1 

15‐180‐cv(L)

In re Vivendi, S.A. Secs. Litig.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2015

(Argued: March 3, 2016    Decided: September 27, 2016)

Nos. 15‐180‐cv(L), 15‐208‐cv(XAP)

––––––––––––––––––––––––––––––––––––

IN RE VIVENDI, S.A. SECURITIES LITIGATION1

MIAMI GROUP, CONSISTING OF THE RETIREMENT SYSTEM FOR GENERAL EMPLOYEES

OF THE CITY OF MIAMI BEACH, FRANCOIS R. GERARD, PRIGEST S.A. AND

TOCQUEVILLE FINANCE S.A., PEARSON‐DONIGER FAMILY, CONSISTING OF TWO

SISTERS AND THEIR RESPECTIVE FAMILY MEMBERS BEATRICE DONIGER,

GRANDCHILDREN’S TRUST BY BRUCE DONIGER TRUSTEE, ALISON DONIGER,

MICHAEL DONIGER, EDWARD B. BRUNSWICK AND RUTH PEARSON TRUST PEARSON

TRUSTEE, GAMCO INVESTORS, INCORPORATED, OPPENHEIM

KAPITALANLAGEGESELLSCHAFT MBH, PLAINTIFF KBC ASSET MANAGEMENT N.V.,

CAPITALIA ASSET MANAGEMENT SGR, S.P.A., CAPITALIA INVESTMENT

MANAGEMENT S.A., EURIZON CAPITAL SGR S.P.A., BADEN‐WURTTEMBERGISCHE

INVESTMENTGESELLSCHAFT MBH, BARCLAYS GLOBAL INVESTORS (DEUTSCHLAND),

COMINVEST ASSET MANAGEMENT GMBH, DEUTSCHE ASSET MANAGEMENT

INVESTMENTGESELLSCHAFT MBH, DWS (AUSTRIA) INVESTMENTGESELLSCHAFT MBH,

DWS INVESTMENT GMBH, ERSTE‐SPARINVEST KAPITALANLAGEGESELLSCHAFT

M.B.H., FORSTA AP‐FONDEN, FORTIS INVESTMENT MANAGEMENT SA, KBC ASSET

MANAGEMENT S.A., LANDESBANK BERLIN INVESTMENT GMBH, LBBW LUXEMBURG

S.A., OPPENHEIM ASSET MANAGEMENT SERVICES S.A.R.L., PIONEER INVESTMENT

MANAGEMENT LIMITED, PIONEER INVESTMENT MANAGEMENT SGRPA, PIONEER

INVESTMENTS AUSTRIA GMBH, PIONEER INVESTMENTS

 1 The Clerk of the Court is directed to amend the caption of the case.     
2 

KAPITALANLAGEGESELLSCHAFT MBH, RAIFFEISEN KAPITALANLAGE‐GESELLSCHAFT

M.B.H., SEB INVESTMENT MANAGEMENT AB, SKANDIA INSURANCE COMPANY LTD.,

UNION ASSET MANAGEMENT HOLDING AG, UNIVERSAL‐INVESTMENT‐

GESELLSCHAFT MBH, SEB INVESTMENT GMBH, ANDRA AP‐FONDEN, BAYERN‐

INVEST KAPITALANLAGEGESELLSCHAFT MBH, DEKA INVESTMENT GMBH, PRIGEST,

S.A., TOCQUEVILLE FINANCE, S.A., ROSENBAUM PARTNERS, L.P., ON BEHALF OF

THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, RUTH PEARSON TRUST, DEKA

INTERNATIONAL (IRELAND) LIMITED, DEKA INTERNATIONAL S.A. LUXEMBURG,

DEKA FUNDMASTER INVESTMENTGESELLSCHAFT MBH, FIDEURAM INVESTIMENTI

S.G.R., FIDEURAM GESTIONS S.A., INTERFUND SICA V., FRANKFURT‐TRUST

INVESTMENT‐GESELLSCHAFT MBH, FRANKFURT‐TRUST INVEST LUXEMBURG AG,

HELABA INVEST KAPITALANLAGEGESELLSCHAFT MBH, HSBC TRINKAUS &

BURKHARDT AG, INTERNATIONALE KAPITALANLAGEGESELLSCHAFT MBH, MEAG

MUNICH ERGO KAPITALANLAGEGESELLSCFHAFT MBH, MEAG MUNICH ERGO ASSET

MANAGEMENT GMBH, METZLER INVESTMENT GMBH, METZLER IRELAND LTD,

NORDCON INVESTMENT MANAGEMENT AG, NORGES BANK, SWISS LIFE HOLDING

AG, SWISS LIFE INVESTMENT MANAGEMENT HOLDING AG, SWISS LIFE ASSET

MANAGEMENT AG, SWISS LIFE FUNDS AG, SWISS LIFE (BELGIUM) S.A., SWISS LIFE

ASSET MANAGEMENT GMBH, SWISS LIFE ASSET MANAGEMENT (NEDERLAN) B.V.,

TREDJE AP‐FONDEN, WESTLB MELLON ASSET MANAGEMENT

KAPITALANLAGEGESELLSCHAFT MBH, ALECTA PENSIONSFORSAKRING, OMSESIDIGT,

SJUNDE AP‐FONDEN, VARMA MUTUAL PENSION INSURANCE COMPANY, DANSKE

INVEST ADMINISTRATION A/S, AFA LIVFORSAKRINGSAKTIEBOLAG, AFA

TRYGGHETSFORSAKRINGSAKTIEBOLAG, AFA SJUKFORSAKRINGSAKTIEBOLAG, AMF

PENSION FONDFORVALTNING AB, ARBETSMARKNADSFORSAKRINGAR,

PENSIONSFORSAKRINGSAKTIEBOLAG, PENSIONSKASSERNES ADMINISTRATION A/S,

ARBEJDSMARKEDETS TILLAEGSPENSION, INDUSTRIENS PENSIONSSFORIKRING A/S,

ARCA SGR, S.P.A., ILMARINEN MUTUAL PENSION INSURANCE COMPANY, PRIMA

SOCIETA’ DI GESTIONE DEL RISPARMIO S.P.A., NORDEA INVEST FUND MANAGEMENT

A/S, NORDEA FONDER AB, NORDEA INVESTMENT FUNDS COMPANY I.S.A., NORDEA

FONDENE NORGE AS, NORDEA FONDBOLAG FINLAND AB, SWEDBANK ROBUR

FONDER AB, FJARDE AP‐FONDEN, OLIVIER CHASTAN, REED S. CLARK, DAHA DAVIS,

COLLEN DODI, RUTH PEARSON TRUST PEARSON TRUSTEE, EDWARD B. BRUNSWICK,

MICHAEL DONIGER, ALISON DONIGER, GRANDCHILDREN’S TRUST BY BRUCE

DONIGER TRUSTEE, BRUCE DONIGER, BEATRICE DONIGER, JEFFREY KURTZ, PRICE

HAL, W. SCOTT POLLAND, JR., NICHOLAS A. RADOSEVICH, CAISSE DE DEPOT ET
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PLACEMENT DU QUEBEC, AGF ASSET MANAGEMENT, S.A., IRISH LIFE INVESTMENT

MANAGERS LIMITED,

Plaintiffs‐Appellees,

BRUCE DONIGER, GERARD MOREL, OLIVER M. GERARD, THE RETIREMENT SYSTEM

FOR GENERAL EMPLOYEES OF THE CITY OF MIAMI BEACH,

Plaintiffs‐Appellees‐Cross‐Appellants,

WILLIAM CAVANAGH,

Cross‐Appellant,

‐v.‐ 

VIVENDI, S.A.,

Defendant‐Appellant‐Cross‐Appellee,

JEAN‐MARIE MESSIER, GUILLAUME HANNEZO, VIVENDI UNIVERSAL,

Defendants.

––––––––––––––––––––––––––––––––––––

Before: CABRANES, LIVINGSTON, AND LYNCH, Circuit Judges.

JEFFREY A. LAMKEN, Molo Lamken LLP, Washington,

D.C. (Robert K. Kry, Lauren M. Weinstein, Molo

Lamken LLP, Washington, D.C.; Arthur N. Abbey,

Stephen T. Rodd, Jeremy Nash, Abbey Spanier, LLP,

New York, N.Y.; Matthew Gluck, Michael C. Spencer,

Milberg LLP, New York, N.Y.; Brian C. Kerr, Brower

Piven, P.C., New York, N.Y., on the brief), for Plaintiffs‐

Appellees‐Cross‐Appellants
4 

MIGUEL A. ESTRADA, Gibson, Dunn & Crutcher, LLP

(Mark A. Perry, Lucas C. Townsend, Gibson, Dunn &

Crutcher LLP, Washington, D.C.; Caitlin J. Halligan,

Gibson, Dunn & Crutcher LLP, New York, N.Y.;  Daniel

Slifkin, Timothy G. Cameron, Cravath, Swaine & Moore

LLP, New York, N.Y.; James W. Quinn, Gregory Silbert,

Weil, Gotshal & Manges LLP, New York, N.Y., on the

brief), for Defendant‐Appellant‐Cross‐Appellee.

DEBRA ANN LIVINGSTON, Circuit Judge:

Prior to 1998, Compagnie Générale des Eaux was a French utilities company,

best known for supplying water to households across France.    By the close of

2000, that same company, now touting the name Vivendi Universal, S.A.

(“Vivendi”), was a global media conglomerate with extensive dealings in the

film, music, telecommunications, publishing, and Internet industries, among

related others.    What followed on the heels of Defendant‐Appellant‐Cross‐

Appellee Vivendi’s seemingly overnight transformation gives rise to the

securities‐fraud allegations now at issue.     

To pull off its transformation and buttress its position as a mover‐and‐

shaker in the global media‐and‐telecommunications market, Vivendi spent much

of 2000 and 2001 acquiring a diverse array of media and communications

businesses in the United States and abroad.    Naturally, these acquisitions

required money, and Vivendi did not have an unlimited supply.   By 2001 and
5 

especially by 2002, Vivendi was running critically low.  Indeed, Vivendi was in

danger of not being able to meet all of its various payment obligations, including

payments on loans it had taken out for the very purpose of financing its buying

spree.    In the worst case scenario, which inquiries later revealed was not an

altogether unlikely one, Vivendi was months away from bankruptcy or

insolvency.    Yet, up until approximately July 2002, Vivendi made numerous

representations to the market suggesting that the course ahead for the company

was smooth sailing.    That all came to a halt when Vivendi’s stock price came

tumbling down in the middle of 2002, after a series of credit downgrades and

revelations that Vivendi was strapped for cash.   

In a class‐action suit they initiated against Vivendi in 2002, Plaintiffs‐

Appellees and Plaintiffs‐Appellees‐Cross‐Appellants (collectively, “Plaintiffs”),

investors in Vivendi’s stock during the relevant time period, alleged that

Vivendi’s persistently optimistic representations during the period from October

30, 2000 to August 14, 2002, constituted securities fraud under § 10(b) of the

Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), as well as

the Securities Exchange Commission’s (“SEC”) Rule 10b–5 (“Rule 10b–5”)

promulgated thereunder, 17 C.F.R. § 240.10b–5.    Vivendi now appeals from a
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December 22, 2014 partial final judgment of the United States District Court for

the Southern District of New York (Scheindlin, J.),2 following a three‐month jury

trial that started in late 2009 and resulted in a jury verdict finding Vivendi liable

for securities fraud under § 10(b) and Rule 10b–5.   

We affirm as to Vivendi’s claims on appeal, concluding as follows:

(1) Plaintiffs relied on specifically identified false or misleading statements

at trial and thus, contrary to Vivendi’s argument on appeal, did not fail to

present an actionable claim of securities fraud by “eliminat[ing] the foundational

element of . . . a specific false or misleading statement,” Vivendi Br. 41;

(2) Vivendi’s claim that certain statements constituted non‐actionable

statements of opinion is not preserved for appellate review;

(3) Vivendi’s claims that certain statements constituted non‐actionable

puffery and that others fall under the Private Securities Law Reform Act’s

(“PSLRA”) safe harbor provision for “forward‐looking statements,” see 15 U.S.C.

§ 78u‐5(c), is without merit;

 2 Judge Richard J. Holwell presided over the trial.  After he stepped down from

the bench in 2012, the case was assigned to Judge Shira Scheindlin, who entered the

order of partial final judgment from which Vivendi appeals.
7 

(4) the evidence was sufficient to support the jury’s determination that the

fifty‐six statements at issue here were materially false or misleading with respect

to Vivendi’s liquidity risk;

(5) the district court did not abuse its discretion in admitting the testimony

of Plaintiffs’ expert, Dr. Blaine Nye (“Nye”); and  

(6) the evidence was sufficient to support the jury’s finding as to loss

causation.

As to the Plaintiffs’ cross‐appeal, we likewise affirm, concluding that the district

court:

(1) did not abuse its discretion in excluding certain foreign shareholders

from the class at the class certification stage; and

(2) did not err in dismissing claims by American purchasers of ordinary

shares under Morrison v. Nat’l Austl. Bank Ltd., 561 U.S. 247 (2010).

