In re Vivendi, S.A. Securities Litigation
United States Court of Appeals for the Second Circuit
838 F.3d 223 (2016)
Vivendi, S.A. (defendant) faced mounting financial trouble after a string of 2000-2001 media acquisitions, yet kept telling investors it was in solid financial shape until its stock crashed in July 2002 and the market learned the truth. Investors (plaintiffs) sued for securities fraud, identifying 57 misstatements over the relevant period. At trial, the district court admitted expert testimony from Dr. Nye, who measured when Vivendi's stock price became artificially inflated due to the market's ignorance of its finances, without trying to tie specific misstatements to specific increases in that inflation. A jury found Vivendi liable, and Vivendi appealed, arguing Nye's testimony was unreliable because it didn't directly connect most of the alleged misstatements to actual increases in stock-price inflation.
Whether, under the price-impact requirement inherent in the reliance element of a private section 10(b) securities-fraud action, a misstatement must be associated with an increase in inflation to have an impact on the company's stock price.