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Liberty Media Corp. v. Vivendi Universal, S.A.

United States District Court, S.D. New York

February 12, 2013

LIBERTY MEDIA CORPORATION, LMC Capital LLC, Liberty Programming Company LLC, LMC USA VI, Inc., LMC USA VII, Inc., LMC USA VIII, Inc., LMC USA X, Inc., Liberty HSN LLCHoldings, Inc., and Liberty Media International, Inc., Plaintiffs,
v.
VIVENDI UNIVERSAL, S.A., and Universal Studios, Inc., Defendants.

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[Copyrighted Material Omitted]

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Macey R. Stokes, Esq., Baker Botts LLP, Houston, TX, R. Stan Mortenson,

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Esq., Michael L. Calhoon, Esq., Alexander M. Walsh, Esq., Baker Botts LLP, Washington, D.C., for Plaintiffs.

Daniel Slifkin, Esq., Cravath Swaine & Moore LLP, New York, NY, James P. Quinn, Esq., Penny P. Reid, Esq., Weil, Gotshal & Manges LLP, New York, NY, for Defendants.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

Plaintiffs, Liberty Media Corporation and certain of its subsidiaries (collectively, " Liberty" ), sued defendants, Vivendi Universal, S.A. and Universal Studios, Inc. (collectively, " Vivendi" ), alleging violations of federal securities law and breach of express warranty under New York state law. In particular, Liberty sued Vivendi for violations of Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission (" SEC" ) Rule 10b-5 (collectively, " Section 10(b)" ). Liberty also sued Vivendi for breach of four different express warranties contained in the Agreement and Plan of Merger and Exchange (" Merger Agreement" ) that was signed on December 16, 2001. On June 25, 2012, the jury found Vivendi liable for violating Section 10(b) and for breach of warranty. The jury awarded Liberty € 765 million in damages for each cause of action.[1]

Vivendi now renews its motion for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50(b), or, in the alternative, for a new trial pursuant to Federal Rule of Civil Procedure 59. Vivendi argues on various grounds that Liberty's evidence at trial was legally insufficient on both liability and damages.

For the following reasons, Vivendi's motion is denied.

II. BACKGROUND

Familiarity with the facts and procedural background of this case is assumed. Only those facts necessary to the disposition of Vivendi's motion will be noted.

On December 16, 2001, the parties signed the Merger Agreement, which involved, in part, a commitment for Liberty to exchange its multiThé matiques (" MTH" ) shares for Vivendi securities.[2] On May 7, 2002, the merger closed. [3] In March 2003, plaintiffs brought an individual action (the " Liberty Action" ) asserting various claims against defendants under both federal securities law and state common-law theories.[4] Two months later, Judge Harold Baer, Jr., consolidated the Liberty Action with a separate securities class action (the " Class Action" ) filed

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against Vivendi in July 2002. [5] In the Class Action, U.S. and foreign shareholders of Vivendi alleged that they purchased certain shares at artificially inflated prices as a result of defendants' material misrepresentations and omissions regarding a concealed risk of a liquidity crisis at Vivendi.[6] In 2004, the consolidated action was transferred to Judge Richard J. Holwell.[7] On March 2, 2009, Judge Holwell vacated Judge Baer's consolidation order.[8]

The Class Action was tried before a jury from October 2009 to January 2010. [9] On January 29, 2010, the jury returned its verdict, finding that Vivendi had violated Section 10(b) as to all fifty-seven misstatements alleged by the Class Action plaintiffs, and that Vivendi acted recklessly with respect to each statement.[10] On April 11, 2012, after the deconsolidated Liberty Action had been reassigned to this Court, I issued an opinion explaining that based on the jury's finding at the Class Action trial, Vivendi was collaterally estopped from contesting the falsity, materiality, and scienter elements of Liberty's Section 10(b) claim for twenty-five statements for which the Class Action jury found Vivendi liable.[11]

The Liberty Action was tried before a jury from May to June 2012. On June 25, 2012, the jury returned its verdict, finding Vivendi liable for violating Section 10(b) and for breach of warranty.[12]

III. APPLICABLE LAW

A defendant is entitled to judgment as a matter of law if, after a party has been fully heard on an issue during trial, the Court finds that " a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue ...." [13] In ruling on a motion for judgment as a matter of law, the trial court is required to

consider the evidence in the light most favorable to the party against whom the motion was made and to give that party the benefit of all reasonable inferences that the jury might have drawn in his favor from the evidence. The court cannot assess the weight of conflicting evidence, pass on the credibility of the witnesses, or substitute its judgment for that of the jury.[14]

A jury verdict should not be set aside lightly. A court may not grant judgment as a matter of law unless: (1) there is such a " ‘ complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer

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surmise and conjecture’ " or (2) there is " ‘ such an overwhelming amount of evidence in favor of the movant that reasonable and fair minded [persons] could not arrive at a verdict against [it].’ " [15]

Under Federal Rule of Civil Procedure 50(b),

[n]o later than 28 days after the entry of judgment ... the movant may file a renewed motion for judgment as a matter of law and may include an alternative or joint request for a new trial under Rule 59 ... In ruling on the renewed motion, the court may: (1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct entry of judgment as a matter of law.

The legal test for granting a new trial under Rule 59 is less stringent than for granting judgment as a matter of law. " Unlike a motion for judgment as a matter of law, a motion for a new trial may be granted even if there is substantial evidence to support the jury's verdict." [16] Nevertheless, " ‘ [a] motion for a new trial ordinarily should not be granted unless the trial court is convinced that the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice.’ " [17]

With regard to the merits of Liberty's claims, under New York law, a breach of warranty claim sounds " essentially in contract." [18] To prevail, a party must establish the existence of a contract containing a bargained-for express warranty with respect to a material fact, reliance on that warranty, a breach of that warranty, and damages suffered as a result of the breach.[19]

A Section 10(b) claim requires proof by a preponderance of the evidence that, in connection with the purchase or sale of a security: (1) defendants made an untrue statement of material fact, or omitted to state a material fact which made what was said, under the circumstances, misleading; (2) defendants acted with scienter; (3) plaintiffs justifiably relied on the misstatement or omission; and (4) plaintiffs suffered an economic loss as a result of the misstatement or omission.[20] As part of the fourth element, plaintiffs must prove " loss causation," which is, in the words of Judge Holwell,

the required " causal link" between the alleged fraud and the subsequent decline in value of the stock when the fraud comes to light. It is typically shown by the reaction of the market to a " corrective disclosure" which reveals a prior

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misleading statement. However, loss causation may also be shown by the " materialization of risk" method, whereby a concealed risk— here, a liquidity crisis— comes to light in a series of revealing events that negatively affect stock price over time. Unlike corrective disclosures, these events do not identify prior company statements as misleading, but they must reveal new information previously concealed and fall within the " zone of risk" concealed so that the events were foreseeable consequences of the fraud. In addition, a plaintiff must show that the loss was caused by materializations of the concealed risk and not other factors.[21]

IV. DISCUSSION

Vivendi offers six arguments for setting aside the jury's verdict and granting judgment as a matter of law, or in the alternative for a new trial: (1) Liberty failed to prove causation and damages because the opinion of Liberty's expert, Dr. Blaine Nye, is legally defective and unreliable; (2) Liberty failed to prove causation because the alleged events or disclosures that ostensibly caused Liberty's losses did not reveal a previously undisclosed risk; (3) the jury's damages award is not supported by any evidence in the record; (4) Liberty failed to prove Section 10(b) reliance; (5) Vivendi proved that Liberty was not obligated to close the transaction, thereby establishing an affirmative defense; and (6) Vivendi was unfairly prejudiced by the admission of evidence regarding falsity and therefore is entitled to a new trial.[22]

I address each argument in turn.

