***Update January 29, 2010***
"The jury in the long-running securities class action lawsuit against Vivendi has resulted in a verdict against the company on all 57 of the plaintiffs’ claims. However, the jury also found that the two individual defendants, former Vivendi CEO Jean Marie Messier and former Vivendi CFO, were not liable. The jury’s verdict reached only the question of liability. Damages will be determined in a later phase. Plaintiffs claim damages of over $11 billion." (via Kevin Lacroix D&O Blog)
Answer: they are both once-in-a-life-time events. Or least that’s what Am Litigation Daily’s Andrew Longstretch posits in the article Extremely Rare F-Cubed Securities Class Action Trial Starts This Week Against Vivendi.
The Litigation Equivalent of Halley’s Comet: In Re Vivendi Universal, S.A.
Mr. Longstretch compares the trial currently underway in the Southern District of New York to Halley’s Comet because it is a-once-in-a-lifetime chance to witness an “f-cubed” securities class action trial. So called because the case involves foreign investors who bought shares of foreign companies on foreign exchanges. Three foreign components, hence cubed.
The class action lawsuit, In Re: Vivendi Universal, S.A., alleges Vivendi; Messier; and Guillaume Hannezo, its former chief financial officer, made material misrepresentations and omissions concerning the firm’s liquidity position, and the truth about its financial health emerged in 2002 when Vivendi announced several asset sales and credit-ratings agencies downgraded its debt.
Lawyers for the shareholders have argued that Vivendi management portrayed the company as financially healthy, but internally management was concerned about potential liquidity problems, which ultimately caused the stock to drop. Judge Richard J. Holwell’s Class Certification Ruling is worth a read.
"Vivendi’s Comet" Closely Watched
The case is being watched closely by the plaintiffs’ bar, which would like to see more foreign investors file international securities suits in U.S. courts. If successful, the case promises to send a stern message that U.S. courts will prosecute and punish foreign companies who use the U.S. as a basis for engaging in fraudulent activity.
You can read more about this extremely rare trial on the Bloomberg website in the article Vivendi Ex-Chief Messier to Testify at Fraud Trial and in the Wall Street Journal article Messier: I Never Commited Fraud as Vivendi’s Chief Executive.
For those of you hoping to catch a glimpse of another F-Cubed securities class action in this lifetime, a bill currently working its way through congress just might make it a regular occurrence.
Could Become Regular Occurrence Under Proposed Bill H.R. 3817
Foreign companies could be sued more easily in U.S. courts under legislation working its way through Congress. The Investor Protection Act of 2009 (H.R. 3817), which was approved by the House financial services committee this month, contains a provision to make it easier for investors to sue public companies in the U.S. even if they are based abroad and listed on overseas exchanges. Section 215 of the proposed Act would in effect legislatively mandate a jurisdictional standard for extraterritoriality.
The proposed language specifies that U.S. courts could properly exercise jurisdiction in any action involving "conduct with the United States that constitutes significant steps in furtherance of violation, even if the securities transaction occurs outside the United States and involves only foreign investors," as well "conduct outside the United States that has a foreseeable substantial effect in the United States."
Under the first of these two prongs, U.S. based conduct alone would be sufficient jurisdictional basis, even with respect to foreign purchasers who purchased their shares of foreign-domiciled companies on foreign exchanges (so-called "f-cubed claimants").
If approved, H.R. 3817 will have a profound effect on international litigation by opening U.S. courts to a torrent of foreign litigation–keeping both sides of the bench busy for years to come. Until then, we’ll be sure to pay close attention to Vivendi’s Comet before it disappears.
Do you think the proposed legislation will pass?