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In re Vivendi Universal

November 19, 2009

IN RE VIVENDI UNIVERSAL, S.A. SECURITIES LITIGATION


MEMORANDUM OPINION AND ORDER

This is a securities fraud class action (the "Action") brought on behalf of shareholders of Vivendi Universal, S.A. ("Vivendi") against Vivendi and its former Chief Executive Officer and Chief Financial Officer, Jean-Marie Messier and Guillaume Hannezo (collectively, "defendants"). Full familiarity with the facts and history of this case, as set forth in this Court's previous opinions, is presumed.*fn1 The current issue before the Court is plaintiffs' motion for a foreign anti-suit injunction, requiring Vivendi to withdraw a lawsuit it recently filed in the Tribunal de Grande Instance de Paris (the "Paris Action")against Olivier Gerard and Gerard Morel (two class representatives from France) and l'ADAM (l'Association de Défense des Actionnaires Minoritaires, a French shareholders' association). In the Paris Action Vivendi seeks, inter alia, to enjoin Gerard and Oliver from continued participation in the trial of this Action which began on October 5, 2009 and will likely continue to year's-end.*fn2 Thus, both a U.S. court and a French court are being asked to enjoin parties from proceeding in a foreign jurisdiction.

The Court concludes that plaintiffs in this Action have likely established their entitlement to an anti-suit injunction against Vivendi. However, the Court also concludes that steps may be taken to avert the need for either a French or a U.S. court to enter competing anti-suit injunctions, and in the interests of comity, the Court elects to take such a path. Accordingly, plaintiffs' motion is DENIED.

BACKGROUND

The following is a summary of only those facts that are relevant to plaintiffs' motion for a preliminary anti-suit injunction.

Plaintiffs, shareholders of Vivendi from the United States and various other countries, brought this action in 2002 on behalf of themselves and a class of similarly-situated purchasers of Vivendi securities. Plaintiffs alleged that defendants issued materially false and misleading statements concerning Vivendi's financial health that caused the company's shares to trade at artificially inflated prices between October 30, 2000 and August 14, 2002, inclusive, in violation of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934. Vivendi I, 381 F. Supp. 2d at 164. Defendants moved to dismiss the action, claiming, inter alia, that the Court lacked subject matter jurisdiction over claims brought by foreign shareholders who purchased their shares abroad. Defendants contended that the conduct at issue, namely the creation and dissemination of allegedly fraudulent statements and financial data, was initiated, organized, and approved by Vivendi executives in France, and that France was the appropriate forum, at least with respect to the claims of French shareholders. The Court, in a decision by Judge Baer, denied defendants' motion with respect to all shareholders, U.S. and European. The Court found that subject matter jurisdiction was satisfied, in part due to the critical fact that Vivendi's Chief Executive Officer and Chief Financial Officer moved their headquarters to the United States during the crucial time period in which investors claimed to have been misled. Id. at 169-70. Thus, the Court's exercise of jurisdiction was based on the traditional notion that a court may exercise its jurisdiction to regulate allegedly illegal activity occurring within its territory.*fn3

Thereafter, plaintiffs moved to certify a class consisting of Vivendi shareholders from the United States and various European countries. The Court found that most requirements for certifying a class under Federal Rule of Civil Procedure 23(b)(3) ("Rule 23(b)(3)") were easily met. See generally Vivendi III, 242 F.R.D. 76. Vivendi, however, argued that French shareholders should be excluded from the class. Id. at 97-102. Vivendi contended at the class certification stage, and continues to contend in its opposition to the present motion, that class actions are unconstitutional under French law and contrary to French concepts of international public policy. (See id.; Def. Br. at 1.) Consequently, Vivendi asserted, a judgment in this Action will not be given res judicata effect in France, thereby subjecting Vivendi to a risk of duplicative lawsuits. (Id.) In the absence of res judicata in France, Vivendi argued that a class action that included French shareholders was not a "superior" procedure for adjudication of shareholder claims as required by Rule 23(b)(3). Vivendi III, 242 F.R.D. at 97-102.

