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Liberty Media Corporation, Lmc Capital LLC, Liberty Programming Company LLC, Lmc Usa Vi, Inc., Lmc v. Vivendi Universal

February 6, 2012


The opinion of the court was delivered by: Richard J. Holwell, District Judge


By an April 23, 2008 motion, the defendants-Vivendi Universal, S.A. ("Vivendi"), Universal Studios, Inc. ("Universal"), Jean-Marie Messier, and Guillaume Hannezo (collectively, "Defendants")- sought dismissal of Liberty Media's state-law claims-Counts I through IV of the Complaint filed by the above-captioned plaintiffs (collectively, "Liberty Media" or "Plaintiffs")-as preempted by the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), 15 U.S.C. § 78bb(f)(1)(A). See Mem. in Supp. of Defs.' Mot. for Partial J. on the Pleadings ("Defs.' Mem.") (S.D.N.Y. Apr. 23, 2008) (ECF No. 37). At oral argument on March 2, 2009, the Court denied the Defendants' Motion for Partial Judgment on the Pleadings ("SLUSA Motion") with respect to Liberty Media from the bench, offering a summary rationale for its holding and further explaining that it would "issue an opinion explaining the Court's reasoning" at a future date. Tr. of Oral Arg. at 142:5--6 (Mar. 2, 2009). The Court reiterated that decision in an omnibus pretrial order less than two weeks later. See Order ("March 13 Order") at 1 (S.D.N.Y. Mar. 13, 2009) (ECF No. 82) (expressing the Court's "inten[t] to issue an opinion stating [the] reasons [for denial] at greater length").

In this Memorandum Opinion & Order, the Court endeavors to provide the previously promised written justification for its 2009 bench decision in advance of the trial currently scheduled for May 2012.


In March 2003, the Plaintiffs-Liberty Media Corporation and certain of its subsidiaries-brought an individual action asserting various claims against the Defendants under both federal securities law and state common-law theories. Two months later, Judge Harold Baer, Jr., of the United States District Court for the Southern District of New York, consolidated the Liberty Media action for pretrial purposes with In re Vivendi Universal, S.A. Securities Litigation, No. 02 Civ. 5571 (S.D.N.Y. filed July 18, 2002), a separate securities class action ("Class Action") filed against Vivendi. See Order ("Consolidation Order") (May 13, 2003) (ECF No. 13). For nearly six years, the cases proceeded as one action. In the interim, on January 22, 2004, the consolidated action was reassigned to this Court. See Notice of Case Reassignment (Jan. 22, 2004) (ECF No. 21).

On April 23, 2008, the Defendants moved for partial judgment on the pleadings with respect to the state-law claims brought by Liberty Media, as well as those brought by certain other plaintiffs whose cases had been similarly consolidated with the Class Action. The Defendants argued that, pursuant to SLUSA, 15 U.S.C. § 78bb(f)(1)(A), those state-law claims could not be maintained in either state or federal court because they were part of a "covered class action," as defined by SLUSA, and that the District Court was therefore required to dismiss them with prejudice. See Defs.' Mem. at 4. The Plaintiffs responded that their lawsuit was not, in fact, a "covered class action" under SLUSA because their claims and those of the Class Action plaintiffs did not "involv[e] common questions of law or fact," Response to Defs.' Mot. for Partial J. on the Pleadings ("Pls.' Mem.") at 3 (quoting 15 U.S.C. § 78bb(f)(5)(B)(ii)) (internal quotation marks omitted), or, alternatively, because Vivendi had "forgone any right [it] may have had to invoke" SLUSA under theories of estoppel and waiver, id. at 15. After full briefing on the motion, the District Court issued an oral ruling on March 2, 2009-later confirmed in the March 13 Order-granting the Defendants' SLUSA Motion with respect to all other plaintiffs, but denying it with respect to the Liberty Media action.