A. Dr. Nye's Opinion

Vivendi argues that it should be granted judgment as a matter of law because " [n]o jury should have been permitted to base a verdict on Dr. Nye's inconsistent, unreliable, and inadmissible testimony." [23] In particular, Vivendi argues that Dr. Nye's testimony provided a legally insufficient evidentiary basis for the jury's loss causation and damages findings.[24] To establish loss causation, Liberty was required to " prove both that the loss it suffered was foreseeable and that the loss was caused by events that revealed information concerning Vivendi's true liquidity risk that previously had been concealed by the false/untrue or misleading statements." [25]

Vivendi challenges Dr. Nye's testimony under five headings.[26] For the reasons stated below, Vivendi's challenges are without merit.

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1. Disaggregation

A number of factors may affect a company's stock price, including fluctuations in the market as a whole, news affecting the industry to which the company belongs, and the release of information specifically related to the company. [27] Under the principle of loss causation, Liberty is only entitled to damages for declines in Vivendi's stock price that resulted from events that represented materializations of Vivendi's previously concealed liquidity risk. [28] Liberty thus bore the burden of disaggregating the effects of such " materialization" events on Vivendi's stock price from the effects of other, non-fraud-related " confounding" events.[29]

At trial, Dr. Nye testified that he had examined each of the 166 trading days between December 16, 2001, the day on which the Merger Agreement was signed, and August 14, 2002, the date of the final alleged materialization event, to determine if there was a statistically significant decline in Vivendi's stock price on any of those days after removing market and industry effects.[30] Dr. Nye also testified to removing company-specific effects on the stock price that were not related to the disclosure of Vivendi's concealed liquidity risk.[31] To perform these analyses, Dr. Nye testified to having reviewed all publicly available information about Vivendi over the period noted above, including sixteen thousand news releases and several thousand analyst reports.[32]

In the end, Dr. Nye identified nine days on which statistically significant negative returns resulted from materializations of Vivendi's concealed liquidity risk.[33] Dr. Nye testified that he had also identified days on which Vivendi's share price dropped as a result of non-fraud-related company-specific news, but that none of these days were among the nine days of materialization events.[34] In addition, Dr. Nye testified that he had studied each of the nine materialization days " for other things that happened on that day that you might need to take out that weren't related to the concealed liquidity risk." [35] When

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challenged on cross-examination, Dr. Nye clarified that he had found no material non-fraud-related company-specific negative news on the nine materialization days: " In those days, ... everything had to do with the fraud." [36] Dr. Nye concluded that Liberty suffered roughly € 842 million in damages from the net share price declines over the nine materialization days.[37]

By contrast, Vivendi's expert, Dr. William Silber, testified that there was competing negative news on several of the materialization days that could have affected Vivendi's stock price.[38] For example, Dr. Silber testified that on June 24, 2002, the fourth of the materialization days, " there was an announcement overnight that News Corp. .... was not going to buy Telepiu," a Vivendi subsidiary.[39] On cross-examination, Liberty challenged the significance of Dr. Silber's alleged confounding events, either by questioning whether they had any effect on Vivendi's stock price, or by questioning whether the market perceived the events as liquidity-related, or both. For example, in the case of the news regarding the Telepiu sale, Dr. Silber conceded under cross-examination that " [i]t didn't seem to affect the stock price." [40] In addition, Liberty introduced evidence suggesting that the market perceived Vivendi's effort to sell Telepiu as liquidity-related.[41]

The jury was charged with the following instruction regarding damages under Section 10(b):

Liberty bears the burden of separating the alleged fraud from any other factors that may have affected Vivendi's stock price and ascrib[ing] some rough proportion of the whole loss to the alleged false or misleading statement. Vivendi is not liable for any loss resulting from those other non-fraud related events.[42]

Having heard the competing testimony of the parties' experts, the jury found that Liberty's reliance on Vivendi's statements caused Liberty to suffer an economic loss of € 765 million.[43]

Vivendi now argues that Dr. Nye's disaggregation analysis was so flawed as to be legally insufficient to support the jury's verdict on loss causation and damages.[44] But Vivendi offers no significant arguments beyond what the jury heard and reasonably rejected at trial.[45] Vivendi criticizes Dr. Nye for claiming to have excluded non-fraud-related company-specific events from his damages calculation, but then failing to " disaggregate a single

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such event on any one of his nine disclosure days." [46] According to Dr. Nye's testimony, however, there simply were no confounding events during the nine days on which he identified materialization events. [47] The credibility of Dr. Nye's testimony was a matter for the jury, and neither legal precedent nor common sense compels the conclusion that every set of materialization event windows, no matter how small in number, must contain at least one confounding event.[48]

Viewing the evidence in the light most favorable to upholding the jury's verdict, I conclude that a reasonable juror could have found that none of the ostensible confounding events put forth by Vivendi were both non-fraud-related and affected Vivendi's share price.[49] Dr. Nye's testimony was not inadmissible simply because it took an aggressively skeptical view of the significance of non-fraud-related news on the nine materialization days, any more than Dr. Silber's testimony was inadmissible because of his equally aggressive but opposite interpretation of potential confounding events. The weighing of the experts' conflicting testimony was a matter for the jury and will not be disturbed by this Court.

2. One-day Event Window

At trial, Dr. Nye testified that he measured the share price declines resulting from the materialization events by using a " one-day event window." [50] That is, for each materialization event, Dr. Nye measured the change in Vivendi's share price in response to the event over the course of one trading day, from market close to market close.[51] Dr. Nye explained that he chose a one-day event window, rather than a longer window of a month or a shorter window of less than a day, because over a day the market becomes more or less efficient.[52] That is, over a day of trading any public information relevant to a stock has been " fully absorbed and reflected in the market price." [53]

Dr. Nye testified that the current academic standard for measuring the effect of the release of information on a stock's price " is to extend the event period to the close of ... trading on the day after the release of the pertinent information." [54] A

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reasonable juror could have found that Dr. Nye adopted a similar approach. For most of the materialization events, Dr. Nye's one-day event window for measuring share decline began at the last close of trade preceding the event and ended at the close of trade following the event.[55] On an occasion when the materialization event arrived after the close of trading in Paris but before the close in New York, Dr. Nye's one-day event window extended from market close on the date of the disclosure to market close on the following day.[56]

Vivendi argues that Dr. Nye's one-day event window analysis is invalid because it fails to take into account the intraday movement of Vivendi's stock price or consider the impact at market opening of overnight disclosures. [57] Vivendi's argument regarding intra-day stock price movements rests on two premises: first, that it is an undisputed principle that stock markets have at least some immediate reaction to significant news, including some reaction at the start of trading if the news occurred overnight; and second, that Dr. Nye impermissibly violated this principle when he " attributed Vivendi's stock price declines on three dates to events to which the stock market had no immediate negative price reaction, " [58] and " attributed Vivendi's stock price decline on certain dates to events happening overnight that did not cause any reaction in the stock price at the next day's opening." [59]

It is true, as Vivendi suggests, that Dr. Nye testified approvingly about the theory that the market will make at least some virtually instantaneous reaction to any significant news.[60] Liberty cites no passage in Dr. Nye's testimony in which Dr. Nye explicitly rejects this principle.[61] It is also true that Dr. Nye attributed Vivendi's stock price decline on three dates to materialization events that at some point involved news-related developments that produced no immediate negative price reaction in the stock market. [62]

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Vivendi is incorrect to conclude, however, that there is an unavoidable inconsistency between Dr. Nye's theoretical principle that markets make virtually instantaneous responses to significant news and his analysis of the connection between materialization events and stock price changes in this case. Dr. Nye repeatedly testified at trial that it is difficult to say in retrospect when, precisely, new information first entered the market. [63] A reasonable juror could have concluded that Dr. Nye was correct about markets making some immediate response to significant news, and could also have concluded that the market did not respond immediately to the developments mentioned by Vivendi, by finding that the developments likely did not contain new information by the time they occurred.

