## Facts

- Vivendi, S.A. rapidly expanded from a French utilities company into a global media conglomerate through major acquisitions in 2000–2001, financed largely with debt.
- By 2001–2002, Vivendi faced severe liquidity constraints and risked being unable to meet payment obligations, with evidence suggesting it was months from insolvency.
- A certified investor class purchased Vivendi common stock and American Depository Shares during roughly late 2000 through mid-2002.
- Plaintiffs alleged Vivendi made materially false or misleading statements and omissions understating its liquidity risk, thereby inflating (or maintaining) the market price of Vivendi securities, in violation of Exchange Act § 10(b) and Rule 10b-5 (and related control-person claims under § 20(a)).
- After extensive pretrial proceedings and a three-month jury trial, the jury found Vivendi liable based on dozens of challenged statements concerning liquidity risk.
- Post-trial, the district court narrowed parts of the class and certain claims in light of extraterritorial limits recognized in Morrison v. National Australia Bank Ltd.

## Issues

1. Whether plaintiffs improperly proceeded on a non-actionable “pure omission” theory rather than on identified misstatements or misleading half-truths.
2. Whether the challenged liquidity-related statements were non-actionable as puffery, protected forward-looking statements under the PSLRA safe harbor, or opinions.
3. Whether the evidence was sufficient to support the jury’s findings on material falsity/misleading nature, scienter, and loss causation.
4. Whether the district court abused its discretion by admitting plaintiffs’ event-study expert testimony using an inflation-maintenance (price-maintenance) model.
5. Whether the district court properly excluded certain foreign investors from the class and dismissed claims involving U.S. purchasers of Vivendi ordinary shares under Morrison.

## Decision

- The Second Circuit affirmed the judgment for plaintiffs on the core § 10(b) and Rule 10b-5 liability verdict and related rulings.
- The court held plaintiffs tried the case on specifically identified false or misleading statements, and the jury was not permitted to impose liability on a pure omission theory.
- The court found sufficient evidence that the challenged statements were materially false or misleading regarding Vivendi’s liquidity risk and that the jury’s findings (including scienter) were supported by the record.
- The court rejected Vivendi’s puffery and PSLRA safe-harbor arguments and declined to reach certain “opinion” arguments as unpreserved.
- The court held the district court did not abuse its discretion in admitting the plaintiffs’ expert event-study testimony and concluded the evidence supported loss causation under a price-maintenance theory.
- On plaintiffs’ cross-appeal, the court affirmed the exclusion of certain foreign shareholders from the class and affirmed dismissal of claims by U.S. purchasers of Vivendi ordinary shares under Morrison.

## Legal Principles

- Section 10(b) and Rule 10b-5 liability must be tied to specific misstatements, misleading half-truths, or omissions made misleading by what was said; a “pure omission” theory is not sufficient absent a duty to disclose.
- Statements about liquidity risk can be sufficiently concrete to be material and actionable when the issuer’s actual financial condition makes the risk severe.
- Appellate review may be limited where a defendant fails to preserve arguments in the district court (including certain characterizations of statements as non-actionable opinions).
- Loss causation may be shown where misstatements or half-truths maintained an already-inflated price and the subsequent disclosure of the truth caused the price to decline (price-maintenance theory).
- District courts have discretion to admit event-study expert testimony supporting inflation and dissipation of inflation over time, even if it does not attribute a discrete price increase to each challenged statement.
- After Morrison, Exchange Act claims are limited to domestic transactions; courts may also narrow classes to address manageability and concerns about the binding effect of U.S. judgments on foreign purchasers.

## Conclusion

The Second Circuit upheld a post-trial securities-fraud class-action verdict against Vivendi, concluding that identified liquidity-risk misstatements were actionable and supported by sufficient evidence, that loss causation could rest on a price-maintenance model supported by expert testimony, and that the district court properly limited the class and certain claims consistent with Morrison.


In re Vivendi, S.A. Securities Litig., 838 F.3d 223 (2d Cir. 2016)