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In re Vivendi Universal

March 23, 2007



Plaintiffs bring this securities fraud class action against defendants Vivendi Universal, S.A. ("Vivendi") and its two most senior former officers, Jean-Marie Messier (former CEO) and Guillaume Hannezo (former CFO), individually and on behalf of similarly situated Vivendi security purchasers. Plaintiffs allege that defendants' materially false and misleading statements caused Vivendi securities to trade at artificially inflated prices, and further, that defendants induced them to purchase or otherwise acquire Vivendi securities pursuant to a registration statement and prospectus dated October 30, 2000, issued in connection with the December 8, 2000 three-way merger of Vivendi, Seagram Company Limited ("Seagram") and Canal Plus, S.A. ("Canal Plus"), in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), as amended, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder, and Sections 11, 12(a), and 15 of the Securities Act of 1933 ("Securities Act"), as amended, 15 U.S.C. § 77k, respectively.*fn1

Plaintiffs now move to certify a class pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure consisting of all persons, foreign and domestic, who purchased or otherwise acquired ordinary shares or American Depository Shares ("ADSs") of Vivendi Universal, S.A. between October 20, 2000 and August 14, 2002. For the reasons discussed below, the Court grants plaintiffs' motion [234] in part and denies it in part.


Prior History

This litigation was commenced on July 18, 2002 with the filing of the original complaint. On August 19, 2002, plaintiffs filed an amended consolidated complaint. By Order dated October 1, 2002, the Hon. Harold Baer, Jr., to whom this action was originally assigned, consolidated fourteen related actions against Vivendi. On January 7, 2003, plaintiffs filed a consolidated class action complaint. Additional shareholder cases were consolidated herewith by Orders dated July 25, 2003 and September 3, 2003. By notice dated January February 24, 2003, defendants moved to dismiss the consolidated class action complaint arguing, inter alia, that the Court lacked subject matter jurisdiction over the claims brought by foreign class members who acquired Vivendi's ordinary shares on foreign exchanges. Applying the "conduct test" to determine whether extraterritorial application of the federal securities laws was warranted, Judge Baer, by opinion dated November 4, 2003, denied defendants' motion to dismiss for lack of subject matter jurisdiction. See In re Vivendi Universal, S.A., 381 F. Supp. 2d at 169. Judge Baer concluded that plaintiffs' complaint adequately alleged that "'defendants' conduct in the United States was more than merely preparatory to the fraud, and particular acts or culpable failures to act within the United States directly caused losses to foreign investors abroad.'" Id. (quoting Alfadda v. Fenn, 935 F.2d 475, 478 (2d Cir. 1991)); see also id. at 170 (inferring "that the alleged fraud on the American exchange was a 'substantial' or 'significant contributing cause' of [foreign investor's] decision[s] to purchase [Vivendi's] stock abroad") (bracketed language in original, citation omitted).

Plaintiffs filed a first amended consolidated class action complaint ("FACC") on November 24, 2003. Shortly thereafter, on December 4, 2003 this case was reassigned to this Court. Defendants then moved for reconsideration of Judge Baer's order, which this Court denied by order dated September 21, 2004. The Court issued a separate Memorandum Opinion and Order addressing one of the many issues raised in defendants' motions for reconsideration; namely, whether this Court has subject matter jurisdiction over foreign plaintiffs' claims pursuant to Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder. See In re Vivendi Universal, S.A., No. 02 Civ. 5571 (RJH), 2004 WL 2375830 (S.D.N.Y. Oct. 22, 2004). In concluding that the claims of foreign class members who acquired Vivendi's ordinary shares on foreign exchanges were properly before the Court and subject to U.S. federal securities laws, the Court reasoned that the United States--based conduct alleged by plaintiffs "significantly contributed to the alleged fraud and that such conduct directly caused foreign investors' alleged losses." Id. at *7 (citing Europe & Overseas Commodities Traders, S.A. v. Banque Paribas London, 147 F.3d 118, 128--29 (2d Cir. 1998)).