Moreover, even if there were an irreconcilable conflict between Dr. Nye's theory of immediate market reaction and his analysis of the connection between materialization events and stock price changes in this case, the jury could have reasonably disregarded the former theory while accepting the latter results. Dr. Nye's loss causation and damages analysis did not depend on the validity of his beliefs about instantaneous market reactions. Rather, his analysis depended on the assumption that markets are more or less efficient over a day,[64] an assumption that Vivendi does not meaningfully contest. [65]

Finally, Vivendi's suggestion that Dr. Nye offered inconsistent testimony in prior cases regarding the extent to which markets are efficient is only relevant as an indication of Dr. Nye's credibility.[66] Credibility determinations lie within the province of the jury, and will not be second-guessed by this Court.[67]

3. May 3, 2002 Moody's Downgrade

Vivendi argues that Dr. Nye impermissibly included in his loss causation and damages analysis a stock decline that preceded a materialization event. [68] Specifically, Dr. Nye attributed the entire company-specific decline in Vivendi's share price on May 3, 2002 to the Moody's downgrade, even though the first news release in the record revealing the downgrade did not arrive until 5:12 p.m. Paris time, after Vivendi's stock had already made approximately sixty percent of the total decline it would experience on May 3. [69]

Liberty counters that Dr. Nye concluded " that news of the downgrade had entered the market before that announcement— either through a leak, or because the announcement in a Dow Jones news release at 5:12 Paris time was not the first the market learned of the downgrade." [70] Liberty argues that the jury could reasonably have accepted Dr. Nye's conclusion based

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on several factors: First, Dr. Nye explained, based on his general expertise regarding trading, that it is easy and common for information to leak into the market before an official announcement.[71] Second, Dr. Silber was unable to identify any specific alternative cause for the decline in Vivendi's stock price on May 3 prior to 5:12 p.m.[72] Third, two internal Vivendi emails show that news of the downgrade may have leaked to part of the market as early as May 2.[73]

The first two factors are together sufficient to support the finding that the pre-5:12 p.m. declines in Vivendi's share price resulted from information concerning Moody's downgrade. A significant share decline occurred shortly before the first record evidence of the public release of news about Moody's downgrade. Liberty's expert testified that leaks of such news are common, and explained how such leaks unfold. The opposing party could provide no alternative cause for the share decline. In light of this evidence, and considering that direct evidence of trading based on impermissibly leaked information will presumably be difficult to prove in many cases even where such trading took place,[74] the jury could have reasonably inferred that the pre-5:12 p.m. share decline more likely than not resulted from information concerning the Moody's downgrade.[75]

Because the first two factors are sufficient to support the jury's finding, it is not necessary to determine whether the two Vivendi emails might provide additional support.[76] It is also unnecessary to address Liberty's argument that Vivendi's challenge is waived.[77]

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4. Maximum Inflation Date

Vivendi argues that no evidence supports Dr. Nye's choice of December 13, 2001 as the date of maximum inflation, that is, the date at which the value of Vivendi's shares was most inflated by Vivendi's fraud.[78] Vivendi's argument suggests that Dr. Nye should have taken into account Vivendi's " multiple misrepresentations" between December 13, 2001 and January 7, 2002, [79] because Liberty should not recover for inflation resulting from misrepresentations made after the signing of the Merger Agreement on December 16, 2001.[80] Vivendi also criticizes Dr. Nye for failing to conduct a quantitative analysis of Vivendi's concealed liquidity risk as a basis for arriving at the date of maximum inflation.[81]

Vivendi's arguments are without merit. A reasonable juror could have accepted Dr. Nye's conclusion that the inflation of Vivendi's stock price as a result of Vivendi's misrepresentations reached its peak on or before December 13, 2001. Dr. Nye's choice was not arbitrary, but rather based on plausible and sufficiently supported reasoning that was submitted to the jury for its consideration. Dr. Nye claimed that in the period leading up to December 13, there were a series of indicators that liquidity risk was very high, but these indicators were unknown to the market and to Liberty.[82] On December 13, Vivendi CFO Guillaume Hannezo wrote a private letter of reassurance to ratings agencies, which the jury could reasonably have concluded helped to prevent a downgrade.[83] Vivendi attempted to suggest at trial, including during the cross-examination of Dr. Nye, that misrepresentations between December 13 and January 7 further inflated Vivendi's share price. [84] But the jury was entitled to reject Vivendi's counternarrative based on the jury's weighing of the evidence, including the testimony of the parties' experts.

Vivendi is also incorrect to suggest that Dr. Nye had an obligation to derive the maximum inflation date from a quantitative analysis of Vivendi's liquidity risk, a suggestion for which Vivendi provides no legal support.[85] It was unnecessary to arrive at an absolute quantitative measure of Vivendi's liquidity risk in order to determine when the inflation of Vivendi's stock price reached its highest point, and for the same reason that it is unnecessary to know the height of each mountain in a range in order to identify which is the tallest: comparative terms like " highest" and " tallest" do not require absolute measures. It would not have been unreasonable for the jury to have accepted Dr. Nye's maximum inflation date based on his narrative analysis of the growth of the gap between Vivendi's actual liquidity risk and the inaccurate perceptions of that risk based on Vivendi's misrepresentations and omissions.

5. Inflation Amount

Finally, Vivendi suggests that a reasonable jury could not have relied on Dr. Nye's damages calculation, because Dr. Nye arrived at the same inflation amount based on different sets of misstatements in the Class and Liberty trials. [86] At the

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Class Action trial, plaintiffs presented fifty-seven misstatements or omissions ranging from October 30, 2000 to June 26, 2002. [87] At the Liberty trial, Liberty relied on a smaller set of twenty-five misstatements or omissions.[88] A small part of the difference resulted from the fact that under the Merger Agreement, Liberty was only entitled to recover for Vivendi's misrepresentations between December 31, 2000 and the signing of the Merger Agreement on December 16, 2001.[89] Liberty's claim thus did not include the two misrepresentations from before this period introduced at the Class Action trial, one of which occurred on October 30, 2000, and the other on December 19, 2000.[90] Despite this and other differences, Dr. Nye testified to the same inflation amount (€ 22.52 per share) in both trials.[91]

If Dr. Nye's analysis were based on the assumption that each of Vivendi's misstatements played a distinct and independently measurable role in inflating Vivendi's share price, then Vivendi's argument might have merit. At minimum, Liberty would not be entitled to recover for whatever inflation Dr. Nye's analysis would suggest was already built into Vivendi's share price at the start of trading on December 31, 2000 based on Vivendi's two earlier misstatements regarding its liquidity risk.[92]

Vivendi's challenge is without merit, however, because Dr. Nye's damages analysis did not depend on the assumption that every misrepresentation by Vivendi could be independently monetized and subtracted from Liberty's damages. [93] Again, Dr. Nye presented to the jury a sufficiently supported narrative of the growth of the inflation in Vivendi's share price based on Vivendi's misstatements and omissions from December 31, 2000 to December 16, 2001. The calculation of damages was not derived from an analysis of the specific effects of individual misrepresentations and omissions. Dr. Nye calculated the damages Liberty suffered as a result of this inflation by analyzing the declines in Vivendi's stock price on the nine days during which the market responded to the materialization of the hidden liquidity risk. Vivendi has offered no legal basis for concluding that this was an unacceptable approach.