I. Background

At the helm of Vivendi’s transition from a centuries‐old French utilities

conglomerate into a modern global media powerhouse was a man named Jean‐

Marie Messier, who had been the chief executive and chairman of the executive

committee since 1994, and chairman of the company since 1996.  Messier was not,
8 

by trade, an expert in French utilities, but rather a former investment‐banker at

the firm Lazard Frères & Co. LLC.    Soon after becoming chairman of the

company’s executive committee, Messier formulated an ambitious plan to

transform the company completely.    In broad strokes, Messier’s plan was to

merge the company with two other large companies that had significant media

dealings; steadily supplement this new company’s core media operations with

various additional media acquisitions; and gradually divest the new company of

its utilities and environment divisions.    

The plan largely got underway in May 1998, when the shareholders of

Compagnie Générale des Eaux approved the company’s name change to Vivendi,

S.A.  Over the course of the following year, Vivendi, S.A., contributed or sold its

interests in certain water‐related holdings to a subsidiary, Vivendi

Environnement, and acquired scattered interests in various media and

telecommunications firms.      

The most aggressive foray in Messier’s plan came on June 20, 2000, when

Vivendi, S.A., formally announced its intent to enter into a three‐way merger

with Canal Plus, S.A. (“Canal+”), a French film and television production

company; and The Seagram Company Ltd. (“Seagram”), a Canadian
9 

entertainment and beverage company that owned, among other things,

Universal Studios and Universal Music Group.  Shortly after the announcement

of the merger, credit‐rating agencies Moody’s and Standard & Poor’s (“S&P”)

undertook to reevaluate the creditworthiness of Vivendi, S.A.  On July 4, 2000,

Moody’s noted a “possible downgrade” of a particular senior class of Vivendi,

S.A.’s debt might be on the horizon, on account of, inter alia, concerns about the

considerable amount of debt Vivendi, S.A., would carry after the merger

(including extensive prior debts already incurred).    S&P also expressed some

concern, but tempered its forecast with the expectation that the company would

be able to dispose of several assets and thereby alleviate its debt.    Neither

Moody’s nor S&P downgraded Vivendi, S.A., at the time.  The three‐way merger

was complete on December 8, 2000, with the surviving entity being Vivendi,

formerly a subsidiary of Vivendi, S.A.    With the three‐way merger, Vivendi

became one of the world’s leading media and communications companies,

second only to AOL‐Time Warner.    Among Vivendi’s assets were the world’s

largest recorded music company, one of the world’s largest motion picture

studios, and businesses in the global telecommunications, television, theme park,

publishing, and Internet industries.  
10 

Still, Vivendi pressed forth with additional acquisitions.  Over the course

of the next eighteen months, Vivendi acquired significant stakes, or added to its

existing interests, in a number of media and telecommunications companies

across the world.    To start, within just a few days of the three‐way merger’s

completion in December 2000, Vivendi announced its acquisition of a 35%

interest in Maroc Telecom, the Kingdom of Morocco’s state‐owned

telecommunications company, for approximately €2.3 billion.  In Summer 2001,

Vivendi acquired publishing company Houghton Mifflin Company (“Houghton

Mifflin”), along with its $500 million in net debt, for approximately $2.2 billion.  

Several months later, on December 17, 2001, Vivendi announced that it would

acquire full control of television company USA Networks Corporation (“USA

Networks”) for $10.3 billion, approximately $1.6 billion of which Vivendi would

finance in cash.    That same day, Vivendi announced that it would invest $1.5

billion in satellite television company EchoStar Communications Corporation

(“EchoStar”), which was expected to gain access to approximately 15 million

homes in the United States when EchoStar acquired DirecTV.   

These multi‐billion‐dollar transactions merely scratched the surface of

Vivendi’s buying frenzy.  Vivendi also acquired, in whole or in part, MP3.com,
11 

GetMusic LLC, RMM Records & Video, MUSIDISC, Koch Group Recorded

Music, Uproar Inc. and EMusic.com Inc., among other media or

telecommunications companies.    In total, Vivendi reportedly spent

approximately $77 billion on its acquisition spree, with Seagram alone costing

roughly $34 billion.  According to Plaintiffs, Vivendi’s debts associated with its

media and communications operations ballooned from approximately €3 billion

in early 2000 to over €21 billion in 2002.   

Meanwhile, Vivendi repeatedly expressed its aggressive growth prospects

and its secure financial footing.  Many of Vivendi’s public statements during its

acquisition period focused on EBITDA (“Earnings Before Interest, Tax,

Depreciation, and Amortization”), an earnings measure that is typically

considered a “good example of [a company’s] cash income” and ability to service

debt.  J.A. 2833.  On October 30, 2000, the company announced its “objective” to

“grow pro forma adjusted EBITDA at an approximate 35% compound annual

growth rate through 2002.”    Special App’x 315.    Over the next year, Vivendi

repeatedly underscored its “confidenc[e] that [it] w[ould] meet [its] very

aggressive [EBITDA] growth targets,” id. at 316, and emphasized that its fiscal

year 2001 quarterly results met or exceeded its EBITDA growth targets, e.g., id. at
12 

320 (“With three quarters of the ‘aggressive’ incremental EBITDA target for the

full year 2001 already achieved in the first half of the year, I can only re‐

emphasiz[e] our confidence.  We will at least meet our stated targets.”); id. at 322

(“EBITDA organic growth is very strong, reaching 36% in the third quarter and

52% year‐to‐date.  It represents the achievement in nine months of close to 100%

of the full year 2001 incremental EBITDA growth target.”).    Vivendi

supplemented these statements with representations that it had “very

strong . . . results with outstanding growth,” id. at 316, “the highest growth rates

in the industry,” id. at 320, “strong operating results,” id., “free operational cash

flow [that was] far above [its] objectives,” id. at 328, and “strong free cash flow,”

id. at 330.   

But the tableau painted by Vivendi’s public statements did not match the

tenor of the discussions inside the company.    With each acquisition, Vivendi

“had to borrow some money from the banks,” J.A. 2485, and it became “more

and more difficult to raise the cash” Vivendi needed to pay for its acquisitions

and its accumulating debts, J.A. 2487.  Vivendi’s liquidity, or its ability to pay its

fixed obligations, became increasingly strained.    According to one member of

Vivendi’s finance department, members of that department believed Vivendi’s
13 

liquidity situation was “tense” by the middle of 2001, “dangerous” by late 2001,

and “more than dangerous [throughout 2002].”  J.A. 2488.  The USA Networks

and EchoStar transactions at the close of 2001 were particularly alarming to one

member of Vivendi’s finance department, who testified that the two deals

“would create havoc with the debt level of Vivendi,” whose “cash situation” was

already “extremely tense” at the time.  Special App’x 366 n.21.    

Starting in June 2001, Vivendi’s Treasurer, Hubert Dupont‐L’Hôtelain,

“clearly raised the issue of a cash problem inside Vivendi” at each one of

Vivendi’s Finance Committee meetings.    J.A. 2512.    According to a Vivendi

employee present at the meetings, Dupont‐L’Hôtelain repeatedly “expressed

concerns over . . . the liquidity situation” and discussed Vivendi’s “shortage in

cash.”    Id.    These discussions prompted Vivendi’s Chief Financial Officer,

Guillaume Hannezo, to comment on multiple occasions that Vivendi appeared to

be “running out of cash” and “nearing bankruptcy.”  Id. at 2513.   

Hannezo also warned Messier of these conditions.    For example, after

credit‐rating agencies raised concerns with Hannezo in early December 2001

about Vivendi’s contemplated USA Networks and EchoStar transactions,

Hannezo wrote Messier warning of the “danger” of a downgrade.  J.A. 4072.  He
14 

later penned a memorandum to Messier recounting the “painful and humiliating

meetings with the ratings agencies.”  Id. at 3794.  In that note, he explained that

he did “not want to put up with[] a downgrade, which [he believed] would

[lead] to a liquidity crisis.”    Id. Hannezo also told Messier that he had “the

unpleasant feeling of being in a car whose driver is accelerating in a sharp turn

while [he was] the one in the death seat.”  Id.  “The only thing that I am asking,”

Hannezo continued, “is that it doesn’t all end in shame.”  Id. at 3794–95.  Four

days after Hannezo alerted Messier to the “danger” of a downgrade, Vivendi

publicly announced its $10.3 billion USA Networks transaction and $1.5 billion

EchoStar transaction.    In a press conference shortly after the announcement,

Vivendi stated that the transactions were “not putting pressure on Vivendi

Universal,” and that it anticipated maintaining “a very comfortable . . . credit

rating.”  Id. at 4158, 4162.   

Around the same time, however, fissures began to appear in Vivendi’s

public façade.  Despite Vivendi’s assurances about the financial soundness of the

USA Networks and EchoStar deals, the two transactions prompted Moody’s to

change its rating outlook on Vivendi to “negative.”    J.A. 4164.    The decision,

Moody’s explained, came as a result of its concerns over the additional debt
15 

incurred by the transactions, in conjunction with other debts previously incurred

by Vivendi and uncertainty about Vivendi’s ability to take steps to reduce its

debt.  A few weeks later, on January 7, 2002, Vivendi announced the sale of 55

million treasury shares for a total of €3.3 billion.    “The proceeds of the sale,”

Vivendi explained in a press release, “w[ould] be used mostly to reduce the

company’s debt.”    J.A. 4117.    Vivendi’s stock prices dipped following the

announcement of the treasury‐share sale.   

Despite raising €3.3 billion for Vivendi, the substantial treasury‐share sale

in January 2002 did not prevent Vivendi’s problems from coming to a head

several months later.    On May 3, 2002, Moody’s downgraded Vivendi’s long‐

term senior debt rating from Baa2 to Baa3, citing concerns about Vivendi’s ability

to reduce debt and return its leverage to a point that would justify a Baa2 rating.3  

In response to Moody’s decision, Vivendi stated that the downgrade “ha[d] no

impact on Vivendi[’s] . . . cash situation,” and that Vivendi “ha[d] every

confidence in its ability to meet its operating targets for 2002.”  J.A. 4667.   

 3 Credit ratings are generally divided into “investment‐grade” and “non‐

investment‐grade,” the latter of which is sometimes referred to as “speculative‐grade”

or “junk.”   Moody’s credit rating of Baa3 is its lowest rating in the investment‐grade

category, which is to say its lowest rating above junk status.    See generally Moody’s

Investment Service, Rating Symbols and Definitions (2016),

https://www.moodys.com/sites/products/AboutMoodysRatingsAttachments/MoodysRa

tingSymbolsandDefinitions.pdf.
16 

Nonetheless, S&P followed Moody’s suit on May 6, 2002, downgrading

Vivendi’s short‐term debt from A‐2 to A‐3.4  Shortly afterwards, Vivendi issued a

press release stating that it “ha[d] no reason to fear any further deterioration [in

its credit rating].”  J.A. 4623.  Vivendi’s “cash flow situation,” according to the

press release, was “comfortable.”  Id.  “[E]ven assuming an extremely pessimistic

market,” Vivendi would be able to “continue its debt reduction program in all

serenity.”  Id.  

Quietly, Vivendi attempted to slough off some of its less critical holdings

for cash.   On June 12, 2002, unbeknownst to the public, Vivendi and Deutsche

Bank entered into a private sale‐and‐repurchase agreement, under which

Vivendi sold a 12.7% stake in its 63%‐owned subsidiary Vivendi Environnement

and agreed to repurchase those shares from Deutsche Bank at a later point.  On

June 17, 2002, while the public remained unaware of Vivendi’s deal with

Deutsche Bank, Vivendi announced it was considering selling a significant stake

in Vivendi Environnement when market conditions were appropriate.  Vivendi’s

stock price took a hit on June 21, 2002, after the market learned that Vivendi had

already entered a sale‐and‐repurchase agreement with respect to some of its

 4 For short‐term debt, S&P’s A‐3 rating is its lowest rating in the investment‐

grade category.    See generally S&P Global, S&P Global Ratings Definitions (2016),

https://www.standardandpoors.com/en_US/web/guest/article/‐/view/sourceId/504352.  
17 

shares in Vivendi Environnement.  Press reports questioned why Vivendi could

not wait until market conditions were appropriate to go through with the sale.  

Three days later, on June 24, 2002, Vivendi announced the immediate sale

of a 15.6% stake in Vivendi Environnement shares, including the 12.7% stake that

was the subject of its repurchase‐and‐sale agreement with Deutsche Bank.  That

day alone, Vivendi’s stock price dropped 23%.    Financial commentators

remarked that the quick succession of the two Vivendi Environnement

transactions suggested that Vivendi “needed a quick cash injection” and “w[as]

in a big rush to get that cash.”   J.A. 2792.  Vivendi parried back on June 26, 2002,

stating in a press release that “[o]wing to its strong free cash flow,” combined

with other factors, Vivendi was “confident of its capacity to meets its anticipated

obligations over the next [year].”  Special App’x 330.  Two days later, however,

Vivendi negotiated a new €275 million credit line from Société Générale.   