By notice dated July 15, 2005, plaintiffs filed a substituted motion to certify a class pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure.*fn2 As noted, the proposed class consists of all persons who purchased or otherwise acquired Vivendi ordinary shares or ADSs between October 30, 2000 and August 14, 2002. The motion seeks appointment of plaintiffs Olivier M. Gerard, the Retirement System for General Employees of the City of Miami Beach ("RSMB"), Bruce Doniger, Gerard Morel, Capital Invest Die Kapitalanlagegesellschaft der Bank Austria Creditanstalt Gruppe GmbH (in its capacity as manager of and attorney-in-fact for APK EU-Big Caps Fund) ("Capital Invest"), and William Cavanagh (collectively, "proposed class representatives"), as class representatives, and Milberg, Weiss, Bershad & Shulman LLP and Abbey Gardy, LLP as class counsel. (Id.)

Factual Background

Vivendi is a corporation organized under the laws of France. It is a global conglomerate engaged in business in two primary areas: "Media and Communications" and "Environmental Services." (FACC ¶ 30.) Throughout the class period, Vivendi's total number of outstanding shares (ordinary shares and ADSs inclusive) was approximately 1.08 billion. (Declaration of François Bisiaux in Support of Vivendi Universal, S.A's Opposition to Plaintiffs' Motion for Class Certification, Sept. 30, 2005 ("Bisiaux Decl."), Exs. 1--5.) Approximately twenty-five percent of these were held by United States shareholders. (Id.) Around thirty-seven percent of Vivendi's total shares were held by French shareholders. (Id.) The remainder of Vivendi's shares were held predominantly by non-French but European persons or entities, and a small percentage (around five percent) was consistently held by shareholders in other unidentified countries. (Id.) During this time, virtually all of Vivendi's ADSs-which traded on the NYSE-were held by persons or entities in North America, while virtually all of Vivendi's ordinary shares-traded predominantly on the Paris Bourse-were held by persons or entities outside the United States, predominantly in France and the rest of Europe. (Bisiaux Decl. ¶ 7.)

Beginning in June of 1996, at which time defendant Messier became CEO and defendant Hannezo was CFO, Vivendi (then Générale des Eaux, and later, as of April 1999, Vivendi, S.A.) embarked upon a massive acquisitions venture, which included a number of multi-billion dollar purchases. (FACC ¶¶ 48--51.) Vivendi purchased substantial equity positions in several U.S. companies and non-U.S. companies by using Vivendi stock as payment and by borrowing cash against future earnings. Financing this growth strategy caused Vivendi to accumulate sizeable debt. (Id. ¶ 50.) Plaintiffs allege that in order to sustain Vivendi's growth strategy, the company was compelled to continue reporting favorable financial results (see id. ¶ 53), resulting in a series of false and misleading public statements reporting "better than expected" and "strong" financial results, while consistently denying rumored problems (see generally id. ¶¶ 56--113), and the filing of financial statements with the United States Securities and Exchange Commission ("SEC") that were materially false and misleading because, inter alia, they failed to timely record goodwill impairments*fn3 and improperly applied generally accepted accounting principles ("GAAP") (see generally id. ¶¶ 54--55, 119--80).

As discussed in Judge Baer's prior opinion denying defendants' motion to dismiss, 381 F. Supp. 2d 158, and this Court's prior supplemental opinion denying defendants' motion for reconsideration, 2004 WL 2375830, the fraud alleged in the FACC was perpetrated, in important part, in the United States. Vivendi's rapid-expansion scheme involved the acquisition of numerous well-known U.S. entertainment and publishing companies, such as Universal Studios, Houghton Mifflin and USA Networks (FACC¶ 23), and in order to successfully accomplish this plan, it took on a $21 billion debt while, allegedly, fraudulently assuring all investors through false and misleading reports filed with the SEC and news releases that it had sufficient cash-flow to manage its debts (id. ¶¶ 24, 54--192). Significantly, both of the alleged principal actors in this scheme, Messier and Hannezo, moved to the United States during 2001. Messier, in particular, moved his primary residence to New York in September 2001, and spent half of his time in the United States from that time through the end of the class period (August 31, 2002), for the stated purpose of increasing United States investments in Vivendi. (Id. ¶¶ 69, 77, 90--92, 105.) Many of the statements alleged to be false and misleading were made by defendant Messier after he had moved to New York. See 2004 WL 2375830, at *4; (see also FACC ¶¶ 73--76, 81--97.)