Vivendi was free to attempt to persuade the jury to reject Dr. Nye's relatively simple method for determining loss causation and damages in favor of a more sophisticated one. Using a different method, it might in theory have been possible to offer a more precise causal analysis, one that

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would have arrived at different damages calculations for the fifty-seven misrepresentations at the Class Action trial and the twenty-five at the Liberty trial. But the law does not require the use of such a fine-grained quantitative method, if one in fact exists that would produce reliable rather than spuriously precise results. The jury in this case was explicitly charged that " [d]amages need not be proven with mathematical certainty, but there must be enough evidence for you to make a reasonable estimate of damage." [94] Dr. Nye's analysis more than satisfies this standard, even if his method leads to the same result based on the misrepresentations in both the Class and Liberty trials.

Finally, a reasonable juror could have concluded that where losses result from a party's failure to correct a false impression it created that a risk does not exist, the losses may be the same whether the party failed to correct the false impression on twenty-five occasions over one year or fifty-seven occasions over a year and a half. Either way, plaintiffs may suffer the same losses as a result of the materialization of the risk.[95]

B. Disclosure of Previously Undisclosed Risk

The jury was instructed that for Liberty to establish loss causation in its Section 10(b) claim, it was required to " prove both that the loss it suffered was foreseeable and that the loss was caused by events that revealed information concerning Vivendi's true liquidity risk that previously had been concealed by the false/untrue or misleading statements." [96] Vivendi now argues, as it did in an unsuccessful post-verdict motion for judgment as a matter of law in the Class Action trial,[97] that the materialization events in the present case did not reveal a previously undisclosed risk, and thus that Liberty failed to prove loss causation.[98] Specifically, Vivendi argues that it is entitled to judgment as a matter of law because Liberty failed to prove that (i) " a reasonable investor misled

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by the fraud would have perceived the allegedly corrective events as ‘ remote or highly unlikely,’ " and (ii) " the allegedly corrective events related to the ‘ specific misrepresentations alleged.’ " [99] Neither of these elements were included in the jury's instructions regarding loss causation, but Vivendi purports to derive them from a reading of Second Circuit case law.[100] Vivendi argues that because Liberty produced " no evidence" to satisfy standards (i) and (ii), there was insufficient evidence for the jury to conclude that Liberty proved loss causation.[101]

Liberty responds that Vivendi's loss causation argument is waived under Rule 50(b) because it did not appear in Vivendi's Rule 50(a) Motion.[102] I agree. The Second Circuit has stated:

[B]ecause the Rule 50(b) motion is only a renewal of the preverdict motion, it can be granted only on grounds advanced in the preverdict motion. The earlier motion informs the opposing party of the challenge to the sufficiency of the evidence and affords a clear opportunity to provide additional evidence that may be available.[103]
" As to any issue on which proper Rule 50 motions were not made, JMOL may not properly be granted by the district court ... unless that action is required in order to prevent manifest injustice." [104] Vivendi did not suggest in its Rule 50(a) motion that Liberty was required to prove, and failed to prove, either element (i) or (ii).[105] Vivendi is thus barred from raising these arguments in its Rule 50(b) motion.

Waiver under Rule 50, however, does not imply waiver under Rule 59. [106]I thus consider Vivendi's challenge to the jury's answer to Question 10 under Rule 59, and conclude that Vivendi's challenge is without merit. Vivendi misinterprets Second Circuit case law to create requirements for Liberty's Section 10(b) claim that do not exist. First, the Second Circuit reaffirmed in Lentell the following principle:

If the significance of the truth is such as to cause a reasonable investor to consider seriously a zone of risk that would be perceived as remote or highly unlikely

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by one believing the fraud, and the loss ultimately suffered is within that zone, then a misrepresentation or omission as to that information may be deemed a foreseeable or proximate cause of the loss. [107]

Vivendi infers from this that " there can be no loss causation unless a reasonable investor misled by the fraud would have thought it ‘ remote or highly unlikely’ that the event causing his or her loss would occur." [108] But Lentell asks whether a reasonable investor who believed the fraud would perceive the zone of risk as remote or highly unlikely, not whether such an investor would perceive any specific event within the zone of risk as unlikely. [109] What Judge Holwell noted in response to Vivendi's identical argument in the Class Action is equally true in the present case: plaintiffs have " offered substantial evidence that the zone of risk— a liquidity crisis— would have been thought unlikely by shareholders who believed Vivendi's repeated assurances about its financial health." [110]

Second, the Second Circuit distinguished in Omnicom between the proof of loss causation based on a theory of corrective disclosure, and proof of loss causation based on a theory of materialization of the risk.[111] Under the former theory, " loss causation can be established by a ‘ corrective disclosure to the market’ that ‘ reveal[s] ... the falsity of prior recommendations.’ " [112] Under the latter theory, loss causation can be established by showing " ‘ that the loss was foreseeable and caused by the materialization of the risk concealed by the fraudulent statement.’ " [113] In rejecting the Omnicom plaintiffs' corrective disclosure argument, the Second Circuit noted that none of the ostensible disclosures put forth by plaintiffs " even purported to reveal some then-undisclosed fact with regard to the specific misrepresentations alleged in the complaint." [114]

Vivendi infers from Omnicom that Liberty had the burden to prove that " the allegedly corrective events" in the present case " related to the ‘ specific misrepresentations alleged’ " in the present case.[115] But what Judge Holwell stated in the context of the Class Action trial also applies here: " This is not a corrective disclosure case. Rather, plaintiffs are proceeding under a materialization of the risk theory." [116] Vivendi's invocation of the Second Circuit's language in analyzing the Omnicom plaintiffs' corrective disclosure argument is misplaced. It was not necessary for Liberty " to establish a one-to-one correspondence between concealed facts and the materialization of the risk." [117]

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Even if Vivendi's sufficiency arguments were treated as though they were independent from its novel legal interpretations,[118] the sufficiency arguments would also fail on the merits. Vivendi repeatedly suggests that the materialization events identified by Liberty were either recharacterizations of previously known information or unrelated to Vivendi's liquidity risk as it existed at the time the Merger Agreement was signed. [119] To take one example, Vivendi suggests that the news on June 21 and June 24, 2002 regarding the repurchase agreement (" repo" ) that Vivendi used in connection with its sale of Vivendi Environnement could not have been understood by a reasonable juror as a revelation of Vivendi's liquidity risk in December 2001, because " it was well known that Vivendi intended to sell Vivendi Environnement in June." [120] Liberty responds that Dr. Nye testified the market was troubled not by the sale itself but by its rapid timing and the use of the " repo" in the deal.[121] Vivendi then suggests that even if Liberty succeeded in proving that the June 21 and 24 news revealed a liquidity risk that troubled the market, that liquidity risk " had nothing to do with Vivendi's liquidity condition six months earlier." [122] Vivendi argues that its asset and share sales in the intervening months " [broke] the chain of causation between the liquidity risk of December and the sale of Vivendi Environnement shares." [123]

Vivendi's attempt to suggest that the liquidity problems revealed in 2002 had " nothing to do" with the liquidity risk concealed in 2001 is unpersuasive. A reasonable juror could have concluded that Vivendi had a need for cash in late June 2002, despite the asset and share sales mentioned by Vivendi, precisely because of the sources of liquidity risk it concealed in 2001. In fact, the intervening asset sales strengthen rather than weaken the chain of causation between the concealed liquidity risk in 2001 and the liquidity problems in 2002. It would be easier for Vivendi to argue that its liquidity problems in June 2002 were unrelated to its liquidity risk in December 2001 if Vivendi had purchased rather than sold assets in the intervening months. In that case, Vivendi could have argued that the June 2002 problems were the result of risk created by the new purchases rather than the result of any liquidity risk existing in December 2001.