After the market closed on July 1, 2002, Moody’s downgraded Vivendi’s

long‐term senior debt rating again, this time from Baa3 to Ba1, landing Vivendi’s

long‐term senior debt in junk territory.    In a press release announcing the

downgrade, Moody’s explained that its decision primarily reflected growing

doubts about Vivendi’s ability to achieve the level of debt reduction befitting of a
18 

Baa3 rating and concerns over Vivendi’s ability to refinance liabilities that would

become due over the course of the next 12 months.  When the market opened the

following day, on July 2, 2002, S&P downgraded Vivendi’s long‐term debt from

BBB to BBB–, just a notch above junk status, and warned that liquidity concerns

could prompt further downgrades.5  Like Moody’s, S&P cited Vivendi’s lack of

transparency about large debt obligations that were fast approaching repayment

deadlines, among other things, as a reason for the downgrade.   After news of

both downgrades hit the market on July 2, 2002, Vivendi’s stock price slid

approximately 26%.  Financial analysts speculated that Vivendi could face a cash

shortfall by the end of 2002 because it did not have the means to cover its debt

repayments.   

Vivendi’s board of directors, meanwhile, hired Goldman Sachs to assess

the severity of Vivendi’s financial difficulties.  In late June 2002, Goldman Sachs

presented its findings to the board and noted that one of four possible scenarios

for Vivendi was bankruptcy, as early as September or October 2002.  The board

of directors then zeroed in on Messier as the source of Vivendi’s troubles and

sought to oust him from his position as CEO.    On July 2, 2002, Messier

 5 For long‐term debt, S&P’s BBB rating is its second‐lowest rating in the

investment‐grade category.  See S&P Global, supra note 4.
19 

announced his resignation, and the next day Vivendi’s stock prices tumbled 22%.  

Now under new management, Vivendi issued a press release acknowledging

that the company faced a “short‐term liquidity issue.”    J.A. 2049.    The press

release also revealed that by the end of July, Vivendi would have to repay

creditors €1.8 billion, and €3.8 billion in credit lines would be up for

renegotiation.    The following week, French regulators began a probe into

Vivendi’s financial affairs, while Moody’s and S&P warned of further

downgrades.   

Additional damaging revelations surfaced on August 14, 2002, when

Vivendi’s new management announced that the company faced refinancing

needs of €5.6 billion, had €10 billion more in debt than is typical of a company

with a BBB credit rating by S&P, and planned to sell €5 billion worth of assets

over the next nine months.  That day, S&P further downgraded Vivendi’s long‐

term debt, and Vivendi’s stock price dropped more than 25%.   

II. Procedural History

On January 7, 2003, Plaintiffs filed a Consolidated Class Action Complaint

against Vivendi, Messier, and Hannezo (collectively, “Defendants”) in the United

States District Court for the Southern District of New York (Baer, J.), principally
20 

alleging that between October 30, 2000 and August 14, 2002 (the “Class Period”),

Defendants made material misstatements that artificially inflated Vivendi’s stock

price, in violation of § 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and SEC Rule

10b–5 promulgated thereunder, 17 C.F.R. § 240.10b–5, as well as § 20(a) of the

Exchange Act, 15 U.S.C. § 78t(a).6    In February 2003, Defendants moved to

dismiss, arguing, inter alia, that Plaintiffs had failed to specify with sufficient

particularity the statements Plaintiffs alleged to be false or misleading.    By

opinion dated November 4, 2003, Judge Baer denied in part and granted in part

Defendants’ motion to dismiss, and granted Plaintiffs leave to amend its

Consolidated Class Action Complaint.  On November 24, 2003, Plaintiffs filed a

First Amended Consolidated Class Action Complaint.   

After several years of discovery, during which time the case was

transferred from Judge Baer to Judge Holwell, Defendants moved for summary

judgment on August 15, 2008.  Judge Holwell denied that motion on March 31,

2009.    On June 2, 2009, Defendants filed a motion in limine to exclude the

testimony of Plaintiffs’ expert, Dr. Blaine Nye.    On August 18, 2009, Judge

 6 Section 20(a) of the Exchange Act imposes “derivative liability on parties

controlling persons who commit Exchange Act violations.” Tongue v. Sanofi, 816 F.3d

199, 209 n.12.   Accordingly, Plaintiffs only alleged § 20(a) claims against Messier and

Hannezo.
21 

Holwell denied Defendants’ motion, with one narrow exception not at issue on

appeal.  Trial was scheduled to begin in the fall of 2009.     

On October 5, 2009, a jury trial commenced on Plaintiffs’ § 10(b) claims

against Vivendi, Messier, and Hannezo, as well as Plaintiffs’ § 20(a) control‐

person claims against Messier and Hannezo.  At trial, Plaintiffs introduced into

evidence the “Book of Warnings,” a compendium of internal communications

and memoranda that Hannezo had written to Messier and other Vivendi

employees during the period from 2000 to 2002, warning them of financial

difficulties Vivendi was facing at the time.    Special App’x 364.    As Plaintiffs

pointed out to the jury, Hannezo’s communications about Vivendi’s

deteriorating financial health stood in sharp contrast to Vivendi’s rosy public

statements.  Plaintiffs also presented the testimony of former Vivendi employees,

who generally corroborated the bleak internal view presented by the Book of

Warnings.   Defendants, meanwhile, called Messier and Hannezo to testify that

Vivendi’s optimistic public statements regarding earnings and growth were in

fact accurate at the time they were made.    Defendants also emphasized that

Vivendi never actually experienced a full‐blown liquidity crisis or defaulted on a

loan.  According to Defendants, the events that occurred in the summer of 2002
22 

merely reflected a transient hitch, from which the company ultimately

rebounded.    

The jury began its deliberations in early January 2010.  The seventy‐two‐

page final jury verdict form identified fifty‐seven alleged misstatements, some of

which were alleged against Vivendi only, and others of which were alleged

against Vivendi and Messier and/or Hannezo.  Among other things, the final jury

verdict form asked the jury to determine whether Plaintiffs had proven the

elements of their § 10(b) claim with respect to each of the fifty‐seven statements

for each Defendant against whom that false statement was alleged.  It also asked

the jury to determine whether Messier and Hannezo had violated § 20(a).  

After fourteen days of deliberation, the jury reached a verdict.   The jury

found that neither Messier nor Hannezo was liable under § 10(b) or § 20(a) for

any of the alleged misstatements.  However, it found Vivendi liable under § 10(b)

for all fifty‐seven alleged misstatements.    The district court denied Vivendi’s

motions for judgment as a matter of law and for a new trial on February 17, 2011,

with one exception: it awarded Vivendi judgment as a matter of law with respect

to one statement. 7  See In re Vivendi Universal, S.A. Secs. Litig., 765 F. Supp. 2d 512,

545 (S.D.N.Y. 2011).  This appeal followed.

 7 Plaintiffs do not appeal this determination.   
23 

DISCUSSION

I. Plaintiffs’ Theory of the Case

Vivendi first challenges Plaintiffs’ theory of the case as well as the way that

Plaintiffs presented that theory at trial.    According to Vivendi, Plaintiffs were

required to prove their case “statement‐by‐statement.”  Vivendi Br. 2.  Vivendi

suggests that throughout the trial, Plaintiffs did not focus on specifically alleged

fraudulent statements, but rather, argued generally that the company failed to

disclose a liquidity risk (an approach Vivendi refers to as the theory of “unitary

omission”).  Id. at 35.  Vivendi contends that Plaintiffs thus sought to prove that

it committed securities fraud with respect to no particular statement at all.  Only

at the eleventh hour and after the close of evidence at trial, Vivendi continues,

did Plaintiffs in fact identify the fifty‐seven alleged misstatements for which they

sought to hold Vivendi liable.    The result, according to Vivendi, was that

Plaintiffs presented no actionable claim of securities fraud.    

Vivendi thus argues that Plaintiffs’ supposed failure to define a specific set

of alleged misstatements earlier in the trial had the effect of “eliminat[ing] the

foundational element of a claim for securities fraud” under § 10(b) and Rule 10b–

5: “a specific false or misleading statement.”  Vivendi Br. 41.  Under Rule 10b–5,
24 

it is unlawful to (1) “make any untrue statement of a material fact,” or (2) “omit

to state a material fact necessary in order to make the statements made . . . not

misleading.”    17 C.F.R. § 240.10b–5(b).    Thus, to support a finding of liability,

Rule 10b–5 expressly requires an actual statement, one that is either “untrue”

outright or “misleading” by virtue of what it omits to state.   Absent an actual

statement, a complete failure to make a statement — in other words, a “pure

omission,” Litwin v. Blackstone Grp., L.P., 634 F.3d 706, 719 (2d Cir. 2011) — “is

actionable under the securities laws only when the corporation is subject to a

duty to disclose the omitted facts,” Stratte‐McClure v. Morgan Stanley, 776 F.3d 94,

101 (2d Cir. 2015) (quoting In re Time Warner Inc. Secs. Litig., 9 F.3d 259, 267 (2d

Cir. 1993)); see also Basic Inc. v. Levinson, 485 U.S. 224, 239 n.17 (1988).8  And in

and of themselves, “§ 10(b) and Rule 10b–5 do not create an affirmative duty to

disclose any and all material information.”  Matrixx Initiatives, Inc. v. Siracusano,

563 U.S. 27, 44 (2011).  No such duty arises “merely because a reasonable investor

would very much like to know” that information.  In re Time Warner, 9 F.3d at

267.   

 8 For instance, “a duty to disclose under [§] 10(b) [or Rule 10b–5] can derive from

statutes or regulations that obligate a party to speak.”  Stratte‐McClure, 776 F.3d at 102.
25 

“Pure omissions,” of course, must be distinguished from “half‐truths” —

statements that are misleading under the second prong of Rule 10b–5 by virtue of

what they omit to disclose.9  See S.E.C. v. Gabelli, 653 F.3d 49, 57 (2d Cir. 2011),

rev’d on other grounds, Gabelli v. S.E.C., 133 S. Ct. 1216 (2013) (“The law is well

settled . . . that so‐called half‐truths — literally true statements that create a

materially misleading impression — will support claims for securities fraud.”

(internal quotation marks omitted)); see also Universal Health Servs., Inc. v. United

States, 136 S. Ct. 1989, 2000 & n.3 (2016) (noting that the principle that “half‐

truths — representations that state the truth only so far as it goes, while omitting

critical qualifying information — can be actionable misrepresentations” applies

in the “securities law” context (citing Matrixx, 563 U.S. at 44)).  The rule against

half‐truths, or statements that are misleading by omission, comports with the

common‐law tort of fraudulent misrepresentation, according to which “a

statement that contains only favorable matters and omits all reference to

 9 Because a “pure omission” theory is relatively uncommon in securities

litigation, and also not strictly within the letter of Rule 10b–5, courts often, to some

confusion, use the term “omission” when referring to statements that fall under the

second prong of Rule 10b–5.  See, e.g., Ganino v. Citizens Utils. Co., 228 F.3d 154, 161 (2d

Cir. 2000).
26 

unfavorable matters is as much a false representation as if all the facts stated

were untrue.”  Restatement (Second) of Torts, § 529, cmt. a (1977).       

It is undisputed that Vivendi had no legal duty to disclose its liquidity risk,

such that Plaintiffs could not hold Vivendi liable simply for its silence on the

subject.    Vivendi therefore contends that Plaintiffs’ presentation of the case

effectively vitiated the requirement that the Plaintiffs prove Vivendi made a false

or misleading statement.  As a result, Vivendi argues, the jury necessarily held

Vivendi liable for failing to disclose something that it had no legal duty to

disclose.  Simply put, we disagree.   

The record does not support Vivendi’s suggestion that Plaintiffs presented

their case to the jury on the theory that Vivendi violated § 10(b) by remaining

completely silent on the subject of its liquidity risk.  To be sure, over the course

of the litigation below, Plaintiffs were at times less than precise in articulating

their theory of liability.  In Plaintiffs’ opening statements, for example, counsel

for Plaintiffs remarked at points that Plaintiffs were “going to prove . . . that the

defendant failed to tell the truth about the growing problems about its liquidity.”  

Trial Tr. 128 (emphasis added).    In isolation, this statement could be taken to

suggest that Plaintiffs would attempt to prove that Vivendi was liable merely for
27 

failing to disclose the company’s liquidity risk, although, even in isolation, it is at

least as easy to understand the statement as an accusation that Vivendi had lied

about the subject.  In context, however, Plaintiffs’ opening statements made clear

that the way in which they alleged that Vivendi “failed to tell the truth” was by

making affirmative statements that were either outright lies or misleading half‐

truths.  See, e.g., id. at 128–29 (noting, two lines later, that Vivendi “gave reports

about how great the company was doing and, in doing so, . . . completely

disregarded alarms that Vivendi’s own employees . . . were sounding inside

Vivendi”).  