Despite ruling for the Plaintiffs, the Court did not adopt the Plaintiffs' two leading theories. Instead, at the hearing, the Court stated that it had determined that consolidation of the Liberty Media action with the Class Action had been "improvidently granted" by Judge Baer "because the issue of SLUSA [preemption] never surfaced . . . at that time."*fn1 Tr. of Oral Arg. at 141:19--20 (Mar. 2, 2009). The Court explained that because Judge Baer had not been presented with the SLUSA issue before consolidating the actions, he did not "have the opportunity to consider the issue of prejudice [to Liberty Media] resulting from an order of consolidation." Id. at 141:21--23. Concluding that "the prejudice to Liberty [Media] is of a different degree or caliber than [that to] the other plaintiffs," the Court vacated Judge Baer's Consolidation Order. Id. at 142:2--4. Because the cases were no longer consolidated, the Court-albeit implicitly- determined that the Liberty Media action was no longer arguably part of a "covered class action" under SLUSA, and the Defendants' preemption argument necessarily failed. The Court then promised-both on the record at oral argument, see id. at 142:5--6, and by subsequent order, see March 13 Order at 1- a written opinion outlining its decision.


Rule 12(c) of the Federal Rules of Civil Procedure provides that "a party may move for judgment on the pleadings" anytime "[a]fter the pleadings are closed-but early enough not to delay trial." Fed. R. Civ. P. 12(c). "In deciding a Rule 12(c) motion, [the Court] appl[ies] the same standard as that applicable to a motion under Rule 12(b)(6), accepting the allegations contained in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party." D'Alessio v. N.Y. Stock Exch., 258 F.3d 93, 99 (2d Cir. 2001). The Court "may dismiss the complaint only if 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Burnette v. Carothers, 192 F.3d 52, 56 (2d Cir.1999) (quoting Conley v. Gibson, 355 U.S. 41, 45--46 (1957)); accord Johnson v. Rowley, 569 F.3d 40, 44 (2d Cir. 2009) ("To survive a Rule 12(c) motion, [the] complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." (internal quotation marks omitted)).


I. Governing Law


SLUSA's purpose is "to ensure that securities fraud cases are heard only in federal courts and only under federal law." Xpedior Creditor Trust v. Credit Suisse First Bos. (USA) Inc., 341 F. Supp. 2d 258, 264 (S.D.N.Y. 2004); accord Lander v. Hartford Life & Annuity Ins. Co., 251 F.3d 101, 108, 107--08 (2d Cir. 2001) (explaining that SLUSA made "federal court the exclusive venue for class actions alleging fraud in the sale of certain covered securities and by mandating that such class actions be governed exclusively by federal law"). To that end, the statute provides that "[n]o covered class action based upon the statutory or common law of any State . . . may be maintained in any State or Federal court by any private party alleging . . . a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." 15 U.S.C. § 78bb(f)(1). "[F]our conditions must be satisfied to trigger SLUSA's removal and preemption provisions: (1) the underlying suit must be a 'covered class action'; (2) the action must be based on state or local law; (3) the action must concern a 'covered security'; and (4) the defendant must have misrepresented or omitted a material fact or employed a manipulative or deceptive device or contrivance 'in connection with the purchase or sale of' that security." Dabit v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25, 33 (2d Cir. 2005) (quoting 15 U.S.C. 78bb(f)(1)--(2)) (citing Riley v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 292 F.3d 1334, 1342 (11th Cir. 2002)), rev'd on other grounds, 547 U.S. 71 (2006); accord Romano v. Kazacos, 609 F.3d 512, 517--18 (2d Cir. 2010) ("Under SLUSA, 'covered class actions' involving 'covered securities' that are filed in state court, invoke state law, and allege securities fraud are removable to federal court, where they are to be dismissed."). As the Supreme Court has noted, "SLUSA does not actually pre-empt any state cause of action"; rather, the statute "simply denies plaintiffs the right to use the class-action device to vindicate certain claims." Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 87 (2006). As a result, "[t]he Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist." Id.

The statute defines its key terms. First, a "covered security" is a security "traded nationally and listed on a regulated national exchange." 15 U.S.C. ยง 78bb(f)(2). Second, ...

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