3d 229, 234 n.3 (2d Cir.
2012) (quotation marks and citations omitted).
97
See, e.g., In re WorldCom, Inc. Sec. Litig., 219 F.R.D. at 281.
29
the fraud on the market presumption could not fairly be rebutted, because, but for
the material misstatements, that investor would not have transacted in the securities
at issue.
Because few securities cases proceed to trial — and fewer still are
bench trials — there are few precedents addressing the narrow issue presented
here. The closest case on point appears to be Black v. Finantra Capital, Inc.98 In
Black, the trial court charged the jury that plaintiff Herbert Black, who purchased
restricted securities that could not be sold for several months in a private-market
transaction, was entitled to the presumption that he relied on the market price of
those securities, because the private-sale price was pegged to the public market
price.99 After the jury returned a verdict for Black, the trial court entered judgment
as a matter of law for the defendant, stating that “close review of the transcript now
convinces the Court that defendants proved, out of Black’s own mouth, the absence
of reliance, in a way that no reasonable juror could dispute.”100
The Second Circuit reversed, holding that:
The jury was free to weigh all the testimony, and either to
98
418 F.3d 203 (2d Cir. 2005).
99
See id. at 208.
100
Black v. Finantra Capital, Inc., 286 F. Supp. 2d 339, 342 (S.D.N.Y.
2003).
30
discredit it or to accept a different interpretation of Black’s
testimony that the current market price was “not really relevant
when you can’t sell the stock for six months or three months,”
(Tr. at 104.), or to credit Black’s testimony that he took market
price into account, because, not surprisingly, the current market
price was what determined whether he was “making a good deal.”
(Tr. at 50.) The fact that Black also took other considerations,
such as Finantra’s future prospects, its business plan, and his trust
in the people soliciting his investment, into account in making his
investment decision does not foreclose a finding of material
reliance upon market price.101
The statement that the jury could have properly found reliance on the basis that the
current market price determined whether Black was “making a good deal” could be
taken to suggest that, once it attaches, the fraud on the market presumption is
irrebutable as against any plaintiff who buys a security at market price. This
reading is overly broad: had the Second Circuit intended to announce such a
sweeping principle, it would have done so. Basic plainly allows for the
presumption to be rebutted when the plaintiff would have transacted in the security
regardless of market price,102 and the court in Black was undertaking an inquiry
into whether the plaintiff had “material[ly] reli[ed] upon market price.” A better
reading of the passage, then, is that the Second Circuit was merely holding that the
jury could have properly found that, but for the market price’s inflation due to
101
Black, 418 F.3d at 209-10.
102
See Basic, 485 U.S. at 249.
31
fraud, the plaintiff would not have invested in the securities at issue.
Unlike Herbert Black, the Plaintiffs did not materially rely on market
price in making their investment decision. Instead, as detailed above, had
Vivendi’s fraud been known to the market, the Plaintiffs would have been all the
more eager to invest — which indeed they did, throughout the Corrective
Disclosure Period. Adopting Vivendi’s useful formulation of the transaction
causation test, the market price of Vivendi ADS’s was not the “motivating driving
force” behind Plaintiffs’ investment decision.103
During closing, counsel for Plaintiffs repeatedly stated that Plaintiffs
had “relied on price.”104 Relatedly, in their trial memorandum Plaintiffs argued
that, in order to rebut the presumption, Vivendi must show that “Plaintiffs would
have purchased Vivendi securities in the same transactions and at the same prices
that they did during the Relevant Period had they known that Vivendi and its
management were engaging in an ongoing fraud.”105
Plaintiffs support their “same price” argument with citations to two
103
2/19/13 Tr. (Vivendi’s Closing Argument) at 261:7.
104
Id. (Plaintiffs’ Closing Argument) at 244:6-7 (“Mr. Cappucci: I
understand that. And what I’m saying is that they relied on price. They relied on
price.”).
105
2/11/13 Plaintiffs’ Trial Memorandum of Law (“Pl. Mem.”) at 6.
32
District Court cases from this Circuit.106 A careful reading of these cases reveals
that they do not announce a general principle, but rather explain that one
circumstance where the presumption may be rebutted is when the plaintiff would
have traded at the same price despite knowing of the material misstatements.