Indeed, counsel for Plaintiffs went on in that opening statement to ask the

jury to “take a look at some examples” of alleged misstatements by Vivendi, Trial

Tr. 141, and consider how those statements compared to the actual situation

inside Vivendi at the time Vivendi made the statements, see Trial Tr. 142–79.  

Essentially all of the examples provided were ultimately submitted to the jury for

consideration.    Compare Trial Tr. 142, with Special App’x 315 (Statement 3);

compare Trial Tr. 152–53, with Special App’x 316 (Statement 5); compare Trial Tr.

154–55, with Special App’x 316 (Statement 6); compare Trial Tr. 162, with Special

App’x 320 (Statement 18); compare Trial Tr. 167, with Special App’x 324
28 

(Statement 32); compare Trial Tr. 167–68, with Special App’x 324 (Statement 33);

compare Trial Tr. 169, with Special App’x 324 (Statement 34); compare Trial Tr. 169–

70, with Special App’x 324–25 (Statement 35); compare Trial Tr. 171, with Special

App’x 326 (Statement 40); compare Trial Tr. 172, with Special App’x 327

(Statement 42); compare Trial Tr. 173, with Special App’x 329 (Statement 51);

compare Trial Tr. 177, with Special App’x 330 (Statement 55).

It is true that Plaintiffs initially proposed to Judge Holwell a jury verdict

form that did not include a list of specific alleged misstatements.10  In re Vivendi,

765 F. Supp. 2d at 577.  It is also true that at oral argument on Vivendi’s renewed

motion for judgment as a matter of law, which took place after trial, Plaintiffs

suggested that their initial proposed jury verdict form embodied the theory that

Vivendi had made “a single unitary omission . . . concerning Vivendi’s true

liquidity risk” that the Plaintiffs believed “manifested in many different ways

 10 Specifically, when Judge Holwell solicited proposed verdict forms from both

sides towards the close of evidence but before closing statements, Plaintiffs requested

that  the proposed verdict form not list specific statements, on the ground that including

“numerous alleged subsidiary statements” would “break[] up” and “[f]ragment[]

[P]laintiffs’ claim in [a] way [that] risks confusing and misleading the jury.”  J.A. 1686.  

Plaintiffs wanted, instead, a straightforward verdict form that asked the jury simply to

determine, with respect to each Defendant (Vivendi, Messier, and Hannezo), whether

that Defendant “knowingly or recklessly ma[d]e materially misleading statements or

omissions that concealed liquidity risks at the company during the Class Period.”  E.g.,

J.A. 1690.   
29 

and with respect to many different statements,” and thus that might not easily

boil down into a discrete set of specific alleged misstatements.  J.A. 3693.   

At trial, however, Judge Holwell insisted on a more specific approach.  

After “review[ing] the verdict forms used in several [then‐]recent securities class

actions tried before a jury,” Judge Holwell concluded that Plaintiffs’ proposed

jury verdict form was inadequate because “[u]nder the plain language of Rule

10b–5, an ‘omission’ is not a violation unless plaintiffs can point to statements

that were made misleading by the omitted facts.”  In re Vivendi, 765 F. Supp. 2d at

578.  Because failing to identify a discrete set of statements in the verdict form

might thus invite a verdict that would be inconsistent with this language, Judge

Holwell “asked [P]laintiffs to propose a[] . . . verdict form that identified specific

misstatements.”  Id.  The final jury verdict form thus asked, with respect to each

statement and in regard to each Defendant, whether “plaintiffs [have] proven

each element of their Section 10(b) claim.”    E.g., Special App’x 243 (emphasis

added).   

At closing argument after the district court finalized the jury verdict form,

counsel for Plaintiffs walked through the fifty‐seven alleged misstatements,

highlighting with respect to each one the evidence that Plaintiffs believed
30 

supported a finding of securities fraud.  Repeatedly, counsel for Plaintiffs asked

the jury to consider the disparity between Vivendi’s “inside reality” and its

“outside message.”  See Trial Tr. 7294–365.  From opening statements to closing

arguments, then, Plaintiffs presented to the jury a theory of securities‐fraud

liability predicated on Vivendi’s statements, not its silence.

In any event, “we review the proof at trial only by reference to th[e]

charged theory.”  United States ex rel. O’Donnell v. Countrywide Home Loans, Inc.,

822 F.3d 650, 663 (2d Cir. 2016).  As in O’Donnell, the record here “shows that the

jury was charged only as to a theory of fraud through an affirmative

misstatement.”   Id.  In keeping with the final jury verdict form, Judge Holwell

instructed the jury that Plaintiffs had to “prove by a preponderance of the

evidence that during the class period . . . [Vivendi] made a false or misleading

statement or omitted to state a fact which made what was said under the

circumstances misleading.”  Trial Tr. 7512.  Far from charging the jury on what

Vivendi terms a “‘pure‐omission’ theory,” Vivendi Br. 2, Judge Holwell informed

the jury that Vivendi was “not required to disclose every piece of material

information” it possessed, Trial Tr. 7513.    He further expressly distinguished

between so‐called “pure omissions” and statements that are misleading by virtue
31 

of what they omit to disclose.    See id.   It is simply incorrect, then, to say that

Plaintiffs “secured a jury verdict based on ‘proof’ [of the six elements of a private

10b–5 action] as to no particular statement.”    Vivendi Br. 41.    In light of the

Plaintiffs’ own presentation of their case, it does not appear that they in fact

presented a “pure omission” theory, as Vivendi argues.  And reviewing the proof

at trial with reference to the charged theory, we discern no basis for concluding

that the jury verdict was based on a theory other than the one on which the jury

was, in fact, instructed.   

In short, Plaintiffs presented a case to the jury based on Vivendi’s alleged

misstatements, and the jury entered a verdict against Vivendi based on fifty‐

seven of them.    We thus reject Vivendi’s contention that the way in which

Plaintiffs tried and proved their case had the effect of vitiating an essential

element of their § 10(b) claim: proving that Vivendi made materially false or

misleading statements.11  

 11 Vivendi also argues that Plaintiffs’ supposedly belated identification of a

specific set of statements violated the PSLRA’s requirement that “securities‐fraud

plaintiffs . . . ‘specify each statement alleged to have been misleading’ and ‘why the

statement is misleading.’”    Vivendi Br. 38 (emphasis in quoting source) (quoting 15

U.S.C. § 78u‐4(b)(1)).  This argument appears to assume what it seeks to prove: that the

PSLRA’s so‐called “specificity requirement,” as Vivendi terms it, Vivendi Br. 40,

confines securities‐fraud plaintiffs to the particular alleged misstatements identified in

their complaint.  We identify no such requirement in the PSLRA, which sets out certain
32 

II. Materially False or Misleading Statements

Having identified no reversible error stemming from the manner in which

Plaintiffs presented and identified statements at trial, we turn to the statements

themselves.  Vivendi contests liability for certain statements on the ground that

they were non‐actionable opinion, puffery, or forward‐looking statements.  

Separately, Vivendi also contests liability for all of the statements on the ground

 

pleading standards so as to prevent securities‐fraud plaintiffs from filing costly

securities class‐action suits on the basis of a barely formed hunch, but nowhere binds

such plaintiffs to the precise set of alleged misstatements identified in their complaint

throughout the entire course of litigation.   

Further, many, if not most, of the fifty‐seven alleged misstatements were

identified in Plaintiffs’ First Amended Consolidated Class Action Complaint, which

Plaintiffs filed in November 2003.  As for the remaining alleged misstatements included

on the final jury verdict form, when the parties were engaged in discovery in 2007,

Defendants submitted multiple sets of interrogatories asking Plaintiffs to “[i]dentify and

describe each false statement, misleading statement and/or omission of material fact on

which you are suing in this Consolidated Action.”  E.g., J.A. 1944; J.A. 2055.  Defendants

described Plaintiffs’ interrogatory responses as “enormously detailed” documents that

reflected the “great care” with which Plaintiffs “identif[ied] . . . statements that they

even conceivably thought that they m[ight] intend to pursue.”    Trial Tr. 6673.    And

although a small handful of the alleged misstatements on the final jury verdict form did

not appear in the First Amended Consolidated Class Action Complaint or Plaintiffs’

interrogatory responses, they were nonetheless detailed in Plaintiffs’ expert reports,

which Vivendi received during discovery.  See id. at 6737–38.  We thus agree with the

district court that Vivendi was “aware long before trial” both “that [P]laintiffs believed

the fifty‐seven [alleged mis]statements . . . were misleading” and “why [P]laintiffs

believed each of [those] statements was misleading.”  In re Vivendi, 765 F. Supp. 2d at

579.   
33 

that they all rested on an impermissible “liquidity risk theory” of liability.  We

address these arguments in turn.   

1. Opinion Statements

Vivendi first argues that certain statements (or sub‐statements) are non‐

actionable statements of opinion.  This argument is not preserved for appellate

review, as Vivendi failed to contend that certain statements were non‐actionable

as opinions in its motions for judgment as a matter of law, even after the parties

agreed upon the set of statements the jury would consider.    See Kirsch v. Fleet

Street, Ltd., 148 F.3d 149, 164 (2d Cir. 1998).  Recognizing this, Vivendi now tries

to excuse its failure to raise this argument below in several ways.     

Vivendi first points out that it objected to statements as opinions in its

motion to dismiss, which it filed in 2003.  This argument can be rejected easily.  

Raising this argument in a motion to dismiss did not sufficiently alert the district

court to the existence of the argument more than six years later, when Vivendi

was required to raise it in its Federal Rule of Civil Procedure 50 motions at trial.  

See id.

Second, Vivendi suggests that the late submission of the actual statements

to the jury prevented Vivendi from challenging certain statements as opinion
34 

statements.  Even assuming this argument to be otherwise colorable, Vivendi’s

own submissions to the district court belie this claim.    Specifically, Vivendi’s

post‐trial Rule 50(b) renewed motion for judgment as a matter of law clearly

challenged specific statements on the ground that they were non‐actionable

forward‐looking statements; it also (in a footnote) challenged certain statements on

the ground that they were inactionable puffery.  Given these challenges, Vivendi

cannot now argue that the timing of Plaintiffs’ identification of a specific set of

statements prevented it from also challenging specific statements on the ground

that they were non‐actionable opinion.

Finally, Vivendi contends that intervening authority — by way of Fait v.

Regions Fin. Corp., 655 F.3d 105 (2d Cir. 2011), and Omnicare, Inc. v. Laborers Dist.

Council Constr. Indus. Pension Fund, 135 S. Ct. 1318 (2015) — excuses its failure to

raise the argument below.  This argument, too, lacks merit.  To excuse waiver on

the grounds of intervening authority, it is not enough to argue that the

intervening authority may have sharpened or otherwise elaborated upon an

argument.  Rather, the intervening authority must have established an argument

that was “not known to be available” to the party seeking to excuse waiver at the

first opportunity that the party had to raise the argument.    Gucci Am., Inc. v.
35 

Weixing Li, 768 F.3d 122, 135 (2d Cir. 2014) (quoting Hawknet, Ltd. v. Overseas

Shipping Agencies, 590 F.3d 87, 92 (2d Cir. 2009)); see also Holzsager v. Valley Hosp.,

646 F.2d 792, 796 (2d Cir. 1981).    Not so with the decisions Vivendi claims

constitute intervening authority.   

For purposes of the claim Vivendi makes on appeal, neither Fait nor

Omnicare established an argument regarding the actionability of opinion

statements that was previously unknown.    As both Fait and Omnicare

acknowledge, Virginia Bankshares v. Sandberg, 501 U.S. 1083, 1090–98 (1991),

addressed the circumstances under which liability may extend to statements of

opinion or belief expressed in proxy solicitations.    See Fait, 655 F.3d at 110;

Omnicare, 135 S. Ct. at 1326–27 & n.2.  Fait and Omnicare merely expanded upon

an uncontroversial point already made clear by Virginia Bankshares: that although

statements expressing opinions may not be grounds for liability when they are

not false or misleading in context to a reasonable investor, such statements are

“not beyond the purview” of the federal securities statutes.  Fait, 655 F.3d at 110;

see also Omnicare, 135 S. Ct. at 1329 (“[I]f a registration statement omits material

facts about the issuer’s inquiry into or knowledge concerning a statement of

opinion, and if those facts conflict with what a reasonable investor would take
36 

from the statement itself, then § 11[] . . . creates liability.  An opinion statement,

however, is not necessarily misleading when an issuer knows, but fails to

disclose, some fact cutting the other way.”).    Indeed, we made similar

observations even before Fait or Omnicare.  See, e.g., In re Int’l Bus. Machs. Corp.

Secs. Litig., 163 F.3d 102, 107 (2d Cir. 1998) (“Statements that are opinions . . . are

not per se inactionable under the securities laws.”); In re Time Warner, 9 F.3d at

266 (2d Cir. 1993) (noting that “expressions of opinion” are “not beyond the

reach of the securities laws” (citing, inter alia, Virginia Bankshares, 501 U.S. at

1088–97)).  

