A jury in Manhattan federal court yesterday agreed with Liberty Media’s claim, filed in 2003, that Paris-based Vivendi misled it about a liquidity crisis at the company, artificially inflating the value of its shares, which it used to make the purchase. The verdict is the largest in the U.S. this year, according to data compiled by Bloomberg.
In December 2001, Vivendi agreed to buy the entertainment business of Barry Diller’s USA Networks for $10.3 billion. As part of the transaction, Englewood, Colorado-based Liberty Media received 37.6 million Vivendi shares for its stake in USA Networks and a European television production company.
“The damage award is very gratifying,” said R. Stan Mortenson, a lawyer for Liberty Media. “More importantly, Vivendi was told that it had done wrong.”
The jury of 12 delivered its verdict, in a trial that began May 29, after two partial days of deliberations, according to Mortenson. The verdict was denominated in euros, Mortenson said. Jurors found Vivendi liable for fraud and breach of contract, Liberty Media said in a statement.
Vivendi, the owner of the world’s largest music and video- game companies as well as telecommunications assets, said in a statement yesterday that it will appeal the verdict.
The shares fell as much as 1.9 percent to 13.32 euros at 9:32 a.m. in Paris. The stock has dropped 25 percent in the past 12 months and in April touched its lowest level in nine years, spurring pressure from investors for management to take measures to revive the share price.
Vivendi is trying to keep customers from leaving its French phone unit SFR for new competitor Iliad SA (ILD), which started selling discounted phone packages in January. The company has also looked at revamping its structure, though these discussions have been kept private, people familiar with the matter have said.
Liberty Media intends to seek prejudgment interest, which could almost double the award, according to Mortenson. Liberty Media owns stakes in businesses ranging from cable programmer Starz Media LLC to the Atlanta Braves baseball team.
“Although Liberty expects the defendants to ask the court to set aside the verdict during this process, Liberty is confident that the court will deny that request and that the jury’s decision will stand,” the U.S. company said.
“Vivendi believes that there are many grounds for appeal and continues to believe strongly that it did nothing wrong and will continue to vigorously defend itself in any subsequent appellant proceedings,” the French company said.
In January 2010, a different Manhattan jury found that Vivendi misled shareholders about its financial well-being 57 times from 2000 to 2002. Lawyers for the investors claimed that damages to the entire shareholders’ class totaled $9.3 billion.
In 2011, former U.S. District Judge Richard Richard Holwell dismissed claims by holders of Vivendi’s ordinary shares. The ruling eliminated more than 80 percent of the claimed damages in the case, the company said at the time. The case is pending in Manhattan federal court.
The shareholders’ case was one of only a handful of securities fraud lawsuits that have gone to trial since the law governing such cases was overhauled in 1995. At the time of the verdict, only about six securities-fraud class actions had been tried, out of hundreds filed, Paul Saunders, a lawyer for Vivendi, said at the time. Most cases are settled or dismissed by courts.
Vivendi agreed in 2003 to pay $50 million to settle U.S. Securities and Exchange Commission accusations of civil fraud, and Jean-Marie Messier, the company’s former chief executive officer, agreed to pay a $1 million fine.
The case is Liberty Media Corp. v. Vivendi Universal SA, 03-cv-02175, U.S. District Court, Southern District of New York (Manhattan).
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