Further, both cases cite a Second Circuit case, Kline v. Wolf, which merely holds
that the presumption of reliance may be rebutted when “even if [plaintiff] had
known of the alleged misrepresentation, [she] would still have purchased the
stock.”107 In short, these cases stand for the proposition that a plaintiff’s
willingness to trade at the same price, even knowing of the fraud, is one way that
the presumption may be rebutted, not for the proposition that it is the only way.
Plaintiffs have also argued that the fact that Plaintiffs based their
evaluation of Vivendi ADS’s on PMV “‘should not defeat the fraud-on-the-market
presumption absent convincing proof that price played no part whatsoever in their
106
See id. at 7 (citing Darquea v. Jarden Corp., No. 06 Civ. 722, 2008
WL 622811, at *4 (S.D.N.Y. Mar. 6, 2008) (The “presumption of reliance can be
rebutted, for example, if defendant can show that plaintiff would have purchased
the stock at the same price even if he had known the non-disclosed information.”);
Lawrence v. Philip Morris Cos., Inc., No. 94 Civ. 1494, 1999 WL 51845, at *4
(E.D.N.Y. Jan. 9, 1997) (“[I]f defendant can show that plaintiff would have
purchased the stock at the same price even if he had [] known the non-disclosed
information, defendant will successfully rebut the ‘market reliance’ presumption
and escape liability.”)).
107
702 F.2d 400, 403 (2d Cir. 1983).
33
decision making’ process.”108 Because price will play a part in virtually all
investment decisions, this standard would effectively convert the fraud on the
market theory into an irrebuttable presumption. The standard proposed by
Plaintiffs might be appropriate for class certification — the posture in which the In
re Initial Public Offering decision was made. It cannot, however, be applied at the
merits stage, as this would ignore the holding of Basic that “[a]ny showing that
severs the link between the alleged misrepresentation and either the price received
(or paid) by the plaintiff, or [her] decision to trade at a fair market price, will be
sufficient to rebut the presumption of reliance.”109
During closing argument, I raised my concern that Plaintiffs were
describing an irrebuttable presumption, and asked Plaintiffs’ counsel how, in his
view, the fraud on the market presumption could be rebutted.110 His response
treated two of the examples given in Basic — truth on the market, and instances
where corrective non-public information is known to the plaintiff — as the only
ways that the fraud on the market presumption could be rebutted.111
108
Pl. Mem. at 8 (quoting In re IPO Sec. Litig., 227 F.R.D. 65, 109
(S.D.N.Y. 2004) (emphasis in the original), vacated and remanded, 471 F.3d 24
(2d Cir. 2006)).
109
Basic, 485 U.S. at 248 (emphasis added).
110
See 2/19/13 Tr. (Plaintiffs’ Closing Argument) at 235:16-236:7.
111
See id. at 235:16-237:10.
34
Contrary to Plaintiffs’ view, the examples given in Basic were not
meant to be exhaustive. Basic holds that “[a]ny showing that severs the link
between the alleged misrepresentation and . . . the plaintiff[’s] . . . decision to trade
at a fair market price, will be sufficient to rebut the presumption of reliance.”112
In light of this holding, defendants must be permitted to attempt to rebut the
presumption by showing that plaintiffs would have transacted in securities
notwithstanding any inflation in their market price caused by fraud. A successful
rebuttal of this sort will be exceedingly rare. But it must be allowed here, lest the
securities laws slip the restraints of causation entirely and become a judicially
created investor insurance scheme.113
IV.
CONCLUSION
Based on the findings of fact and conclusions of law stated above, I
hold that Vivendi has rebutted the fraud on the market presumption of reliance.
The Clerk of the Court is directed to enter judgment in Vivendi’s favor and close
this case.
112
Basic, 485 U.S. at 248 (emphasis added).
113
Cf. Dura Pharm., Inc., 544 U.S. at 345.
35
SO ORDERED:
Dated:
New York, New York
February 27, 2013
36
-Appearances-
For Plaintiffs:
Vincent R. Cappucci, Esq.
Arthur V. Nealon, Esq.
Evan T. Raciti, Esq.
Entwistle & Cappucci LLP
280 Park Avenue, 26th Floor West
New York, New York 10017
(212) 894-7200
For Defendant Vivendi, S.A.:
Paul C. Saunders, Esq.
Timothy G. Cameron, Esq.
Margot A. Miller, Esq.
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
37
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