The argument that certain statements are not materially false or misleading

because they contain only opinions was therefore known to be available prior to

Fait and Omnicare.    Cf. Gucci Am., Inc., 768 F.3d at 135–36 (concluding that a

defendant did not “waive its personal jurisdiction objection” when, prior to an

intervening decision, “controlling precedent in this Circuit made it clear that [the

defendant] . . . was properly subject to general personal jurisdiction” (emphasis  

in original)); Hawknet, 590 F.3d at 91–92 (concluding that a defendant could raise

an argument on appeal that the defendant did not raise before the district court

because intervening authority “provided [the] defendant with a new objection”
37 

that, prior to the intervening decision, “would have been directly contrary to

controlling precedent in this Circuit” (emphasis added)).    Although Fait and

Omnicare may have provided a stronger basis for such an objection, having a

better argument on appeal is not tantamount to having a previously unknown

argument.    As it required not “clairvoyance” but “conscientiousness” on

Vivendi’s part to object to certain statements on the basis that they were non‐

actionable opinion statements, Vivendi’s reliance on Fait and Omnicare as

intervening authority is unavailing.    See id. at 92 (“[T]he doctrine of waiver

demands conscientiousness, not clairvoyance, from parties.”).   Finding none of

Vivendi’s reasons for excusing its failure to raise the opinion argument below

convincing, we decline to consider the argument on its merits.      

2. Puffery

Vivendi next contends that several statements are non‐actionable puffery.  

Vivendi raised this argument only in a footnote in its Rule 50(b) renewed motion

for judgment as a matter of law, though the district court considered, and

rejected, the argument on the merits.  Cf. Fortress Bible Church v. Feiner, 694 F.3d

208, 216 n.3 (2d Cir. 2012).  Assuming this footnote was sufficient to present the
38 

argument to the district court and thus preserve it for appellate review, the

statements of which Vivendi complains are simply not puffery.   

Puffery encompasses “statements [that] are too general to cause a

reasonable investor to rely upon them,” ECA, Local 134 IBEW Joint Pension Trust

of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 206 (2d Cir. 2009), and thus

“cannot have misled a reasonable investor,” San Leandro Emergency Med. Grp.

Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 811 (2d Cir. 1996).  They are

statements that “lack the sort of definite positive projections that might require

later correction.”  Id. (quoting In re Time Warner, 9 F.3d at 259, 267 (2d Cir. 1993)).     

The jury reasonably concluded that the statements identified by Vivendi as

puffery were actionable.12    Consider, for example, Vivendi’s June 26, 2001

statement that it “posted RECORD‐HIGH NET INCOME, and ha[d] cash

available for investing,” Special App’x 318, or its July 23, 2001 representation that

“[t]he results produced by Vivendi Universal in the second quarter are well

 12 Vivendi argues that these statements should not have been submitted to the

jury, but does not contend on appeal that the district court was wrong to view the

question whether a given statement was inactionable puffery as a fact one.  Thus, we

assume this to be the case, and we review the jury’s verdict in this regard for sufficiency

of the evidence.  See Gronowski v. Spencer, 424 F.3d 285, 291 (2d Cir. 2005) (“In reviewing

the sufficiency of the evidence in support of a jury’s verdict, we examine the evidence in

the light most favorable to the party in whose favor the jury decided, drawing all

reasonable inferences in the winning party’s favor.”).
39 

ahead of market consensus,” id. at 319.  There was sufficient evidence for the jury

to conclude that such statements were not so general that a reasonable investor

could not have relied upon them in evaluating whether to purchase Vivendi’s

stock.  Cf. ECA, Local 134, 553 F.3d at 205–06 (concluding that “statements such as

the assertion[s] that [the defendant company] had ‘risk management processes

[that] are highly disciplined and designed to preserve the integrity of the risk

management process’; that [the company] ‘set the standard for integrity’; and

that [the company] would ‘continue to reposition and strengthen [its] franchises

with a focus on financial discipline’” constituted puffery (citations omitted)); San

Leandro, 75 F.3d at 806, 811 (concluding that “general announcements,” such as

the defendant company’s statement that it “‘should deliver income growth

consistent with [its] historically superior performance’” and was “‘optimistic

about 1993’” constituted puffery).  We thus reject Vivendi’s argument that certain

statements found actionable by the jury are statements of puffery that are non‐

actionable as a matter of law.

3. Forward‐Looking Statements

Vivendi next argues that certain statements fall under the safe‐harbor

provision for “forward‐looking statements” under the PSLRA.    See 15 U.S.C.
40 

§ 78u–5(c).    Under that provision a defendant is not liable if (1) “the forward‐

looking statement is identified and accompanied by meaningful cautionary

language,” (2) the forward‐looking statement “is immaterial,” or (3) “the plaintiff

fails to prove that [the forward‐looking statement] was made with actual

knowledge that it was false or misleading.”  Slayton v. Am. Express Co., 604 F.3d

758, 766 (2d Cir. 2010).  Because “[t]he safe harbor is written in the disjunctive,” a

forward‐looking statement is protected under the safe harbor if any of the three

prongs applies.  Id.

As an initial matter, Vivendi disputes the district court’s conclusion that

“[P]laintiffs challenge the non‐forward looking elements of Vivendi’s statements

regarding its EBITDA growth, rather than the [forward‐looking] elements.”  In re

Vivendi, 765 F. Supp. 2d at 569.    “The PSLRA includes several definitions of a

forward‐looking statement, including ‘a statement containing a projection

of . . . income (including income loss), earnings (including earnings loss) per

share, . . . or other financial items’ and ‘a statement of future economic

performance, including any such statement contained in a discussion and

analysis of financial condition by the management.’”  Slayton, 605 F.3d at 766–67

(quoting 15 U.S.C. § 78u–5(i)(1)(A) & (C)).  However, “[a] statement may contain
41 

some elements that look forward and others that do not,” and “forward‐looking

elements” may be “severable” from “non‐forward‐looking” elements.  Iowa Pub.

Emps.’ Ret. Sys. v. MF Glob., Ltd., 620 F.3d 137, 144 (2d Cir. 2010); see also Makor

Issues & Rights, Ltd. v. Tellabs Inc., 513 F.3d 702, 705 (7th Cir. 2008) (“[A] mixed

present/future statement is not entitled to the safe harbor with respect to the part

of the statement that refers to the present.”).   

It is clear that at least some of the statements that Vivendi identifies as

forward‐looking contain present representations, and that it is these non‐

forward‐looking elements of those statements that Plaintiffs alleged were false or

misleading.    Consider the February 14, 2001 alleged misstatement, which

Vivendi labels as forward‐looking: “Vivendi Universal enters its first full year of

operations with strong growth prospects and a very strong balance sheet.  This

new company is off to a fast start and we are very confident that we will meet the

very aggressive growth targets we have set for ourselves both at the revenues

and EBITDA levels.”    Special App’x 316.    Although some aspects of this

statement could conceivably be characterized as forward‐looking, there is

nothing prospective about the representation that Vivendi entered 2001 with a

“very strong balance sheet,” which Plaintiffs argued at trial was part of what
42 

made Vivendi’s February 14, 2001 statement misleading.  See Trial Tr. 7297.  The

safe‐harbor provision does not protect this and other present representations —

about “very strong 2000 results,” Special App’x 316, or achievement of

“‘aggressive’ incremental EBITDA targets,” Special App’x 320 — embedded

within statements that Vivendi deems forward‐looking.    

To the extent that other statements identified by Vivendi as forward‐

looking are arguably false or misleading with respect to their forward‐looking

elements, we need not decide whether those statements, or elements thereof, are

indeed forward‐looking.    Even assuming, arguendo, that they are, there was

sufficient evidence for a reasonable jury to conclude that none of the prongs of

the PSLRA safe‐harbor provision applies to them.13

Contrary to Vivendi’s argument, there was sufficient evidence to support

the jury in concluding that any forward‐looking statements were not

 13 We consider here only Vivendi’s arguments that: (1) any forward‐looking

statements were accompanied by meaningful cautionary language, and (2) Plaintiffs

failed to show that Vivendi made such statements with actual knowledge that they

were false or misleading.  To the extent that Vivendi contends that the statements are

not material because they did not increase price inflation, we address that argument

infra, in Part III.
43 

accompanied by meaningful cautionary language.14  “To avail themselves of safe

harbor protection under the meaningful cautionary language prong, defendants

must demonstrate that their cautionary language was not boilerplate and

conveyed substantive information.”    Slayton, 604 F.3d at 772.    “Vague”

disclaimers are inadequate.  Id.

Although Vivendi points to a miscellany of disclaimers peppered

throughout its required SEC filings in 2001 and 2002, there is sufficient evidence

to support the jury’s conclusion that none of them was meaningful.    To start,

several of the disclaimers highlighted by Vivendi are quite irrelevant to the

alleged misstatements at issue.  In one, for example, Vivendi warned that factors

that “could cause actual results to differ materially from those described in the

forward‐looking statements” included “inability to identify, develop and achieve

success for new products, services and technologies; increased competition and

 14 The district court instructed the jury to determine whether any forward‐

looking statements were accompanied by meaningful cautionary language.   It further

noted in its opinion denying Vivendi’s renewed motion for judgment as a matter of law

that “it was for the jury to determine whether the cautionary language accompanying

any of the statements . . . was sufficiently ‘meaningful.’”  In re Vivendi, 765 F. Supp. 2d at

567 n.45.  Vivendi does not argue on appeal that the meaningfulness of the cautionary

language in question was not a factual question (whether or not the district court could

have or should have resolved it as a matter of law).  As with puffery, we therefore treat

the meaningfulness of the cautionary language here as a question of fact that the district

court appropriately put to the jury to consider, and review the sufficiency of the

evidence in support of the jury’s determination.     
44 

its effect on pricing, spending, third‐party relationships and revenue; [and]

inability to establish and maintain relationships with commerce, advertising,

marketing, technology, and content providers.”   J.A. 4167.   The considerations

mentioned in this disclaimer — success with new products and services,

relationships with competitors and third parties, and marketing and advertising

efforts — do not bear even tangentially on Vivendi’s liquidity risk.    The jury

reasonably could have found that this kitchen‐sink disclaimer, listing garden‐

variety business concerns that could affect any company’s financial well‐being,

was not meaningful cautionary language.

Vivendi’s disclaimers with respect to the use of EBITDA were no less

oblique.    In Vivendi’s October 30, 2000 Form F–4 registration statement filing

with the SEC, Vivendi stated that it “considers operating income to be the key

indicator of the operational strength and performance of its business.”  J.A. 4681.  

Vivendi continued to state, however, that while “[a]djusted EBITDA should not

be considered an alternative to operating or net income as an indicator of

Vivendi’s performance,” or “an alternative to cash flows from operating

activities as a measure of liquidity,” adjusted EBITDA was nevertheless a

“pertinent comparative measure” to “operating income.”  Id. (emphasis added).  
45 

Given the arguable endorsement of the EBITDA measure inherent in this

language, sufficient evidence supported the jury’s conclusion that such language

did not meaningfully caution against reliance on EBITDA figures as a measure of

Vivendi’s performance.   

Turning to the “actual knowledge” prong of the PSLRA safe‐harbor

provision, we conclude that there was sufficient evidence for the jury to find that

Vivendi made the statements with actual knowledge that the statements were

false or misleading.15    To take an example, Plaintiffs presented evidence that

 15 Vivendi suggests in its reply brief that, in assessing whether there was

sufficient evidence for any reasonable jury to find liability as to these purportedly

forward‐looking statements, we must defer to the impaneled jury’s answers, in special

interrogatories, that Vivendi acted recklessly in making each of the fifty‐seven

statements.   Our hands tied by these interrogatory responses, the argument goes, we

should limit our inquiry to whether there was sufficient evidence to find the statements

not to be forward‐looking, as plainly they cannot have been made with actual

knowledge.   

As an initial matter, Vivendi does not clearly make such an argument, predicated

on the special interrogatories, in its opening brief.    See Vivendi Br. 56.    Thus, the

argument is waived.  See JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V.,

412 F.3d 418, 428 (2d Cir. 2005) (“[A]rguments not made in an appellant’s opening brief

are waived even if the appellant pursued those arguments in the district court . . . .”).   

It is also without merit.    As the Eleventh Circuit has observed, there is a

fundamental distinction between an argument that the actual jury’s verdict is internally

inconsistent (and thus that the court should order a new trial), and an argument that the

district court should grant a party judgment as a matter of law on the basis that there is

insufficient evidence in the record to support any reasonable jury’s verdict against the

movant.    See Hubbard v. BankAtlantic Bancorp, Inc., 688 F.3d 713, 716 (11th Cir. 2012)

(“When a court considers a motion for judgment as a matter of law — even after the

jury has rendered a verdict — only the sufficiency of the evidence matters.  The juryʹs
46 

Vivendi actually knew that its October 30, 2000 announcement of a 35% EBITDA

growth‐rate objective was misleading to a reasonable investor.  On September 15,

 

findings are irrelevant.” (citation omitted)); cf. United States v. Jespersen, 65 F.3d 993, 998

(2d Cir. 1995) (“[W]hen reviewing the sufficiency of the evidence, the Supreme Court

has made it clear that jury verdicts are not to be reviewed for consistency.”).   