Vivendi's arguments regarding the other materialization days are equally unpersuasive. Vivendi repeatedly suggests that the materialization events " revealed nothing," [124] " revealed no new information," [125] " were recharacterizations of previously disclosed facts," [126] or were " unrelated to Vivendi's ... liquidity risk" altogether. [127]

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With regard to each challenge, Liberty offers persuasive arguments as to how a reasonable juror could have concluded based on Dr. Nye's testimony and other evidence that each of the materialization events did, in fact, reveal new information specifically related to Vivendi's liquidity risk. [128] For example, in response to Vivendi's argument that the May 3 Moody's downgrade " revealed no new information about Vivendi's liquidity risk" because " the reasons for the Moody's downgrade were known to the market before the downgrade," [129] Liberty correctly recounts testimony heard by the jury that could easily have supported the conclusion that " the downgrade conveyed to the market new information about Vivendi's liquidity," including Dr. Nye's testimony that ratings agencies have access to nonpublic information. [130] The jury could reasonably have rejected Dr. Silber's competing testimony.[131]

C. Damages

The jury awarded € 765 million in damages.[132] This was roughly € 77 million less than Dr. Nye's damages calculation of roughly € 842 million.[133] Stated in terms of share price, the jury's award was € 2.06 per share less than Dr. Nye's calculation of € 22.52 inflation per share. [134] By contrast, Dr. Silber had calculated Liberty's damages as between € 0 and € 175 million.[135]

Vivendi argues that the jury's damages award is not supported by any evidence in the record and must be rejected.[136] Specifically, Vivendi's opening brief criticizes the jury's damages finding because it " bears no relation to either Dr. Nye's or Dr. Silber's analyses" and " does not correspond to any of the price drops that Dr. Nye attributes to corrective disclosures." [137] Vivendi's reply brief attempts to clarify that " Vivendi does not argue that the jury's award has to match either expert witness's damages calculation ‘ wholesale,’ or exactly match the price drops claimed by Dr. Nye." [138] If a jury may

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depart from expert damages calculations, however, and need not do so in a way that exactly, numerically corresponds to the rejection of specific elements of those calculations, it is difficult to understand the basis for Vivendi's criticism of the jury's award. Vivendi gives no indication of the nature of the " relation" that the jury's award was required to have, but failed to have, to Dr. Nye's and Dr. Silber's analyses, if the " relation" was not one of the two relations disavowed in Vivendi's reply brief.[139]

In any case, Vivendi's argument is probably waived.[140] Vivendi failed to request a jury instruction placing strict numerical constraints on the jury's damages award, or requiring the jury to itemize its award based on specific declines in share price. To the contrary, the jury was instructed " to make a reasonable estimate " (emphasis added):

Any damages you award must have a reasonable basis in the evidence and may not be based on speculation. Damages need not be proven with mathematical certainty, but there must be enough evidence for you to make a reasonable estimate of damage.[141]

The jury heard Dr. Nye's and Dr. Silber's calculations and apparently found the former largely but not entirely credible. If the jury discounted Dr. Nye's calculation by roughly ten percent, the jury acted appropriately and within the bounds of its instructions. Even Vivendi seems to acknowledge the appropriateness of such discounting: Vivendi approvingly notes that the jury in the Class Action awarded roughly half the damages calculated by Dr. Nye because the jury " found Dr. Nye's calculations non-credible by a factor of 50%." [142] The jury here has apparently done nothing different, except that it found Dr. Nye's calculations roughly ninety percent credible rather than roughly fifty percent credible. Credibility determinations are the province of the jury, and it is appropriate for damages awards to reflect credibility determinations regarding the damages calculations of experts. [143] Vivendi has not cited, and I am not aware of, any precedent for the proposition that juries departing from expert calculations must themselves reason like experts and perform technical calculations, rather than arriving at rough estimates based on reasonable but imprecise credibility determinations.

The question remains, however: if the jury did find Dr. Nye roughly ninety percent credible, why did it award € 765 million in damages, which is 90.86% of € 842 million, rather than a simple, round 90% of € 842 million (that is, € 757.8 million)? One possible answer would be that the jury, recognizing the many sources of imprecision in the damages calculations in this case, conceived of Dr. Nye's damages as " roughly € 850 million," and then discounted that number by ten percent. Ninety percent of € 850 million is exactly € 765 million. Another possible answer would be that the jury subtracted € 2.06 per share from Dr. Nye's € 22.52 per share inflation calculation by partially or wholly discounting one or more of the materialization events, as noted above, or by partially or wholly incorporating one or more of Dr.

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Silber's confounding events, also as noted above. Liberty invited such discounting in its summations: " Now, if there are some of these days you're not persuaded by, like you think, well, one of the days is a close call or whatever ... I understand that.... I would understand if you don't do that exact number...." [144] This invitation, as well as the jury's instructions, were appropriate in light of the Second Circuit's repeated emphasis that losses resulting from securities fraud need not be proved with mathematical precision. [145]

It is hopeless to attempt to determine which specific materialization events, if any, the jury might have questioned; or which specific confounding events, if any, it might have incorporated; and what specific degrees of credence it gave to either or both. The jury's deliberations cannot be deduced from the number 77, nor from the number 2.06. But while I cannot know for sure which calculations the jury actually made, " ‘ a jury has wide discretion in determining damages, so long as it has a reasonable basis.’ " [146] There were any number of reasonable paths for arriving at a damages award of € 765 million based on rough credibility determinations regarding the experts' calculations.

Finally, Vivendi argues that the Court should grant remittitur and reduce Liberty's award because it " deviates materially" from reasonable compensation as measured by awards in similar cases, in violation of section 5501(c) of New York's Civil Practice Law and Rules (" CPLR" ).[147]Section 5501(c) was enacted " as part of a series of tort reform measures," [148] and states in relevant part:

In reviewing a money judgment in an action in which an itemized verdict is required by rule forty-one hundred eleven of this chapter in which it is contended that the award is excessive or inadequate and that a new trial should have been granted unless a stipulation is entered to a different award, the appellate division shall determine that an award is excessive or inadequate if it deviates materially from what would be reasonable compensation.[149]

The only subsections of CPLR § 4111 that require an itemized verdict are subsections (d) and (e), which concern, respectively, " medical, dental, or podiatric malpractice actions," and " personal injury, injury to property or wrongful death." Neither Liberty's Section 10(b) claim nor its breach of warranty claim fall within these tort law categories. Nevertheless, Vivendi points to past decisions in which federal courts have applied CPLR § 5501(c) outside of the tort context.[150]

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In any case, even if the " deviates materially" standard applied to the jury's € 765 million award on Liberty's state-law-based breach of warranty claim, the more difficult " shocks the conscience" standard would continue to apply to the jury's € 765 million award on Liberty's federal section 10(b) claim. " When federal law provides the cause of action, remittitur is appropriate when the jury award includes an identifiable error of a quantifiable amount or is so high as to ‘ shock the conscience.’ " [151]

Thus, even if I were persuaded by Vivendi's argument that the jury's verdict on the breach of warranty claim is excessive under section 5501(c)— which I am not [152]— and even if I were to reduce the breach-of-warranty award on that basis, Liberty would still be entitled to the full € 765 million in damages from the jury's verdict on the section 10(b) claim— unless Vivendi succeeded in establishing that the latter verdict shocked the judicial conscience. Vivendi has not done so. The jury faithfully obeyed its instructions, arriving at a reasonable estimate of Liberty's damages that fell between the plausible calculations of the experts.

