Vivendi SA has agreed to pay $26.4 million to settle all remaining disputes in an almost 15-year-old case alleging that it falsely reported “better than expected” financial results after making a series of acquisitions that led it to the brink of bankruptcy. The settlement, which is subject to court approval, was filed in New York federal court on April 6. This closes the book on a Second Circuit appeal and a possible petition for the U.S. Supreme Court to hear the case.
The money will go to 96 investors who appealed to the Second Circuit two New York federal court rulings that granted summary judgment for Vivendi. As a result, those shareholders, clients of investment managers Capital Guardian Trust Co. and Southeastern Asset Management, couldn’t collect damages because the trial court said the companies hadn’t actually relied on the alleged misstatements when trading Vivendi’s stock. If those 96 clients had prevailed in the Second Circuit, they could have been entitled to $79 million, about three times more than the amount offered in the settlement. The appeal was withdrawn after the settlement, which, if approved, will completely end all claims in the long-running litigation.
Investors sued the French media conglomerate in 2002, alleging that it misled investors about its finances after making a series of acquisitions, including a $30 billion buyout of Canada’s The Seagram Co. Ltd. and a $10.3 billion purchase of USA Networks Inc., that put the company $18 billion in debt and led it to the brink of bankruptcy. Before going to trial in 2009, the court certified a class of investors from the United States, France, England and the Netherlands who purchased Vivendi common stock or American depositary shares between 2000 and 2002.
In January 2010, a New York jury found Vivendi liable for the alleged misstatements and, in December 2014, U.S. District Judge Shira Scheindlin entered partial judgment on the bulk of the class claims, awarding $49.7 million in damages and interest. Vivendi took that ruling to the Second Circuit, arguing that the investors presented no actionable claim of securities fraud and that the company’s statements were nonactionable opinion, “puffery” or forward-looking statements. But in September, the Second Circuit rejected Vivendi’s arguments, saying that shareholders had presented enough evidence to the jury to prove Vivendi was liable for the $49.7 million in damages.
The appellate court stood by that ruling in November when it declined to rehear the case. Vivendi was primed to petition the Supreme Court to review the Second Circuit decision, even getting Justice Ruth Bader Ginsburg to grant an extension of time to file a petition for a writ of certiorari until April 10.
The shareholders are represented by Arthur N. Abbey and Stephen T. Rodd of Abbey Spanier LLP. The case is In re Vivendi Universal, S.A. Securities Litigation (case number 1:02-cv-05571) in the U.S. District Court for the Southern District of New York.
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