A consistency challenge argues that the jury verdict itself is flawed — and we

generally ask in assessing such a claim whether the jury’s findings are “ineluctably

inconsistent,” an inquiry that may require some examination of the record.    Cash v.

County of Erie, 654 F.3d 324, 343 (2d Cir. 2011) (quoting Munafo v. Metro. Transp. Auth.,

381 F.3d 99, 105 (2d Cir. 2004)).    Since the jury itself is capable of correcting such an

inconsistency at the judge’s behest, a party must raise a consistency challenge before the

district court discharges the jury.  See id. at 342.  Because success as to such a claim does

not suggest that no reasonable jury could have found for the prevailing party, only that

the verdict itself could not be reconciled internally, the remedy is not a directed verdict,

but a new trial.  See id. at 342.   

In contrast, a motion for judgment as a matter of law is not based on the jury’s

verdict, but on the record established at trial.  Such a motion must be made before the

jury even renders a verdict (and can be granted at such a time in rare circumstances),

and then renewed thereafter.  See Chaney v. City of Orlando, 483 F.3d 1221, 1228 (11th Cir.

2007) (“The fact that Rule 50(b) uses the word ‘renew[ed]’ makes clear that a Rule 50(b)

motion should be decided in the same way it would have been decided prior to the

juryʹs verdict, and that the juryʹs particular findings are not germane to the legal

analysis.”).  And success on such a motion results not in a new trial, but in a directed

verdict in favor of the movant — and thus reflects the court’s assessment not that the

jury has erred, but that the evidence could not support any jury in reaching a verdict

against the movant.  For these reasons, a judge, assessing a motion for judgment as a

matter of law, looks only to the evidence in the record; she is not bound by a jury’s

answers in special interrogatories.   

To the degree that Vivendi indeed means to make a consistency (rather than a

sufficiency) challenge, that argument (as well as Vivendi’s argument that the findings of

liability as to Vivendi, Messier, and Hannezo were inconsistent) was not timely made.  

See In re Vivendi, 765 F. Supp. 2d at 550–52 (finding Vivendi waived any challenge to the

verdict on consistency grounds by failing to timely object to the verdict); see also

Anderson Grp., LLC v. City of Saratoga Springs, 805 F.3d 34, 46–47 (2d Cir. 2015).  As to the

sufficiency argument that is before us, we consider all the evidence in the record, and

are not bound by the jury’s determination in special interrogatories that Vivendi acted

recklessly in making the statements.
47 

2000, Hannezo circulated an e‐mail informing others at Vivendi that “the

analysts will not have it easy to track the purchase accounting benefits” in

EBITDA figures.  J.A. 4169.  Much less would a reasonable investor, who is not as

well‐versed at making sense of Vivendi’s disclosures as a financial analyst, be

able to discern the impact of purchase accounting.     

To take another example, Vivendi highlights as forward‐looking the

December 19, 2000 statement that Vivendi would be “free of debt in its

communications businesses” as of January 1, 2001 and have “free cash flow of

more than 2 billion euros for the two coming years.”    Special App’x 315.  

Plaintiffs presented sufficient evidence at trial, however, for a jury to find that

Vivendi actually knew that this statement conflicted with internal forecasts of

debt and free cash flow and thus was misleading.   In December 2000, Vivendi

was planning to restructure Seagram’s debt, a process that it knew would incur

additional short‐term debt and require it to pay substantial premiums on that

debt.  See Trial Tr. 1305–06, 7295.  And just two weeks after Vivendi issued the

statement, Hannezo stated in an internal communication that he “believe[d] that

it [was] wrong to reason in terms of . . . free cash flow” because “there [wouldn’t]
48 

be any this year.”16  J.A. 4059.  Assuming, arguendo, that some of the statements

Vivendi claims are purely forward‐looking are indeed so, such evidence was

sufficient for a jury to find that Vivendi actually knew that its forward‐looking

statements were false or misleading.   

4. Liquidity Risk Theory  

In addition to objecting that certain alleged misstatements are non‐

actionable opinion, puffery, or forward‐looking statements, Vivendi lodges a

broader attack against the entire set of alleged misstatements.  To wit, Vivendi

repeatedly protests what it terms to be Plaintiffs’ impermissible “liquidity risk

theory,” under which all of the fifty‐seven statements were allegedly false or

misleading with respect to Vivendi’s liquidity risk.    The nub of Vivendi’s

argument appears to be that “liquidity risk” is too “amorphous” and

“ephemeral” a concept for any statement to be false or misleading with respect to

it, much less all fifty‐seven statements at issue here.  Vivendi Br. 51, 88.   

But, even assuming that this argument has separate purchase from the

more specific arguments Vivendi makes as to the actionability of the

 16 Hannezo qualified this statement at trial, testifying that it referred to his view

that Vivendi would not have enough free cash flow “when it comes to buying things

like Direct TV or Echostar or Yahoo.”  J.A. 2540–41.     
49 

statements,17  “liquidity risk” is not so “amorphous” or “ephemeral” a concept as

Vivendi would lead us to believe.  As Plaintiffs defined it at trial, liquidity is “the

ease or difficulty with which a company can timely meet its financial obligations

and fund its operations.”  Trial Tr. 128; see also Trial Tr. 3481 (Nye testifying that

liquidity is “the ability to pay fixed obligations”).  Liquidity risk, then, is simply a

financial‐accounting term for the concept of being “debt rich and cash poor.”  

Trial Tr. 141.  Further, to the extent that liquidity risk is not a perfectly defined

concept with rigid outer bounds, that does not necessarily preclude liability for

securities fraud.    The federal securities laws do not protect against only those

false and misleading statements that are false or misleading with respect to very

specific material facts.  See, e.g., Suez Equity Inv’rs, L.P. v. Toronto‐Dominion Bank,

250 F.3d 87, 97–99 (2d Cir. 2001) (concluding that plaintiffs’ allegations were

sufficient to state a claim that certain statements fraudulently concealed a

company executive’s “financial and business problems,” “lack of skill,” and

“inability to run the [company]”).  The jury found that knowledge of Vivendi’s

true liquidity risk at any given time would have been material to a reasonable

 17 Indeed, this broader attack echoes specific points made throughout the other

challenges in this section.    For instance, Vivendi argues that the amorphousness of

“liquidity risk” necessarily rendered statements regarding or concealing such a risk

inactionable opinions.  See Vivendi Br. 51.  
50 

investor and that the fifty‐seven statements were individually false or misleading

with respect to this risk.  Without opining on whether there are indeed concepts

so amorphous or broad that their concealment cannot support an actionable

theory under § 10(b) as a matter of law, liquidity risk as defined in this case was

not such a concept.

The question, then, is whether there was sufficient evidence to support the

jury’s finding that all of the fifty‐six statements (excluding the statement on

which the district court granted Vivendi judgment as a matter of law) were

materially false or misleading with respect to liquidity risk.    “The test for

whether a statement is materially misleading under Section 10(b)” is not whether

the statement is misleading in and of itself, but “whether the defendants’

representations, taken together and in context, would have misled a reasonable

investor.”    Rombach v. Chang, 355 F.3d 164, 172 n.7 (2d Cir. 2004) (emphasis

added) (quoting I. Meyer Pincus & Assocs. v. Oppenheimer & Co., 936 F.2d 759, 761

(2d Cir. 1991)); see also Meyer v. Jinkosolar Holdings Co., Ltd., 761 F.3d 245, 250 (2d

Cir. 2014) (“The literal truth of an isolated statement is insufficient; the proper

inquiry requires an examination of defendants’ representations, taken together

and in context.” (quoting In re Morgan Stanley Info. Fund Secs. Litig., 592 F.3d 347,
51 

366 (2d Cir. 2010))).    Whether a misrepresentation is material is “judged

according to an objective standard” that turns on “the significance of an omitted

or misrepresented fact to a reasonable investor.”  Amgen Inc. v. Conn. Ret. Plans &

Trust Funds, 133 S. Ct. 1187, 1191, 1195 (2013) (quoting TSC Indus., Inc. v.

Northway, Inc., 426 U.S. 438, 445 (1976)).   

We conclude that there was sufficient evidence for the jury to find the fifty‐

six relevant statements materially false or misleading in regards to Vivendi’s true

liquidity risk.   To be sure, the statements do not each repeat the precise same

refrain.  Some speak directly to liquidity risk, while others concern components

that contributed to Vivendi’s liquidity risk.    That individual alleged

misstatements may relate to different aspects of a larger problem does not

necessarily subvert a finding of fraud, however.    It would be perverse if

companies could escape liability for securities fraud simply by disseminating a

network of interrelated lies, each one slightly distinct from the other, but all

collectively aimed at perpetuating a broader, material lie.    Where a company

seeks fraudulently to hide a particularly large problem with multiple

contributing factors, it is quite probable that the company will have to lie about a

number of related topics in order successfully to conceal the larger issue.   
52 

Just so here.  Vivendi’s alleged fraud (in the jury’s reasonable estimation)

is remarkable in part because the problem that Vivendi sought to conceal from

the public was so vast, and touched upon so many aspects of its business, that a

few scattered misstatements would not have sufficed to mask it.  Vivendi needed

both to systematically misrepresent its ability to satisfy its liquidity demands,

and also to assiduously conceal any material facts (of which there were many)

that would call into question its ability to meet its liquidity demands.   

Consider, for instance, Vivendi’s statements about its self‐described

“aggressive” EBITDA growth rates, which Vivendi consistently advertised as a

point of strength.    E.g., Special App’x 317 (Statement 9: “[F]or first quarter of

2001, the Company generated very strong EBITDA . . . growth with 900 million

euros, an increase of 112% or an incremental 475 million euros over the first

quarter of the prior year.” (first alteration in original)); id. at 320 (Statement 18:

“With three quarters of the ‘aggressive’ incremental EBITDA target for the full

year 2001 already achieved in the first half of the year, I can only re‐emphasiz[e]

our confidence”).    As Plaintiffs’ expert testified, high EBTIDA suggests high

profitability — and by implication, ample cash flow available to service debt.  

But Vivendi’s high EBITDA targets derived in large part from purchase
53 

accounting effects (which are just one‐time paper adjustments that cannot readily

translate into free cash flow) rather than profits from a company’s business

operations (which reflect actual earnings that may translate into free cash flow).  

And although purchase accounting was the required accounting technique at the

time, Plaintiffs submitted evidence that Vivendi emphasized EBITDA growth to

the public because financial analysts, to say nothing of the average investor,

“w[ould] not have it easy to track the purchase accounting benefits” and the

degree to which they contributed to Vivendi’s EBITDA figures. J.A. 4169.  

Hannezo at one point referred to purchase accounting benefits as “accounting

magic” and acknowledged that Vivendi met its EBITDA growth targets thanks to

purchase accounting benefits.  J.A. 4119; see Trial Tr. 1348‐50.

Further, investors did not digest Vivendi’s statements about EBITDA

growth in a vacuum.    During the Class Period, Vivendi also made numerous

statements about, for example, its cash flow and its debt.  Whether misleading or

not when made, such statements strongly suggested that Vivendi faced no

liquidity risk at the time.  Given that Vivendi was in a phase of intense buying,

moreover, any investor attuned to Vivendi’s pattern of behavior would be keen

to know whether and how Vivendi was making sufficient profits to translate into
54 

cash flow that would cover all of Vivendi’s sundry debt obligations.  We find the

evidence introduced at trial sufficient to support the jury’s conclusion that a

reasonable investor could find Vivendi’s statements about high EBITDA growth

misleading for omission to disclose Vivendi’s liquidity risk.   

We need not detail the evidence in support of the jury’s verdict with

respect to each of the remaining alleged misstatements.  It suffices to highlight a

representative sample of statements:   

 On December 19, 2000, Vivendi stated in a press release that, on a

January 1, 2001 pro forma basis, Vivendi would “be free of debt

in its communications businesses, yet . . . have a free cash flow of

more than 2 billion euros for the two coming years.”    Special

App’x 315 (Statement 2).  Two weeks later, Hannezo expressed to

Messier his “belie[f] that it is wrong to reason . . . in terms of free

cash flow (there won’t be any this year).”  J.A. 3952.   

 On January 12, 2001, Vivendi stated in a 6–K SEC filing that

“[t]hanks to our free net cash flow and the opportunities to

dispose of some holdings, such as our stake in BSkyB, we will

have an additional war chest of 10 billion euros for 2001–2002
55 

before the first euro of debt, and without the creation of new

shares.    That means we will have the resources to pursue the

growth of our businesses in an especially healthy and efficient

way.”    Special App’x 315 (Statement 3).    Two days earlier,

however, Hannezo had informed Messier that it was “wrong to

reason . . . in terms of free cash flow.”  J.A. 3952.   

