Judge Declines to Block Vivendi Suit in France

(CN) - In an effort to avoid dueling "anti-suit injunctions," a federal judge in Manhattan refused to force media giant Vivendi SA to withdraw a French lawsuit against two members of a class action alleging securities fraud.

U.S. District Judge Richard J. Holwell tried to avoid stepping on the Paris court's jurisdiction, despite acknowledging that the plaintiffs in the U.S. suit met the qualifications for an injunction.

Investors sued in 2002, claiming Vivendi artificially inflated its stock price and issued false and misleading statements.

The trial in Manhattan Federal Court began on Oct. 5. Three days later, Vivendi asked the Tribunal de Grande Instance de Paris to enjoin two individual French class members from participating. The trial is expected to last until the end of the year, the judge said.

"Thus, both a U.S. court and a French court are being asked to enjoin parties from proceeding in a foreign jurisdiction," Holwell wrote. "The court concludes that plaintiffs in this action likely established their entitlement to an anti-suit injunction against Vivendi."

But he said that his decision was "in the interests of comity" and was the necessary step "to avert the need for either a French or a U.S. court to enter competing anti-suit injunctions."

Former CEO Jean-Marie Messier fueled Vivendi's growth from a water supply company to one of the world's largest media and telecommunications conglomerates.

He and the company are accused of failing to disclose a liquidity crisis and of manipulating the company's share price. He faces criminal charges in France.

Messier and former CFO Guillaume Hannezo are named as defendants along with Vivendi.

They suit in 2007, claiming France was the proper venue to hear the case because the alleged fraudulent statements were approved by executives in Paris.

U.S. District Judge Harold Baer Jr. ruled that the Manhattan District Court had jurisdiction over the case, in part because the company had moved its headquarters to New York. The fact that Messier lived in a $17 million Park Avenue apartment paid for by the company didn't help Vivendi's cause either.

The judge certified a class of investors from the United States, France, England and the Netherlands. German and Austrian shareholders were excluded.

Vivendi unsuccessfully argued that French investors should be barred from the suit, as class actions are not allowed in France.

The court's decision "was based on the traditional notion that a court may exercise its jurisdiction to regulate illegal activity occurring within its territory," the judge wrote.

In the most recent proceedings, Judge Holwell chose to not impede on a lawsuit filed in another country's court, but noted that "a final judgment in this case will dispose of the Paris action because the alleged need for a French court to issue an injunction against this action will be mooted."

Vivendi claimed it was not trying to disrupt the trial or coerce the two French plaintiffs, but wanted to obtain a ruling from a French court. Such a decision "might be helpful to this court in any further consideration of these issues," Holwell wrote.

"Requesting a French court to order class plaintiffs to withdraw from this action in the middle of a trial on the merits is a most unusual form of help."

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