Following the December 8, 2000 merger of Vivendi, Seagram, and Canal Plus, Vivendi repeatedly predicted "strong growth prospects" and touted financial results as exceeding even their "too ambitious" expectations. (Id. ¶ 57--68.) In September 2001-the same time that Messier and Hannezo moved to the United States-rumors began to circulate that Vivendi's earnings would be disappointing. Messier responded by consistently denying any problems-indeed, until the day before his ultimate resignation he disavowed there was any serious problem-which quelled some of the negative speculation. (See id. ¶¶ 73--77.) In late 2001, Vivendi announced its acquisition of USA Networks for $10.3 billion, and reported that the transaction would increase Vivendi's net free cash flow by a projected $350 million. (Id. ¶¶ 80--81.) Throughout the spring of 2002, Vivendi (and Messier) continued to make positive statements in the press to "dispel concerns about the Compan[y's] debt levels and accounting practices." (Id. ¶83; see also id. ¶¶ 84--87, 89, 94--97.) However, on May 3, 2002, Moody's lowered Vivendi's long-term debt rating to one notch above "junk" status assigned to speculative investments, due to concerns that Vivendi "might not be able to reduce debts as quickly and comprehensively as planned." (Id. ¶ 99.) In response, Vivendi downplayed the rating and announced it had "no impact on Vivendi Universal's cash situation," which it described as "comfortable" and capable of financing Vivendi's continued debt reduction. (Id. ¶¶ 100, 102--03.)

In response to continued concerns about Vivendi's debt levels, a June 25, 2002 press release was issued, noting steps taken to reduce debt and that its cash situation was not precarious, and Messier held a June 26, 2002 conference call to assure investors there was "no hidden liability" and expressing confidence with respect to Vivendi's debt and cash outlook. (Id. ¶¶ 104--05.) On July 2, 2002, Messier e-mailed his employees stating that despite reports that Vivendi was in danger of default, there were no hidden risks in the company's accounting. (Id. ¶ 109.) The very next day, however, Messier resigned and Vivendi's securities prices collapsed. (Id.) Vivendi issued a press release through new management acknowledging its "short-term liquidity issue," though Messier continued to claim that Vivendi's financial statements were transparent. (Id. ¶ 110.) Contrary to Vivendi's numerous press releases, financial statements, and SEC filings throughout the class period, plaintiffs allege that the company was in fact on the brink of financial disaster. At the time of the USA Networks acquisition, announced on December 17, 2001 (id. ¶ 8), "Vivendi was already in dire financial straits," despite representations made to the contrary by Messier to investors and the board of directors (id. ¶ 184). Vivendi was allegedly on the verge of insolvency by the end of 2001, and had barely enough "cash needed to pay the bills" as of May 2002. (Id. ¶ 185.) Nevertheless, Vivendi had continued to reassure investors that it could meet its obligations for the next twelve months, despite being privately advised of its dire financial outlook. (Id. ¶ 186.)

On August 14, 2002, new management announced that Vivendi had suffered a €12 billion net loss for the first half of 2002 and would take a €11 billion goodwill write-down of depreciatedassets, the same day that Standard & Poor's rated Vivendi's long-term corporate credit at junk status. (Id. ¶ 114.) New management later admitted that Vivendi "would have been forced to declare bankruptcy within 10 days if Jean-Marie Messier had not resigned." (Id. ¶ 187.)


I. Legal Standard

A district court's analysis of a class certification request generally proceeds in two steps, both of which are governed by Rule 23 of the Federal Rules of Civil Procedure. As a threshold matter, the court must be persuaded, "after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied." Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 161 (1982). Rule 23(a) provides:

(a) Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a).