 On June 26, 2001, Vivendi stated in a 6–K SEC filing that it

“posted record‐high net income” and had “cash available for

investing.”  Special App’x 318 (Statement 12) (emphasis omitted).  

In the same filing, Vivendi also emphasized “the strength of [its]

cash flow.”  Id. (Statement 13) (emphasis omitted).  In contrast, a

Vivendi employee testified that “beginning in June 2001,”

Dupont‐L’Hôtelain “expressed concerns over the cash situation,

the liquidity situation,” and noted “the shortage in cash inside

Vivendi.”  J.A. 2512.   

 On September 25, 2001, Vivendi stated that “[f]or the first half

[of] 2001, operating free cash flow was more than 500 million

euros (excluding environment),” meaning that “[f]or the first
56 

time, cash flow is breaking even after financial costs, taxes and

restricting costs.”  Special App’x 321 (Statement 19).  According

to a Vivendi employee, during this time (“between June and

October of 2001”), Dupont‐L’Hôtelain “often” discussed “the

shortage in cash inside Vivendi,” and Hannezo even noted “two

or three times” that if Vivendi’s “path . . . continue[d], [Vivendi

would] be near bankruptcy.”  J.A. 2512–13.    

 On February 6, 2002, a Reuters article indicated that Vivendi

(through Messier) stated the following: “*Is there any major

uncertainty about our level of debt?  No.  *Are there any hidden

off‐balance sheet transactions that could cause any particular

fears or risks?    No. . . . There are no hidden risks . . . .”    Special

App’x 324–25 (Statement 35); see also J.A. 4719.  Two days later,

however, Hannezo informed Messier that “[c]ompared to its

peers[,] and particularly if the market begins to disregard

EBITDA,” Vivendi “has a big problem,” including “free cash

flow” difficulties and “overleverage.”   Trial Tr. 7346.    Hannezo
57 

also stated that “although Vivendi’s rival, AOL Time Warner,

had impressive cash flows, Vivendi’s was around zero.”  Id.      

 On June 26, 2002, Vivendi issued a press release stating that

“[o]wing to its strong free cash flow, combined with the

execution of the disposals program and potential bond issues,

[Vivendi] is confident of its capacity to meet its anticipated

obligations over the next 12 months.”    Special App’x 330

(Statement 56).    Two days earlier, on June 24, 2002, Goldman

Sachs, in response to a request by Vivendi’s board to analyze

Vivendi’s liquidity situation, explained to Vivendi’s board that

one of four possible scenarios is that Vivendi would have to file

for bankruptcy protection as early as September.  Soon thereafter,

Edgar Bronfman, Jr., whose family was one of Vivendi’s largest

shareholders at the time, wrote that Vivendi’s situation was a

“matter of the gravest concern” and that Vivendi “must

install . . . new management right away to take charge of

convincing the banks to extend some credit while we sell some of

our assets to avoid bankruptcy.   We have no time.   Our board
58 

must act tomorrow without fail.  Our company may fail, and we

have not one minute more to waste.”  Trial Tr. 7361.   

The jury’s finding that these (and all of the fifty‐six relevant) alleged

misstatements were materially false or misleading was supported by sufficient

evidence.  To be clear, we do not foreclose the possibility that in a different case,

a set of alleged misstatements will cover such varied and sundry territory that a

single theory of fraud will not adequately encompass all of the statements.  We

merely conclude that, on the facts of this case, there is sufficient evidence to

support the jury’s finding that a reasonable investor could find each of the

alleged misstatements false or misleading in context with respect to Vivendi’s

liquidity risk, and that this risk was not so amorphous, in this case, to be

categorically inactionable for purposes of a theory of liability.     

III. Expert Testimony

Vivendi next asserts that the district court abused its discretion in

admitting the testimony of Plaintiffs’ expert, Dr. Nye, on loss causation and

damages.18  Under Federal Rule of Evidence 702, which governs the admissibility

of expert testimony, an expert with “specialized knowledge [that] will help the

 18 Nye holds an M.B.A. and a Ph.D in finance from Stanford University.  He also

owns an economic consulting group that frequently provides expert reports in

securities litigation.   
59 

trier of fact” may testify so long as that testimony is “based on sufficient facts or

data” and “is the product of reliable principles and methods” that the witness

has “reliably applied . . . to the facts of the case.”   The proponent of the expert

testimony bears the burden of establishing these admissibility requirements, and

the district court acts as a “gatekeeper” to ensure that the “expert’s testimony

both rests on a reliable foundation and is relevant to the task at hand.” United

States v. Williams, 506 F.3d 151, 160 (2d Cir. 2007) (quoting Daubert v. Merrell Dow

Pharms., Inc., 509 U.S. 579, 597 (1993)).   

“The district court has broad discretion to carry out this gatekeeping

function,” and “[i]ts inquiry is necessarily a ‘flexible one.’”  In re Pfizer Inc. Secs.

Litig., 819 F.3d 642, 658 (2d Cir. 2016) (quoting Daubert, 509 U.S. at 594).    “We

therefore review both the district court’s ‘ultimate reliability determination’ and

its decision about ‘how to determine reliability’ for abuse of discretion.”    Id.

(quoting Kumho Tire Co. v. Carmichael, 526 U.S. 137, 142 (1999)).   

Consistent with what has now become “standard operating procedure in

federal securities litigation,” Nye performed an event study to determine

whether, and the extent to which, Vivendi’s stock price was artificially high (i.e.,

inflated) during the Class Period due to the market’s misapprehension of
60 

Vivendi’s true liquidity risk.  United States v. Gushlak, 728 F.3d 184, 201 (2d Cir.

2013); see also FindWhat Inv’r Grp. v. FindWhat.com, 658 F.3d 1282, 1313 n.31 (11th

Cir. 2011) (“The methodology of event studies has been sustained by many

circuits.”).  In a typical event study, an expert “disentangle[s] the effects of two

types of information on stock prices — information that is specific to the firm

under question . . . and information that is likely to affect stock prices

marketwide.”  Mark L. Mitchell & Jeffry M. Netter, The Role of Financial Economics

in Securities Fraud Cases: Applications at the Securities & Exchange Commission, 49

Bus. Law. 545, 556–57 (1994).    The expert then identifies which

“information . . . caused notable changes in the price of [a company’s]

securit[ies]” and the magnitude of those changes.  J.A. 853; see also In re Pfizer Inc.,

819 F.3d at 649.  Thus, an event study can help an expert determine whether, and

the extent to which, the release of certain information caused a stock price to fall.  

See id. at 649‐50.   This, in turn, allows an expert to make inferences about the

degree to which the company’s stock price may have been artificially inflated on

the basis of the market’s misconception as to the truth prior to the release of that

information.  See id.   
61 

The first step for Nye was to identify changes in Vivendi’s stock price

during the Class Period that could not be attributed to general market dynamics,

but were unique to Vivendi, called “residual returns.”  J.A. 856.  Nye began by

analyzing the normally observed correlation between Vivendi’s stock price and

market‐  and industry‐wide trends over the course of a benchmark “control

period.”  Identifying this correlation made it “possible [for Nye] to predict,” for

each day of the Class Period, the “predicted return” on Vivendi’s stock, i.e.,

“what the return of [Vivendi’s] security should [have] be[en]” on the basis of the

normally observed correlation.   In re Pfizer, 819 F.3d at 649 (quoting Daniel R.

Fischel, Use of Modern Finance Theory in Securities Fraud Cases Involving Actively

Traded Securities, 38 Bus. Law. 1, 18 (1982)); see also J.A. 856.  Nye then calculated,

for each day of the Class Period, the “actual return” on Vivendi’s stock, i.e., the

amount that the company’s stock price actually changed.  Id.  The residual return

on any given day, then, was simply the difference between the actual return and

the predicted return.    

Thus, because the residual returns equal the predicted returns subtracted

from the actual returns, they factored out the market‐ and industry‐wide effects

captured by predicted returns.    In other words, the residual returns Nye
62 

calculated, as he explained it, isolated the variations in Vivendi’s stock price that

were specific to Vivendi, rather than reflective of fluctuations affecting the entire

market or the industry in which Vivendi operated.  A positive residual return on

any given day generally implied that good news about Vivendi emerged, and

that the stock price went up accordingly.   On the flipside, a negative residual

return on any given day generally implied that negative information about

Vivendi issued that day.    

After identifying the residual returns that were statistically significant,

Nye then attempted to isolate the residual returns that could be attributed to

information related to Vivendi’s liquidity risk, rather than other information

related to Vivendi but unrelated to liquidity.    To do this, Nye reviewed more

than 16,000 documents to determine whether the information released in the

market about Vivendi on any particular day had to do with Vivendi’s liquidity

risk.  His analysis yielded a list of days on which there was either a positive or

negative residual return associated with information bearing on Vivendi’s

liquidity risk.  

The final relevant list included nine “negative” residual return days and

one “positive” residual return day.   As Nye testified, the nine negative‐return
63 

days were days on which negative news about Vivendi’s liquidity risk came out

and resulted in inflation dissipating from Vivendi’s stock price.    The one

positive‐return day, meanwhile, was a day on which positive news pertaining to

Vivendi’s liquidity came out and inflation in Vivendi’s stock price increased.  

The sum of the nine negative‐return days, offset by the one positive‐return day,

came to €22.52.    This amount, Nye concluded, was the maximum loss that

investors suffered due to the market’s lack of knowledge about Vivendi’s true

liquidity risk, which is to say the maximum artificial inflation that entered

Vivendi’s stock price and subsequently dissipated as the market found out about

the truth.   

Inflation reached its highest point, Nye believed, around December 13,

2001.   As far as the market knew at that time, Vivendi had doubled down on

statements about Vivendi’s growth projections, but inside the company, Vivendi

employees viewed the company’s liquidity situation as dangerous and Hannezo

was telling Messier that a credit‐downgrade would lead to a liquidity crisis.  

Thus, in Nye’s opinion, December 13, 2001 was when “the discrepancy between

what the market knew and what Vivendi knew was at its widest.”  Trial Tr. 3577.
64 

If what goes up must come down, as the saying goes, then (Nye assumed)

what came down must have gone up.  In other words, the artificial inflation that

dissipated from Vivendi’s stock price must have entered into the price in the first

place.  See Glickenhaus & Co. v. Household Int’l, Inc., 787 F.3d 408, 415 (2d Cir. 2015)

(“The best way to determine the impact of a false statement is to observe what

happens when the truth is finally disclosed and use that to work backward, on

the assumption that the lie’s positive effect on the share price is equal to the

additive inverse of the truth’s negative effect.”).   

A key question was how that inflation entered the stock or, more aptly,

when.  Given that the maximum amount of inflation in the stock was €22.52, one

approach to determining how inflated the stock price was throughout the Class

Period would have been to say that all €22.52 of inflation entered into Vivendi’s

stock price from the very beginning of that period, on October 30, 2000, and

remained at that level until the date of the first negative residual return, January

7, 2002.  There is an obvious downside to this approach, however.  Namely, the

full amount of the inflation reflects the value of the truth about Vivendi’s

liquidity problem at the apex of that problem.   But the magnitude of Vivendi’s

liquidity risk — and by extension, the amount of liquidity‐related inflation in
65 

Vivendi’s stock — presumably had not reached its peak at the start of the Class

Period.  Rather, it grew over time as Vivendi’s liquidity situation worsened, and

as the distance between the truth and the deception thus widened.  Ascribing the

full value amount of loss to the very first alleged misstatement would therefore

tend to overstate the degree to which Vivendi’s stock was inflated due to the

market’s lack of knowledge about Vivendi’s true liquidity risk, at least toward

the beginning of the Class Period.    Such an approach might thus lead to an

inflated recovery for class members who purchased the stock earlier in the Class

Period.

A better method, Nye reasoned, would be to model inflation as increasing

over time — that is, as the magnitude of Vivendi’s liquidity risk grew — and

reaching its maximum point on December 13.  But precisely because the market

was not privy to the full extent of Vivendi’s liquidity risk, or so Plaintiffs alleged,

the scope of that liquidity risk had no direct measure.  Without a direct measure,

Nye turned to potential proxy measures.  He examined three quantitative proxies

for the magnitude of Vivendi’s true liquidity risk at any given time and

considered how well each one might approximate the inflation trajectory over

the relevant period.  Observing that all three “followed similar paths over time,
66 

and matched qualitative descriptions of [Vivendi’s] accelerating debt and

liquidity problems over time,” Nye selected as a proxy the most conservative of

the proxy candidates: the increasing degree to which purchase accounting

benefits contributed to Vivendi’s EBITDA figures.  J.A. 864–65.  Because Vivendi

reported EBITDA figures on a quarterly basis, Nye’s model of inflation showed

inflation increasing step‐wise on such a basis.   