D. Section 10(b) Reliance

Reliance by Liberty upon Vivendi's " deceptive acts is an essential element of the § 10(b) private cause of action." [153] The Supreme Court has found

a rebuttable presumption of reliance in two different circumstances. First, if there is an omission of a material fact by one with a duty to disclose, the investor to whom the duty was owed need not provide specific proof of reliance. Second, under the fraud-on-the-market doctrine, reliance is presumed when the statements at issue become public. The public information is reflected in the

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market price of the security. Then it can be assumed that an investor who buys or sells stock at the market price relies upon the statement.[154]

The jury instructions reflected these principles:

Liberty must prove by a preponderance of the evidence that it relied upon the statements Vivendi made to the public. In order to satisfy this element, Liberty must prove that it read or heard the false and misleading statement and relied on it, and that its reliance was reasonable and justified....
...
What Liberty must prove to establish reliance depends on whether the particular statement in question was a misstatement or an omission. To prove that it relied on a misstatement that Vivendi made, Liberty must prove that, but for the misstatement that Vivendi made, Liberty would not have signed the Merger Agreement.
With respect to an omission— that is Vivendi's failure to state a material fact that was necessary to prevent the statements that were made from being misleading under the circumstances— Liberty is entitled to a presumption of reliance. An omission is material if there is a substantial likelihood that a reasonable investor would have considered the omitted fact to be important in making investment decisions regarding Vivendi's stock.[155]

The instructions then described how Vivendi could rebut the presumption of reliance regarding material omissions. The instructions also reflected my ruling before trial that the fraud-on-the-market presumption only applied in a very limited sense.[156]

At trial, Liberty introduced evidence that Robert Bennett, Liberty's CEO, directed Liberty Vice President Neal Dermer to perform due diligence and formulate a recommendation on a Vivendi investment; Bennett and John Malone, Liberty's Chairman, expected Dermer to review public information about Vivendi, including SEC filings and press releases; during his review, Dermer read all or nearly all of the twenty-five material misrepresentations presented to the jury; [157] Dermer's review of these misrepresentations affected his conclusion that Vivendi's stock was fairly valued and his recommendation; and Bennett and Malone relied on Dermer's recommendation when they decided to sign the Merger Agreement.[158]

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At the conclusion of trial, the jury answered " YES" to the following question on the Special Verdict Form regarding Liberty's Section 10(b) claim: " Has Liberty proven, by a preponderance of the evidence, that it justifiably relied on any of the statements set forth in Table A when it signed the Merger Agreement with Vivendi on December 16, 2001?" [159] As will be discussed at greater length below, Table A contained the list of Vivendi's twenty-five " False or Misleading Statements That Misstated or Omitted Vivendi's True Liquidity Risk That Were Made Prior to [the] Signing of the Liberty Contract." [160]

Vivendi argues that based on the evidence at trial, Liberty " utterly failed" to prove reliance under Section 10(b),[161] and thus that the jury's finding of Section 10(b) reliance lacked a " legally sufficient basis" and must be rejected.[162] Vivendi's argument is factually detailed, but ultimately depends on the false premise that in order to establish reliance, Liberty needed to prove that someone with the authority to sign or close the transaction personally reviewed some or all of the twenty-five misrepresentations, or reviewed an analysis that specifically dealt with the misrepresentations.[163]

The only legal support Vivendi offers for this position is a brief 1987 decision, Zaro v. Mason, in which the District Court found that three individual plaintiffs had failed to show Section 10(b) reliance on a misstatement in the offering memo for a limited real estate partnership. [164] In Zaro, however, the three plaintiffs who failed to prove Section 10(b) reliance had neither read the misstatement at issue nor relied on representations from an agent that were based on a review of the misstatement. [165] By contrast, Liberty, through its corporate agent Dermer, actually read all or nearly all of the misrepresentations at issue in the present case.

It is a general rule " ‘ that a corporation is charged with constructive knowledge ... of all material facts of which its officer or agent receives notice or acquires knowledge while acting in the course of employment within the scope of his or her authority.’ " [166] As the jury was instructed: " Vivendi and Liberty are corporations and thus can only act through their agents. That is, statements and actions by Vivendi and Liberty employees acting within the scope of their employment are imputed to the corporation." [167] Because Dermer was an employee of Liberty, and because his analysis of the Vivendi investment took place within the scope of his employment, a reasonable juror could have found that Liberty read the misrepresentations that Dermer read.[168]

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The reliance requirement of Section 10(b) ultimately aims to ensure " that, for liability to arise, the ‘ requisite causal connection between a defendant's misrepresentation and a plaintiff's injury’ exists." [169] Even if the jury viewed all twenty-five of Vivendi's misrepresentations as misstatements rather than omissions,[170] Liberty provided sufficient evidence of the requisite causal connection between Vivendi's misrepresentations and Liberty's injuries. A reasonable juror could have inferred that if Vivendi had accurately stated its liquidity risks— or remained entirely, conspicuously silent regarding its financial health— Dermer's analysis would have been materially different, and the Merger Agreement, at least in the form it ultimately took, would not have been signed.[171]

E. Vivendi's Obligation to Close the Transaction

Even if Liberty justifiably relied on Vivendi's fraud in signing the Merger Agreement on December 16, 2001, Vivendi could have broken the chain of causation between this justifiable reliance and Liberty's losses by showing that before Liberty closed the transaction, on May 7, 2002, Liberty knew or should have known of Vivendi's fraud and was free to walk away.

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The jury was thus instructed that Vivendi could defend itself against Liberty's proof of Section 10(b) causation by showing the following:

after signing the Merger Agreement on December 16, 2001 but prior to closing on the Agreement on May 7, 2002, (1) Liberty knew or should have known of Vivendi's fraud, such that Liberty's continued reliance on the statements made on or before December 16, 2001, was utterly unreasonable, foolish, or knowingly blind, and ... (2) Liberty could have walked away from its obligations under the Merger Agreement.[172]

Questions 10 and 11 on the Special Verdict Form addressed this defense. Question 10 asked: " Has Vivendi proven ... that Liberty was not legally obligated to close the transaction embodied in the Merger Agreement?" If the jury answered " NO," the form told the jury to proceed to Question 12, the calculation of Section 10(b) damages. If the jury answered " YES," the form told the jury to proceed to Question 11, which asked: " Has Liberty proven ... that Liberty's decision to close the Merger Agreement, on May 7, 2002, in reliance on any of the statements set forth in Table A caused Liberty to suffer an economic loss?" [173] If the jury answered " YES," it was directed to proceed to the damages calculation in Question 12; if " NO," to sign the verdict sheet without calculating damages.[174]

