August 13, 2015
On August 11, 2015, Weil defeated a $57 million claim by the largest shareholder-claimant in one of the few securities fraud class actions to be tried to judgment. The decision rejecting the claim is significant because it demonstrates that it is possible to rebut the reliance of a value investor. Here, it was done with testimony demonstrating that the investor was aware of or indifferent to the risks that the class plaintiffs alleged were concealed and by showing that the investor possessed a unique depth of understanding about the company’s assets and liabilities.
As U.S. District Judge Shira Scheindlin noted in granting summary judgment: the claimant relied on “his own careful assessment of Vivendi’s assets and liquidity position, drawing largely from his familiarity with the company’s assets and tapping into resources unavailable to the average investor. Even had Thompson known about the fraud, it would not have mattered to him: he said that he was ‘right the whole time’ about his calculations and assessment and ‘was not misled’ about Vivendi’s debt. He thought Vivendi’s supposed liquidity crisis – the very subject of the fraud – was ‘overblown.’ He did not view any of the nine corrective disclosures as ‘correcting’ any misunderstanding he had about Vivendi’s liquidity.” As this case illustrates, notwithstanding Chief Justice Roberts’ admonition in Halliburton II, that for a “value investor . . . to indirectly rely on a misstatement . . . he need only trade stock based on the belief that the market price will incorporate public information within a reasonable period,” it is possible to rebut such reliance with the right evidence.
The Weil team is led by partners Miranda Schiller and Gregory Silbert and included associates Teresa Brady and Karin Portlock, all in the Firm’s New York office. Vivendi was also represented by Cravath, Swaine & Moore LLP in the matter.