If a court determines that the Rule 23(a) requirements have been met, it must then decide whether the class is maintainable pursuant to one of the subsections of Rule 23(b), which govern, inter alia, the form of available relief and the rights of absent class members. When seeking to certify a class pursuant to Rule 23(b)(3), plaintiffs must meet the following two additional criteria: (1) questions of law or fact common to class members must predominate over any questions affecting individual members; and (2) the class action device must be superior to any other method of adjudication. Fed. R. Civ. P. 23(b)(3). The requirement of "rigorous analysis" to ensure "actual, not presumed conformance" with Rule 23(a) applies with "equal force to all Rule 23 requirements, including those set forth in Rule 23(b)(3)." Miles v. Merrill Lynch & Co. (In re Initial Public Offering Sec. Litig.), 471 F.3d 24, 33 & n.3 (2d Cir. 2006) (citing Falcon, 457 U.S. at 160--61). Thus it is not sufficient for plaintiffs to make merely "some showing" that the requirements of Rule 23 have been met. Id. at 35--36 (citing and distinguishing Caridad v. Metro-North Commuter Railroad, 191 F.3d 283, 292 (2d Cir. 1999) and In re Visa Check/Master Money Antitrust Litigation, 280 F.3d 124, 134-35 (2d Cir. 2001)). To the contrary, the following standard now applies to class certification motions in this circuit:

(1) a district judge may certify a class only after making determinations that each of the Rule 23 requirements has been met; (2) such determinations can be made only if the judge resolves factual disputes relevant to each Rule 23 requirement and finds that whatever underlying facts are relevant to a particular Rule 23 requirement have been established and is persuaded to rule, based on the relevant facts and the applicable legal standard, that the requirement is met; (3) the obligation to make such determinations is not lessened by overlap between a Rule 23 requirement and a merits issue, even a merits issue that is identical with a Rule 23 requirement; (4) in making such determinations, a district judge should not assess any aspect of the merits unrelated to a Rule 23 requirement; and (5) a district judge has ample discretion to circumscribe both the extent of discovery concerning Rule 23 requirements and the extent of a hearing to determine whether such requirements are met in order to assure that a class certification motion does not become a pretext for a partial trial of the merits.

In re IPO Sec. Litig., 471 F.3d at 41. With these principles in mind, the Court turns to the Rule 23 analysis.

II. Rule 23(a)

A. Numerosity

Rule 23(a)(1) requires that the proposed class be "so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a)(1). "Impracticability means difficulty or inconvenience of joinder [not] . . . impossibility of joinder," In re Blech Sec. Litig., 187 F.R.D. 97, 103 (S.D.N.Y. 1999) (citation omitted), and the Second Circuit has observed that "numerosity is presumed at a level of 40 members." Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995), cert. denied, 515 U.S. 1122 (1995) (citing 1 Newberg on Class Actions § 3.05 (2d ed. 1985)); see also Presbyterian Church v. Talisman Energy, Inc., 226 F.R.D. 456, 466 (S.D.N.Y. 2005) ("Numerosity is presumed when a class consists of forty or more members."). "Precise quantification of the class members is not necessary because a court may make common sense assumptions regarding numerosity." In re Blech Sec. Litig., 187 F.R.D. at 103 (citations omitted); see also de la Fuente v. DCI Telecomms., Inc., 206 F.R.D. 369, 390 (S.D.N.Y. 2002); Weissman v. ABC Fin. Servs., Inc., 203 F.R.D. 81, 84 (E.D.N.Y. 2001).

"In securities fraud class actions relating to publicly owned and nationally listed corporations, the numerosity requirement may be satisfied by a showing that a large number of shares were outstanding and traded during the relevant period." Teachers' Ret. Sys. of La. v. ACLN Ltd., No. 01 Civ. 11814 (LAP), 2004 WL 2997957, at *3 (S.D.N.Y. Dec. 27, 2004) (citations and internal quotation marks omitted)); see also In re Globalstar Sec. Litig., No. 01 Civ. 1748 (PKC), 2004 WL 2754674, at *3--*4 (S.D.N.Y. Dec. 1, 2004) ("[I]t is not unusual for district courts to certify plaintiff classes in securities actions based on the volume of outstanding shares." (citations omitted)); In re Deutsche Telekom AG Sec. Litig., 229 F. Supp. 2d 277 (S.D.N.Y. 2002) ("Class certification is frequently appropriate in securities fraud cases involving a large number of shares traded publicly in an established market."); In re Frontier Group Ins., Inc. Sec. Litig., 172 F.R.D. 31, 40 (E.D.N.Y. 1997). With more than 107 million ADSs and approximately 1 billion ordinary shares outstanding during the relevant class period, plaintiffs have established that joinder is impracticable and that the proposed class satisfies the numerosity requirement. (See FACC ¶ 41; Bisiaux Decl. Ex. 2 (indicating 1.086 billion outstanding Vivendi shares, ordinary shares and ADSs inclusive, as of June 30, 2001).)