After deliberation, the jury answered " NO" to Question 10, and— as instructed— proceeded to the calculation of damages in Question 12 without addressing the issue of post-signing reliance in Question 11.[175] Vivendi now argues that no reasonable juror could have answered " NO" to Question 10 based on the evidence at trial.[176] In Vivendi's view, Liberty was not legally obligated to close the Merger Agreement when Liberty did so on May 7, because under the terms of the Merger Agreement, Liberty was only obligated to close if certain conditions were met.[177] Vivendi argues that no reasonable juror could have found that the following two conditions were met: (i) Vivendi's " Registration Statement shall have been declared effective by the SEC under the Securities Act," [178] and (ii) Vivendi " shall have performed or complied in all respects" with its obligation to obtain a waiver of the right of first refusal held by other holders of MTH shares.[179] Vivendi further argues that the jury's erroneous finding in Question 10 significantly impacted the verdict, because if the jury had answered " YES" to Question 10, it would have proceeded to Question 11 and could have answered " NO" there, which would have resulted in no Section 10(b) damage award against Vivendi.[180]

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Liberty does not dispute that (i) and (ii) were conditions for Liberty's obligation to close. But Liberty argues that a reasonable juror could have found that both conditions were satisfied.[181] Liberty also argues that Vivendi waived its challenge to the jury's verdict on Question 10, because Vivendi failed to move for the exclusion of Question 10 from the verdict form before deliberations began.[182] Vivendi concedes that its Rule 50(a) motion did not argue for judgment as a matter of law on the issue of whether closing conditions (i) and (ii) had been met before May 7. Vivendi argues, however, that it was not required to make such an argument in its Rule 50(a) motion, because it filed the motion before having the opportunity to present evidence in support of its closing-conditions defense.[183]

It is true that Vivendi filed its Rule 50(a) motion at the close of plaintiffs' case. But Vivendi could have moved under Rule 50(a) again at the close of evidence, before the jury began deliberations.[184] Thus, Vivendi could have raised its closing-conditions challenge in a Rule 50(a) motion after it had been fully heard on its affirmative defense and before the case was submitted to the jury. By failing to do so, Vivendi waived its ability to bring the challenge under Rule 50(b). As noted above, however, waiver under Rule 50 does not imply waiver under Rule 59.[185]I thus consider Vivendi's challenge to the jury's answer to Question 10 under Rule 59.

First, with regard to the Registration Statement condition, a reasonable juror could have found the following facts: (1) Under the Merger Agreement, the parties agreed that if Vivendi had not met the closing conditions by the end of September 2002, either party could walk away from the deal.[186] As Vivendi's lead lawyer for the United States testified, " [W]e had until the end of September [2002] effectively to satisfy both of those closing conditions," that is, conditions (i) and (ii) above. Until then, " Liberty could not walk away because of those conditions not being satisfied." [187] (2) On May 7, 2002, Liberty closed on the Merger Agreement and signed a Letter Agreement waiving the Registration Statement condition in exchange for a modification in another provision of the Merger Agreement.[188] (3) On June 3, 2002, Vivendi's Registration Statement was declared effective by the SEC.[189]

Vivendi does not dispute that a reasonable jury could have found these facts. [190] Rather, Vivendi suggests that no inferences

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can be reasonably drawn from these facts that would support the jury's verdict. [191] I disagree. It is true that there is a narrow, trivial sense in which the jury's response to Question 10 could be viewed as erroneous. But there is a far more relevant and significant sense in which the jury's response to Question 10 was reasonable— and indeed, may have been the only reasonable inference from the evidence introduced at trial.[192]

Setting aside for a moment the issues raised by the May 7 Letter Agreement, discussed below, and assuming provisionally that none of the other closing conditions were unmet when Liberty closed, I turn to the language of Section 6.03 of the Merger Agreement. This section states in relevant part: " The obligation of the Liberty Parties to consummate the Transactions is subject to the satisfaction on the Closing Date of the following conditions, any one or more of which conditions may be waived ..." [193] One of the conditions is: " The Registration Statement shall have been declared effective by the SEC under the Securities Act." [194] In the event, the SEC had not declared the Registration Statement effective by the closing date of May 7, 2002. As a result, the Registration Statement condition was not satisfied on the closing date. Because Liberty's obligation to close was, strictly speaking, subject to the satisfaction on the closing date of the Registration Statement condition, there is a literalistic sense in which Liberty never incurred an obligation under Section 6.03 to close. That is, under a literal application of Section 6.03 to the chronology of Liberty's closing, by closing before the registration statement became effective, Liberty ensured that the legal obligation to close under Section 6.03 would never come into effect.

As this chain of reasoning already suggests, however, there is another, more significant sense in which Liberty's decision to close on May 7, prior to the effective date of the registration statement, had no effect on its obligation to close on the Merger Agreement. Section 6.03 does not state that Liberty was free to walk away from the Merger Agreement until the moment when the SEC declared the Registration Statement effective. To the contrary, as the parties understood,[195] and as the Merger Agreement stated,[196] the parties had until September 30 to satisfy the conditions. If Liberty had attempted to walk away from the Merger Agreement on May 7, rather than closing, the Merger Agreement made clear that Liberty's attempt to walk away could prove futile: Vivendi's satisfaction of the Registration Statement condition at any time before September 30 would have obligated Liberty to close despite any attempt to walk away.[197] In other words, it was only by closing that Liberty avoided the risk of being obligated to close under Section

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6.03.[198] Because Liberty was neither free to walk away after it closed nor before it closed, the Registration Statement condition never provided a basis for Liberty to escape its legal obligation to close the Merger Agreement.

A reasonable juror could thus have found that Vivendi did not prove the Registration Statement condition provided Liberty with an avenue for avoiding its legal obligation to close the Merger Agreement. Vivendi's challenge to the jury's rejection of Vivendi's closing-conditions defense is without merit to the extent that the challenge is based on the Registration Statement condition. [199]

I now turn to the effect of the May 7 Letter Agreement, which was excluded from the foregoing analysis. As noted above, in the Letter Agreement, signed on the day of closing, Liberty waived the Registration Statement condition in exchange for a modification in another provision of the Merger Agreement. [200] Vivendi

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cites the Letter Agreement in its brief, apparently as further evidence that the Registration Statement had not been declared effective by May 7.[201] There is no dispute, however, that the Registration Statement was not declared effective until June 3. The Letter Agreement would only be relevant to the present analysis if it had freed Liberty to walk away from the Merger Agreement. In fact, the Letter Agreement did the opposite: it removed what still appeared (incorrectly, as it turned out) to be a potential avenue for walking away. By signing the Letter Agreement and thereby waiving the Registration Statement condition, Liberty imposed a legal obligation on itself to close even if the Registration Statement was never declared effective.

Second, as noted above, another closing condition in the Merger Agreement required Vivendi to obtain a waiver of the right of first refusal held by other holders of MTH shares.[202] Vivendi argues that no reasonable juror could have found based on the evidence at trial that Vivendi satisfied the MTH waiver condition.[203] As a result, Vivendi argues, no reasonable juror could have found that Liberty was obligated to close on the Merger Agreement, and the jury's answer to Question 10 requires a new trial under Rule 59. [204]

The jury heard conflicting evidence regarding the satisfaction of the MTH waiver condition. The dispute between the parties turns in large part on a letter that Vivendi forwarded to Liberty on March 19, 2002. At the time, Vivendi presented the letter as " confirming that Lagardere Active Broadcast will not exercise its right of first refusal under the Multithematique Cooperation Agreement." [205] The crux of Vivendi's post-trial argument is that the March 8 letter from Lagardere (the " Lagardere Letter" ) did not in fact satisfy the MTH waiver condition, and thus that Liberty was free to walk away from the Merger Agreement on this basis.