On May 21, 2007, this Court certified a single class which included Vivendi shareholders from the United States, France, England, and the Netherlands. Vivendi III, 242 F.R.D. at 109. In analyzing whether to certify the class, the Court considered whether, under Rule 23(b)(3), a class action was "superior to other available methods for fairly and efficiently adjudicating the controversy." The Court concluded that it was, as to American, French, English, and Dutch shareholders. Id. at 105. In reaching its conclusion, the Court separately considered the non-exhaustive list of pertinent factors set forth in Rule 23(b)(3):

(A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the likely difficulties in managing a class action. F. R. Civ. P. 23(b)(3).*fn4 The Court concluded as to the first two factors that "this prototypical securities fraud case was particularly appropriate for class treatment." Vivendi IV, 2009 WL 855799, at *2 (citing Vivendi III, 242 F.R.D. at 92). The Court considered the probable res judicata effect of a judgment entered by this Court under the third articulated factor, the desirability of concentrating claims in this forum. With regard to the inclusion of French shareholders in the class, the Court observed at the outset that "[t]he issue of whether a United States class action judgment would be recognized and enforced in France has never been directly addressed by French courts." Vivendi III, 242 F.R.D. at 96. After analyzing the expert affidavits submitted by the parties, the Court concluded that "a judgment in this case would, more likely than not, be granted recognition [in France] at such time as an exequatur proceeding is instituted."*fn5

Id. at 102. The Court reached this conclusion by applying the test set forth in the French case, Munzer v. Jacoby, Cass. civ. lre, Jan. 7, 1964, [1964] Juris-Classeur Périodique [J.C.P.] II 13590, which asks, inter alia, whether a foreign judgment would violate French concepts of "international public policy."*fn6 While recognizing that France may not itself adopt a U.S.-style class action procedure, the Court concluded that a U.S. judgment arising out of allegedly fraudulent conduct occurring in the United States would not violate French concepts of international public policy. Vivendi III, 242 F.R.D. at 101-102. Considering this and other important factors relevant to the issue of superiority, the Court included French shareholders in the class. The Second Circuit declined to hear an interlocutory appeal of the class certification decision, and the Supreme Court declined to issue a writ of certiorari. In re Vivendi Universal, S.A. Sec. Litig., No. 07-1419 (2d Cir. May 8, 2007); Vivendi S.A. v. Gerard, 128 S.Ct. 391 (2007).*fn7

As noted, trial of this Action began on October 5, 2009. On October 8, 2009, Vivendi filed the Paris Action, which asked the Tribunal de Grande Instance de Paris to require Gerard, Morel and ADAM "to provide reparations for the injury they have caused by abusively filing suit in US jurisdiction, on the one hand . . . and on the other hand, by enjoining [them], at the threat of further penalties, to abandon the class action." (Palmer Decl. Ex. A at 3.) Vivendi contended that the dispute between Vivendi and its French shareholders should have been submitted to the French courts and that "[r]ecourse to US courts within the context of an action that would not be recognized in France, regarding a dispute falling under the natural jurisdiction of the French courts, constitutes abuse of forum shopping, which is an offense defined by Article 1382 of the [French] Civil Code." (Id. at 6.) Vivendi's initial submission in the Paris Action asked, inter alia, for an order requiring Gerard, Morel, and ADAM to pay damages in the amount of one million Euros, to pay three thousand Euros as a civil fine for abuse of legal proceedings, and to withdraw from the U.S. lawsuit on threat of a penalty of fifty thousand Euros per defendant per day of delay. (Id. at 12.) The return date for the Paris Action is November 25, 2009. (Pl. Br. at 10 n.10.)

On October 13, 2009, plaintiffs filed the present motion for a preliminary injunction, seeking to enjoin Vivendi from proceeding with the Paris Action against Gerard and Morel. The next day, Vivendi altered course and informed Gerard, Morel and ADAM in writing that the only monetary judgment that Vivendi now seeks is "one symbolic Euro per defendant," which Vivendi alleges is necessary to maintain standing before the French court. (Crépin Decl. ¶9, Ex. 1).

Plaintiffs maintain that although Vivendi withdrew its monetary demands "after being confronted with its blunder in the press and in this Court," the Paris Action remains coercive in two respects: (1) it is still seeking to enjoin Gerard and Morel from participating in the action before this Court, and to thus cause the French class members to "disappear" from this action; and (2) Gerard and Morel will still incur substantial legal fees to defend the Paris Action. (See Pl. Reply at 1, 5; Tr. at 1263-64.) Vivendi disputes plaintiffs' contention that it is seeking to coerce and intimidate Gerard and Morel or to disrupt proceedings in this Court. (Crépin Decl. ¶ 8.) Rather, Vivendi contends that its decision to file the Paris Action was motivated by the "hope of obtaining . . . a decision from a French court, which might then be helpful to this Court in any further consideration of these issues." (Def. Br. at 2.) Requesting a French court to order class plaintiffs to withdraw from this Action in the middle of a trial on the merits is a most unusual form of help.

DISCUSSION

I. Legal Standard for Issuance of a Foreign ...


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