B. Commonality

The class certification prerequisite of commonality requires that "there are questions of law or fact common to the class . . . ." Fed. R. Civ. P. 23(a)(2); Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997) (per curiam) ("[P]laintiffs' grievances [must] share a common question of law or of fact."). Not every "issue[] must be identical as to each [class] member, but . . . plaintiff [must] identify some unifying thread among the members' claims that warrants class treatment." Cutler v. Perales, 128 F.R.D 39, 44 (S.D.N.Y. 1989) (internal quotation marks and citation omitted). The commonality requirement "has been applied permissively" in securities fraud litigation. In re Nortel Networks Corp. Sec. Litig., No. 01 Civ. 1855 (RMB), 2003 WL 22077464, at *3 (S.D.N.Y. Sept. 8, 2003) (internal quotation marks omitted); see also In re Frontier, 172 F.R.D. at 40. Here, plaintiffs allege the following questions of fact or law are common to all members of the proposed class: (1) whether defendants violated the securities laws by the acts and conduct alleged in the FACC; (2) whether defendants issued false and misleading statements during the class period; (3) whether defendants acted with scienter in issuing materially false and misleading statements; (4) whether the market prices of Vivendi ordinary shares and ADSs during the class period were artificially inflated because of defendants' misconduct, and (5) whether the members of the class sustained damages, and, if so, what is the appropriate measure of damages. (FACC ¶ 45.) Cf. In re Interpublic Sec. Litig., No. 02 Civ. 6527 (DLC), 2003 WL 22509414, at *3 (S.D.N.Y. Nov. 6, 2003) (finding commonality requirement satisfied where plaintiffs raised common issues as to whether defendants' public filings and statements contained material misstatements, whether the defendants acted with scienter in misrepresenting material facts in the company's public filings and press releases, and whether the damages to the investors were caused by the defendants' misstatements); In re Ashanti Goldfields Sec. Litig., No. CV 00-0717 (DGT), 2004 WL 626810, at *12 (E.D.N.Y. Mar. 30, 2004) (finding commonality on similar allegations). Defendants do not dispute commonality. Plaintiffs have adequately demonstrated that these claims are common to the members of the proposed class, and the Court finds the commonality requirement is satisfied.

C. Typicality and Adequacy

Rule 23(a)(3) requires that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). "While the commonality inquiry establishes the existence of a certifiable class, the typicality inquiry focuses on whether the claims of the putative class representatives are typical of the class sharing common questions." In re Frontier, 172 F.R.D. at 40. Typicality requires that "the claims of the named plaintiffs arise from the same practice or course of conduct that gives rise to the claims of the proposed class members." Marisol A. v. Giuliani, 929 F. Supp. 662, 691 (S.D.N.Y. 1996), aff'd 126 F.3d 372 (2d Cir. 1997); see also Robidoux v. Celani, 987 F.2d 931, 936--36 (2d Cir. 1993) ("When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is usually met irrespective of minor variations in the fact patterns underlying individual claims."). Rule 23(a)(4) requires plaintiffs to establish that "the representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). This showing requires that plaintiffs demonstrate that the proposed class representatives have no "interests [that] are antagonistic to the interest of the other members of the class." Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000). As many courts have observed, the issues of typicality and adequacy tend to merge because they "serve as guideposts for determining whether . . . the named plaintiff's claim and the class claims are so inter-related that the interests of the class members will be fairly and adequately protected in their absence." Falcon, 457 U.S. at 157 n.13.