On the one hand, Vivendi notes that prior to closing, Liberty itself questioned whether the Lagardere Letter satisfied the MTH waiver condition. [206] For example, when Liberty received the letter, it responded by writing that it did not " quite see how this letter meets the requirements of the merger agreement," and noted language in the letter that " casts doubt in our minds as to the validity of this letter as a waiver of the [right of first refusal] rights." [207] Liberty concluded: " Therefore, we consider it imperative that Vivendi obtain a clear, irrevocable waiver from Lagardere...." [208] Later, Vivendi notes, Liberty proposed and the parties entered into an Indemnification Agreement that required Vivendi to indemnify Liberty for any losses " directly or indirectly related to, based upon, arising out of or otherwise in respect of (i) Vivendi's failure to satisfy in full its obligations pursuant to and in accordance with Section 5.01(e) of the Merger Agreement," which contains the MTH waiver condition.[209]

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On the other hand, Liberty notes that Vivendi forwarded Liberty a March 12 letter from Messier to Lagardere confirming Lagardere's waiver of the right of first refusal.[210] At the time, Vivendi argued " that the original [March 8] letter, combined with the fact of Lagardere's cooperation to date ... and the absence of a response from them to [Messier's letter] to date, together satisfy the requirements of obtaining the necessary waivers." [211] Vivendi also provided, at closing, an " Officer's Certificate" warranting that it had " performed or complied in all respects with" the MTH waiver condition.[212]

Based on the evidence introduced at trial, a reasonable juror could have found that Liberty was not free to walk away from the Merger Agreement based on the MTH waiver condition having not been satisfied. While the evidence suggested uncertainty as to whether the Lagardere Letter satisfied the MTH waiver condition, none of the evidence established that the Letter in fact failed to satisfy the condition. A reasonable juror could have found that Liberty insisted on the Indemnification Agreement in order to protect itself against the risk created by the uncertainty around the Lagardere Letter, not because it had been definitively established that the Letter failed to satisfy the waiver condition. The fact that Liberty questioned the validity of the Letter before, and now defends it— while Vivendi defended its validity before, and now questions it— illustrates the lack of clarity regarding the effect of the Letter on the waiver condition.[213]

In the face of such uncertainty, it is appropriate to defer to the jury's findings. Because a reasonable juror could have found that the MTH waiver condition was adequately satisfied despite the lack of certainty regarding the legal effect of the Lagardere Letter, the waiver condition does not provide a basis for concluding that the jury's answer to Question 10 was seriously erroneous.

Viewing the evidence concerning both the Registration Statement condition and the waiver condition together, a reasonable juror could have found that Liberty was never free to walk away from the Merger Agreement based on unsatisfied closing conditions. The jury's answer to Question 10 was thus not seriously erroneous, and there was no need for the jury to answer Question 11. Vivendi is not entitled to a new trial under Rule 59.

F. Challenges to Admitted Evidence

Vivendi argues that at trial Liberty introduced " highly prejudicial evidence that was not relevant to any issue before the jury," and that as a result Vivendi should be granted a new trial under Rule 59, which permits the granting of a new trial " ‘ if substantial errors were made in admitting or excluding evidence.’ " [214] Specifically,

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Vivendi argues that the Court allowed the introduction of evidence " related solely to falsity— an element of Liberty's Section 10(b) claim that was not before the jury" because of the Court's collateral estoppel order.[215]

The evidence challenged by Vivendi related to: (1) Vivendi having engaged in " earnings management" to boost its reported earnings; (2) Vivendi having failed to disclose the role of one-time " purchase accounting benefits" in its reported EBITDA growth; (3) Vivendi having concealed its obligation to purchase an additional stake in a Moroccan telephone company, Maroc Telecom; and (4) Vivendi having failed to consolidate earnings with an affiliate, Telco, which allowed Vivendi to report less debt.[216] Vivendi suggests that Liberty used these categories of evidence only " to show that Vivendi had made false statements and had lied regarding the true nature of its liquidity risk." [217]

Liberty argues that Vivendi's evidentiary challenges are waived because Vivendi failed to object when the Court issued its pretrial rulings limiting Liberty's evidence and, for the most part, failed to object during trial to the introduction of the evidence it now contests.[218] But before trial Vivendi challenged the evidence it challenges now, using many of the same arguments it uses now.[219] Given the rapid pace of the pretrial proceedings, the definitive nature of the Court's rulings, and Vivendi's clearly stated disagreement with those rulings, it would have been a formalism to have required Vivendi to explicitly repeat, after each ruling with which it obviously disagreed, that it continued to disagree and thus preserved its objection.[220]

Thus, Vivendi's challenges to the evidence introduced at trial were not waived. They are, however, without merit. First, some discussion of the four categories of evidence challenged by Vivendi was obviously necessary for the jury to have a basic understanding of the facts of the case. Vivendi is incorrect to the extent that it argues the jury should have determined— or indeed could have determined— whether Liberty suffered damages caused by its justifiable reliance on Vivendi's fraud, without being exposed to relatively detailed evidence concerning the nature of that fraud and how the fraud was causally related to Liberty's losses.

In addition, the jury was instructed that Liberty was required to " show that its reliance was reasonable or justified" :

[I]f through minimal diligence Liberty should have discovered the statements were false or misleading, Liberty's reliance would not be justified. In deciding

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whether Liberty justifiably relied on the misstatements, you may consider evidence of:
...
3. Liberty's access to relevant information;
4. Vivendi's concealment of the fraud;
5. Liberty's opportunity to detect the fraud; and
6. the generality or specificity of the misrepresentation.[221]

Much of the evidence that Vivendi now challenges was relevant to showing how difficult it would have been for Liberty to uncover Vivendi's fraud, and thus that Liberty's reliance on the fraud was justified.[222] Indeed, one of Vivendi's primary defenses at trial was that Liberty's reliance on Vivendi's fraud was unjustified because Liberty failed to take adequate steps to uncover the fraud.[223] It would have been unfair to Liberty to preclude it from introducing evidence of the difficulties of investigating Vivendi's fraud and the extent to which the fraud was concealed even within Vivendi.

Second, the evidence challenged by Vivendi was not unfairly prejudicial, and certainly was not " so clearly prejudicial to the outcome of the trial" [224] that a new trial is warranted. The jury was instructed of the falsity of Vivendi's statements, so evidence related to that falsity would have been unlikely to prejudice the jury unless it were presented in an inflammatory or otherwise inappropriate way. Vivendi provides no persuasive examples of Liberty exploiting the evidence related to Vivendi's fraud in such a way.[225] To the contrary, Liberty's counsel made efforts during the trial to prevent witnesses from offering prejudicial testimony, in accordance with my pretrial rulings.[226]

In sum, Vivendi has neither provided grounds for revisiting my pretrial evidentiary rulings, nor provided persuasive evidence that Liberty departed from those rulings at trial in such a way as to warrant a new trial.

V. CONCLUSION

For the foregoing reasons, Vivendi's renewed motion for judgment as a matter of law pursuant to Rule 50(b), or, in the alternative, for a new trial pursuant to Rule 59, is DENIED. The Clerk of Court is not required to take any action, as there

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is no open docket entry corresponding to plaintiffs' motion.

SO ORDERED.


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