In a brief order today, Judge Scheindlin denied a request by French conglomerate Vivendi to file, in light of the Supreme Court’s recent decision in the Halliburton II case, a new Rule 50(b) motion three years after its initial post-trial motion was denied. As Judge Scheindlin explained:
In the Supreme Court’s own words, it granted certiorari in Halliburton II to address two issues: (1) “to resolve a conflict among the Circuits over whether securities fraud defendants may attempt to rebut the Basic [Inc. v. Levinson] presumption at the class certification stage with evidence of a lack of price impact”; and (2) “to reconsider the presumption of reliance for securities fraud claims that [the Supreme Court] adopted in Basic.“ The Court said yes to the first question and no to the second.
Vivendi had argued that Halliburton II created new law under Rule 10b-5, requiring a plaintiff to prove that a misleading statement had an impact on the price of a security. But, Judge Scheindlin ruled, that has always been the rule, and was the rule when Vivendi’s prior Rule 50(b) motion had been denied. Halliburton II merely requires that “[d]efendants must be afforded an opportunity before class certification to defeat the [Basic]presumption through evidence that an alleged misrepresentation did no actually affect the market price of the stock.”
In its prior motion, Vivendi had argued that the plaintiffs had failed to show how or whether any of 57 alleged misstatements caused price inflation, instead relying on evidence that the misstatements “hade a role” in causing or “maintaining” inflation in the stock. As Judge Scheindlin ruled, that issue had already been litigated at the district court, and Vivendi’s argument would have to be made to a higher court:
Halliburton II made no mention of how a plaintiff can prove price impact, and certainly did not address the maintenance theory of inflation relied upon by plaintiffs in Vivendi. While this is surely an interesting issue, the district court has made its ruling. Vivendi’ s opportunity to challenge this theory of price impact, and the adequacy of the proof supporting it, lies with the Court of Appeals and perhaps the Supreme Court.