In this case, proposed class representatives argue that the typicality requirement is met because their claims "arise out of the same uniform pattern of conduct-i.e., defendants' failure to disclose that Vivendi's operations and financial condition were dramatically weaker than what their public statements portrayed." (Pls.' Supp. Mem. 11.) In the First Amended Consolidated Complaint, named plaintiffs, like the other purported class members, have asserted that they purchased or otherwise acquired Vivendi securities during the class period, and were injured by defendants' false and misleading representations made throughout the class period in violation of the securities laws. Central to all the proposed class representatives claims is defendants' alleged course of conduct throughout the class period. In prosecuting their case, plaintiffs will necessarily seek to develop facts relating to the alleged accounting irregularities and the dissemination of allegedly false or misleading statements underlying their claims. Such allegations are generally considered sufficient to satisfy the typicality requirement. See, e.g., In re Interpublic Sec. Litig., No. 02 Civ. 6527 (DLC), 2003 WL 22509414, at *3 (S.D.N.Y. Nov. 6, 2003); In re WorldCom Inc. Sec. Litig., 219 F.R.D. 267, 280--81 (S.D.N.Y. 2003). Furthermore, defendants' individualized arguments regarding the adequacy and typicality of the proposed class representatives are unavailing. The Court will address seriatim the arguments made with respect to the six named plaintiffs.

1. Olivier Gerard

Proposed class representative Gerard is a resident of France who, on December 11, 2000, exchanged Vivendi, S.A. shares for Vivendi Universal shares pursuant to the three-way merger with Seagram and Canal Plus. (See Deposition of Olivier Marie-Guillaume Gerard, June 24, 2005 ("Gerard Dep.") at 81:05--82:13; Gerard Second Corrected Certification, June 24, 2005 at Schedule A, Zach Decl. Ex. 7.)

Defendants submit that Gerard is not an adequate class representative for two reasons. First, defendants argue that persons such as Gerard who obtained Vivendi Universal shares and/or ADSs only in the one-to-one exchange of Vivendi, S.A. securities may not be properly included in the putative class, because such persons*fn4 did not suffer economic damage and cannot prove materiality. (See Defs.' Opp'n Mem. ("Opp'n") 21--23, 27.)

Defendants argue that this group of class members, as pre-existing Vivendi shareholders, "cannot show that the alleged misstatement inflating the value of shares or ADSs that they already owned was material to them or caused them any economic damage." (Opp'n 21.)

Plaintiffs propose as a solution to defendants' concerns that the words "and were damaged thereby" be inserted into the class definition. Plaintiffs also argue that it would be premature to exclude class members who have exchanged Vivendi S.A. shares for Vivendi Universal shares because the question of whether defendants' misstatements were material to these plaintiffs cannot be determined at the class certification stage.

Given the teaching of In re IPO Sec. Litig., 471 F.3d at 41--42, it is not inappropriate to consider either damages or materiality in assessing the typicality of the individual plaintiffs' claims, even though some assessment of the merits of their claims is required. However, the Court is not persuaded that either issue precludes a finding that the typicality requirement is satisfied here. Materiality for all class members will turn on the nature and accuracy of all defendants public statements including, obviously, those made in connection with the three-way merger of Vivendi, Seagram and Canal Plus in December, 2000. That Vivendi S.A. shareholders received Vivendi Universal shares as a result of the merger does not alter the materiality of defendants alleged misstatements to plaintiff-shareholders' decision to approve the merger and accept shares in a new entity. And to the extent that, as alleged, defendants were constructing an ever-expanding house of cards, old Vivendi S.A. shareholders who accepted shares in Vivendi Universal were likely damaged thereby.*fn5 Therefore, the Court declines to exclude members of the class who acquired their shares in the one-to-one exchange, including Gerard as class representative, on the basis of defendants' arguments regarding damages or materiality.

Defendants also allege that Gerard is incapable of performing the fiduciary responsibilities as a class representative because Gerard admitted to destroying documents. (Opp'n 27--28 n.23.) The documents to which defendants allude, however, appear to be French and other European newspaper articles relating to the Vivendi scandal, and perhaps some personal notes taken by Gerard during meetings with his French attorney. (Gerard Dep. 28:24--29:16, 30:23--31:02.) Gerard testified that he discarded the news articles because he believed the attorneys in this matter had collected all the relevant documentation and articles published in the press, and there was no reason for him to keep it. (Id. at 29:11--30:05.) Defendants cite no authority to support the proposition that such conduct renders Gerard inadequate to represent the interests of the class, and the Court finds Gerard to be an adequate class representative. See, e.g., In re Initial Pub. Offering Sec. Litig., 227 F.R.D. 65, 88 (S.D.N.Y. 2004) (rejecting defendants' credibility argument to defeat appointment of named plaintiff as class representative where "[t]here [was] no evidence that any of the conduct here was the result of bad faith or an attempt to deceive defendants or the court").

