In what Judge Shira A. Scheindlin of the Southern District of New York called an “extraordinary case,” French multimedia company Vivendi, S.A. has scored an unusual victory based on a successful rebuttal of the fraud-on-the-market presumption of reliance, which the Supreme Court established 15 years ago in the seminal decisions of Basic v. Levinson, 485 U.S. 224 (1998). Though the stakes were relatively small—the Vivendi investor alleged only $3.5 million in damages—the decision is significant. It is one of the few in which a defendant successfully rebutted the almost impenetrable fraud-on-the-market presumption.

The court’s opinion in Gamco Investors, Inc. v. Vivendi, S.A. came after a two day bench trial on the limited issue of whether Vivendi could rebut the fraud-on-the-market presumption. Vivendi was collaterally estopped from challenging any elements of the plaintiff’s 10b-5 claims, other than reliance, following an earlier class action jury verdict concerning similar claims regarding Vivendi’s liquidity status. READ MORE →