2nd UPDATE: Vivendi To Cut US Class Action Provision
February 23 2011 - 10:21AM
Dow Jones News
Vivendi SA (VIV.FR) said Wednesday it will significantly reduce
the EUR550 million provision it had made to cover potential damages
for a U.S. class action case after a U.S. judge narrowed the size
of the class.
The Paris-based company's potential liabilities have been
slashed by 80% in light of the court victory, which will free up
more cash as the group prepares to buy out Vodafone PLC's (VOD)
minority stake in telecoms operator SFR.
Vivendi made the provision in its 2009 accounts to cover any
eventual payout after a jury in January last year found the company
liable for 57 misstatements about its financial condition in the
two years leading up to its near bankruptcy in 2002.
The damages arising from the ruling in January 2010, which was
based on a class involving shareholders outside the U.S., could
have totaled more than $9 billion, according to lawyers for the
shareholders, although Vivendi's lawyer Herve Pisani rejected the
sum as "unfounded."
The ruling Tuesday by U.S. District Judge Richard Holwell that
shareholders who bought Vivendi shares outside the U.S. are barred
from bringing fraud claims against the company in the U.S.,
considerably narrowed the overall size of the potential class.
"We are very satisfied with today's decision", Vivendi's Chief
Executive Jean-Bernard Levy said in a statement. "It is a
substantial victory for Vivendi."
At 1440 GMT, shares in Vivendi rose 1.2% to EUR20.48 on the
news, which is the latest in a string of positive developments for
the company, which also recently settled a protracted legal battle
in Poland.
"After recent case law in the U.S. pointed the way, the decision
is not unexpected, but it's still reassuring, as it lowers
massively the chances of an eventual settlement far above that
already provided," said Kepler Capital Markets analyst Conor O'
Shea.
Vivendi had long been trying to achieve the narrowing of the
class, arguing in particular that the opt-out nature of U.S. class
action suits, which automatically include plaintiffs in a class
unless they choose otherwise, is incompatible with French laws,
where plaintiffs must actively decide to join a lawsuit.
In France, where class actions are not recognized, shareholders
have to file individual complaints or join an association which
files on their behalf, experts say.
It isn't clear from Judge Holwell's decision what the next step
in the litigation process will be.
He declined to enter a final judgment against Vivendi, saying
the company is entitled to challenge on an individual basis the
extent to which shareholders relied on the alleged misstatements.
The judge said the individual reliance issues may require separate
proceedings.
"In addition, it may be that the methods for calculating an
individual claimant's damages will be hotly contested and may
trigger additional appeals," the judge said.
Vivendi remains committed to appealing any eventual decision by
the court, Pisani said. According to the lawyer, it could still
take a year or two before the size of any indemnification will be
known as the percentage of shareholders making a claim has to be
established before the size of an indemnification can be set.
Vivendi said it will analyze the judge's decision in detail to
determine its next steps, but declined to comment further.
-By Ruth Bender of Dow Jones Newswires and Max Colchester of
Wall Street Journal; ruth.bender@dowjones.com,
max.colchester@wsj.com
(Chad Bray and Inti Landauro contributed to this report.)