2. Gerard Morel

Gerard Morel is also a French resident who exchanged his shares in Vivendi, S.A. and Canal Plus for Vivendi Universal shares after the December 2000 merger. (Declaration of Gerard Morel, Feb. 19, 2005 ("Morel Decl.") at Schedule A, Zach Decl. Ex. 8.) He also bought and sold Vivendi ordinary shares on the Paris Bourse during the proposed class period. (Id.) His last transaction in Vivendi securities occurred on January 11, 2002. (Id.)

Defendants argue that Morel only has standing to represent a class including Europeans who purchased Vivendi securities on a European exchange up to the latest date on which he engaged in a transaction involving Vivendi stock. (Opp'n 28.) Without an adequate proposed class representative who purchased Vivendi ordinary shares on the Paris Bourse after January 11, 2002, defendants argue, the period of any class including French shareholders cannot extend beyond this date.*fn6 Defendants further argue that inconsistencies in Morel's testimony, submissions, and document production on the issue of his transactions in Vivendi securities will become a focal point of cross-examination and unique defenses at trial to the detriment of the class. (Id. at 28 n.25.)

With respect to class representative standing, it is well established that where, as here, plaintiffs allege that their losses were the result of a sustained course of conduct that propped up defendant's stock price throughout the class period, the class may be represented by an individual who purchased his shares prior to the close of the class period. See Robbins v. Moore Med. Corp., 788 F. Supp. 179, 187 (S.D.N.Y. 1992) (finding class representatives entitled to assert Section 10(b) claims "arising from statements made both before and after the purchase date if the statements allegedly were made in furtherance of a common scheme to defraud" (citing Nicholas v. Poughkeepsie Savings Bank/FSB, No. 90 Civ. 1607 (RWS), 1990 WL 125154, at *5 (S.D.N.Y. Sept. 27, 1990))); Zucker v. Sasaki, 963 F. Supp. 301, 306--07 (S.D.N.Y. 1997) (discussing Robbins and noting that where defendants with an identity of interest make a series of "inter-related misstatements" as part of a "common course of conduct," post-purchase statements are relevant to the course of wrongful conduct alleged); cf. Denny v. Barber, 576 F.2d 465, 468--69 (2d Cir. 1978) (finding that proposed class representative could not properly represent persons who bought securities in reliance on fraudulent statements where he had purchased before any alleged false statements were made). As such, the Court finds that Morel may adequately represent later purchasers. See Nicholas, 1990 WL 145154, at *6 (rejecting implication that only someone who bought on the last day of the class period would be able to bring an action on her own behalf or on behalf of the entire class, and stating "there is considerable authority allowing class plaintiffs to represent later purchasers" (internal citations omitted)).

3. Capital Invest

Capital Invest, the fund management company of the Bank Austria Greditanstalt Gruppe GmbH ("Bank Austria"), seeks to represent the claims of APK EU--Big Caps fund ("Big Caps Fund"), in its capacity as manager and attorney-in-fact. (Declaration of Irene Reisenberger, August 30, 2005 ("Reisenberger Decl.") ΒΆ 2, Zach Decl. Ex. 12.) The sole owner of the shares (i.e., units) in the Big Caps Fund is a large Austrian pension entity known as APK Pensionskasse Aktiengesellschaft ("APK"). The Big Caps Fund obtained Vivendi Universal shares in exchange for previously held Vivendi, S.A. shares, and also purchased and sold Vivendi Universal shares on foreign exchanges, the last purchase of which occurred on January 21, 2002. (Zach Decl. Exs. 15, 16.) For reasons discussed in greater detail below, Austrian claimants shall be excluded from ...

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