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In re Vivendi, S.A. Securities Litigation

United States Court of Appeals for the Second Circuit
838 F.3d 223 (2016)


In 2000 and 2001, Vivendi, S.A. (defendant) acquired several media companies. As a result of these acquisitions, by 2002, Vivendi began having trouble meeting its financial obligations. Despite the real possibility that Vivendi could go bankrupt, Vivendi represented to investors that it was in solid financial condition. It was not until July 2002, when Vivendi’s stock crashed, that the market gained full knowledge of Vivendi’s true financial condition. Vivendi investors (plaintiffs) filed a class-action lawsuit against the company, alleging that the company engaged in securities fraud. The plaintiffs identified 57 misstatements Vivendi made over the relevant period. Over Vivendi’s objection, the district court admitted expert testimony of Dr. Nye. Nye testified that Vivendi’s stock price was artificially high on account of the market’s unawareness of the company’s financial troubles. Significantly, Nye measured only when the inflation occurred; he did not attempt to prove that any fraud caused the inflation. A jury found Vivendi guilty. Vivendi appealed, arguing that the district court should not have admitted Nye’s testimony on the ground that it was unreliable because he did not directly tie most of Vivendi’s alleged misstatements to increases in the artificial inflation of Vivendi stock.

Rule of Law


Holding and Reasoning (Livingston, J.)

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