It is important to emphasize that, although Nye calculated the artificial

inflation in Vivendi’s stock that was due to the market’s misapprehension about

Vivendi’s true liquidity risk, his analysis did not purport to prove that that

misapprehension was caused by Vivendi’s alleged fraud.   Artificial inflation is

not necessarily fraud‐induced, for a falsehood can exist in the market (and

thereby cause artificial inflation) for reasons unrelated to fraudulent conduct.  See

Glickenhaus, 787 F.3d at 418.    Nye did not measure inflation actually caused by

Vivendi’s alleged fraud nor “assume[] that [Vivendi’s] share price was inflated

due to misrepresentations.”  Id.  

It was up to the jury to determine how much, if any, of the artificial

inflation identified by Nye was caused by Vivendi’s alleged fraud (and thus by

the various statements Vivendi released in the relevant period), by assessing the
67 

alleged misstatements and their connection to the misconception in question.  

Nye’s analysis merely operated on the assumption that Plaintiffs would be able

to prove at trial all the necessary elements to succeed on their private 10b–5

action.    

Because Nye determined the amount of artificial inflation due to the

market’s lack of information about Vivendi’s true liquidity risk, without

reference to whether that inflation was a result of Vivendi’s alleged

misstatements, Nye’s testimony did not depend on the specific identification of

the fifty‐seven alleged misstatements that Plaintiffs later identified at the close of

trial.  By design, then, Nye’s testimony did not exhibit any obvious correlation

between the inflation increases identified by Nye and the timing of the fifty‐

seven statements.   Though fifteen of the fifty‐seven statements issued on days

where, under Nye’s model, inflation increased, such correlation was not

something Nye himself sought to prove.  And to the degree that the remaining

forty‐two statements were not associated with an immediate increase in inflation

under Nye’s model, that would not obviously affect Nye’s own testimony.

Nevertheless, according to Vivendi, the fact that these forty‐two

statements did not directly correlate with specific increases in inflation made
68 

Nye’s testimony unreliable.   Vivendi asserts that the securities laws require an

alleged misstatement to have a “price impact,” and that no such impact exists

with respect to these forty‐two statements.    Vivendi Br. 72.    To salvage Nye’s

testimony from this supposed legal deficiency, Vivendi continues, the district

court had to fabricate an erroneous inflation “maintenance” theory.  That theory,

as Vivendi frames it, posits that statements that merely maintain inflation

already extant in a company’s stock price, but do not add to that inflation,

nonetheless affect a company’s stock price.   Vivendi urges us to hold that this

purportedly newfangled theory violates the securities laws, and that because

Nye’s testimony necessarily rests on the theory, the district court abused its

discretion in admitting it.   

We begin with an assessment of Vivendi’s argument that a statement must

be associated with an increase in inflation to be actionable, before turning to

what relevance, if any, such an argument had to the district court’s decision to

admit Nye’s testimony.  The “price impact” requirement to which Vivendi refers

arises in the context of “transaction causation,” or “reliance,” the element of a

private § 10(b) action that asks whether there is “a proper ‘connection between a

defendant’s misrepresentation and a plaintiff’s injury,’” or, framed more
69 

specifically, whether the fraud affected “the investor’s decision to engage in the

transaction.”  Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 805, 810‐12 (2011)

(“Halliburton I”) (quoting Basic, 485 U.S. at 243).    “The traditional (and most

direct) way a plaintiff can demonstrate reliance is by showing that he was aware

of a company’s statement and engaged in a relevant transaction — e.g.,

purchasing a common stock — based on that specific misrepresentation.”  Id. at

810.  But because “limiting proof of reliance [to the traditional method] ‘would

place an unnecessarily unrealistic evidentiary burden on the Rule 10b–5 plaintiff

who has traded on an impersonal market,’” id. (quoting Basic, 485 U.S. at 245),

the Supreme Court has established a rebuttable presumption of reliance under

which courts may “assume . . . that an investor relies on public misstatements

whenever he ‘buys or sells stock at the price set by the market,’” id. (quoting

Basic, 485 U.S. at 244, 247).   

“Price impact” simply concerns “whether the alleged misrepresentations

affected the market price in the first place.”  Id. at 814.  If they do not affect the

stock price, then there is “no grounding for any contention that investors

indirectly relied on those misrepresentations through their reliance on the

integrity of the market price.”    Amgen, 133 S. Ct. at 1199.    Defendants can
70 

therefore attempt to rebut the presumption of reliance by introducing “evidence

that the misrepresentation did not in fact affect the stock price.”  Halliburton Co.

v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2414 (2014) (“Halliburton II”).    

In distinguishing between inflation introduction and inflation

maintenance, Vivendi contends that statements that introduce new inflation

actually affect a company’s stock price, while statements that merely maintain

inflation have no impact.  And the reason they have no “price impact” is because

the “preexisting inflation would have persisted” had the defendant who made

those inflation‐maintaining statements “simply remained silent” as was the

defendant’s right in the absence of a duty to disclose.    Vivendi Reply Br. 33.  

Thus, Vivendi’s objection to the idea that a statement may cause inflation by

maintaining it (rather than by increasing it) rests on two premises: that the

maintained inflation would have remained if Vivendi had simply remained

silent; and that Vivendi had the option of remaining silent even though it in fact

chose to speak.  Both premises are problematic.

First, contrary to Vivendi’s implication to the contrary, it is not necessarily

the case that preexisting inflation indeed remains in a company’s stock price in

the face of that company’s silence, either in a circumstance where the stock is
71 

inflated because the market arrived at a misconception on its own or a case in

which inflation may itself be traced to a prior fraudulent statement.  Perhaps, in

the face of silence, inflation could have remained unchanged.  But it also could

have plummeted rapidly, or gradually, as the truth came out on its own, no

longer hidden by a misstatement’s perpetuation of the misconception.  

Alternately, inflation (or, really, the market’s continued belief in the

misconception) could have dissipated gradually because the defendant’s silence

in the face of escalating concerns on a particular subject would have all but

amounted to an admission.  The important point is that the defendant’s alleged

misstatement, in a scenario where, as here, the defendant does not remain silent,

prevents the market from discovering which of these scenarios, among other

relevant scenarios, would have materialized had the defendant said nothing at

all.    In light of the dubiousness of the premise that inflation would have

continued in the face of silence, it becomes evident that Vivendi has framed the

effect of a given affirmative material misstatement in the context of preexisting

inflation improperly.    It is far more coherent to conclude that such a

misstatement does not simply maintain the inflation, but indeed “prevents [the]

preexisting inflation in a stock price from dissipating.”    FindWhat, 658 F.3d at
72 

1317 (holding that “[d]efendants whose fraud prevents preexisting inflation in a

stock price from dissipating are just as liable as defendants whose fraud

introduces inflation into the stock price in the first instance”).   

In short, it is hardly obvious that had Vivendi remained silent, the market

would indeed have maintained its rosy perception of Vivendi’s liquidity state.  

Even were that not so, however, Vivendi’s attack on the so‐called inflation‐

maintenance theory suffers from a greater deficiency: in suggesting that, had it

remained silent, the misconception‐induced (whether or not fraud‐induced)

inflation would have persisted in the market price, Vivendi assumes it is even

relevant what would have happened had it chosen not to speak.  Yet in framing

the argument this way, Vivendi misunderstands the nature of the obligations a

company takes upon itself at the moment it chooses, even without obligation, to

speak.    It is well‐established precedent in this Circuit that “once a company

speaks on an issue or topic, there is a duty to tell the whole truth,” “[e]ven when

there is no existing independent duty to disclose information” on the issue or

topic.  Meyer v. Jinkosolar Holdings Co., Ltd., 761 F.3d 245, 250 (2d Cir. 2014); see

also Caiola v. Citibank, N.A., N.Y., 295 F.3d 312, 331 (2d Cir. 2002) (“[T]he lack of

an independent duty [to disclose] is not . . . a defense to . . . liability[,] because
73 

upon choosing to speak, one must speak truthfully about material issues.”).  That

is because, at the moment the company chooses to speak, it takes upon itself the

obligation to speak truthfully, and it is the breach of that obligation which forms

the basis for the §10(b) claim.    Framed as such, it becomes clear that, once a

company chooses to speak, the proper question for purposes of our inquiry into

price impact is not what might have happened had a company remained silent,

but what would have happened if it had spoken truthfully.   And there is little

need to speculate what would have happened to the inflation in Vivendi’s stock

price had it released to the public not a rosy picture of its liquidity state, but the

misgivings its executives were sharing behind the scenes.

Vivendi’s argument thus rests on erroneous principles that, once dispelled,

make clear that it is hardly illogical or inconsistent with precedent to find that a

statement may cause inflation not simply by adding it to a stock, but by

maintaining it.  Were this not the case, companies could eschew securities‐fraud

liability whenever they actively perpetuate (i.e., though affirmative

misstatements) inflation that is already extant in their stock price, as long as they

cannot be found liable for whatever originally introduced the inflation.  Indeed,

under Vivendi’s approach, companies (like Vivendi) would have every incentive
74 

to maintain inflation that already exists in their stock price by making false or

misleading statements.    After all, the alternatives would only operate to the

company’s detriment: remaining silent, as already noted, could allow the

inflation to dissipate, and making true statements on the issue would ensure that

the inflation dissipates immediately.   

A hypothetical helps illustrate the point.    Suppose an automobile

manufacturer widely praised for selling the world’s safest cars plans to release a

new model (“Model V”) in the near future.  The market believes that Model V,

like all of the company’s previous models, is safe, or has no reason to think

otherwise.  In fact, the automobile manufacturer knows that Model V has failed

crash test after crash test; it is, in short, simply unfit to be on the road.  To protect

its stock price, however, the automobile manufacturer informs the market, as per

routine industry practice, that Model V has passed all safety tests.   When the

truth eventually reaches the market, the automobile manufacturer’s stock price

bottoms out.   

In addition to potentially being liable for any number of things if Model V

indeed makes it to the market, the automobile manufacturer has almost certainly

committed securities fraud.  And the question of the automobile manufacturer’s
75 

liability for securities fraud does not turn on whether inflation moved

incrementally upwards when the company represented to the market that the

new model passed all safety tests.    Nor does it rest on whether the market

originally arrived at a misconception about the model’s safety on its own, or

whether the company led the market to that misconception in the first place.  

“We decline to erect a per se rule that, once a market is already misinformed

about a particular truth, corporations are free to knowingly and intentionally

reinforce material misconceptions by repeating falsehoods with impunity.”  

FindWhat, 658 F.3d at 1317.    “Defendants who commit fraud to prop up an

already inflated stock price do not get an automatic free pass under the securities

laws.”  Id.

In rejecting Vivendi’s position that an alleged misstatement must be

associated with an increase in inflation to have a “price impact,” we join in the

Seventh and Eleventh Circuits’ conclusion that “theories of ‘inflation

maintenance’ and ‘inflation introduction’ are not separate legal categories.”  

Glickenhaus, 787 F.3d at 418; FindWhat, 658 F.3d at 1316 (“There is no reason to

draw any legal distinction between fraudulent statements that wrongfully

prolong the presence of inflation in a stock price and fraudulent statements that
76 

initially introduce that inflation.” (emphases added)).   Put differently, we agree

with the Seventh and Eleventh Circuits that securities‐fraud defendants cannot

avoid liability for an alleged misstatement merely because  the misstatement is

not associated with an uptick in inflation.    

All of that said, it is unclear how Vivendi’s “price impact” argument, even

were it valid, bears on the question here: whether the district court abused its

discretion in concluding that Nye’s testimony “rest[ed] on a reliable foundation

and [was] relevant to the task at hand.”    Williams, 506 F.3d at 160 (quoting

Daubert, 509 U.S. at 597).  Nye’s model measured “‘actual inflation’ — inflation

due to investors not knowing the truth” about Vivendi’s liquidity risk.19  

Glickenhaus, 787 F.3d at 418.    And it identified the amount of inflation due to

 19 As the Seventh Circuit has explained:

[T]here are two senses of “inflation.”  One is “actual inflation” — just the

difference between the stock price and what the price would have been if

the truth had been known; this is what the expert’s model measures.  The

other is “fraud‐induced inflation” — the difference between the stock

price and what the price would have been if the defendants had spoken

truthfully; this is what the jury determined using the model plus its

findings regarding false statements.    Before the first false statement is

made, there is “actual inflation” in the stock price but no “fraud‐induced

inflation” because although the stock is overpriced, misrepresentations are

not the cause.

Glickenhaus, 787 F.3d at 418.
77 

investors not knowing the truth “even if no false statement [was] ever made[,]

because investors might not know the truth for reasons other than false

statements.”    Id. at 417.    This method of measuring actual inflation, without

reference to the timing or nature of a defendant’s alleged misstatements, is

commonly employed by experts who provide testimony on loss causation and/or

damages in securities‐fraud cases.    See, e.g., In re Pfizer, 819 F.3d at 649–52;

Glickenhaus, 787 F.3d at 415–19; FindWhat, 658 F.3d at 1313–14.   

Here, Nye’s testimony is relevant as to loss causation because the total

amount of actual inflation that Nye identified is the maximum amount of loss

potentially caused by Vivendi’s alleged misstatements.  Nye’s testimony is also

relevant as to damages because Nye’s model of inflation over the course of the

Class Period provides a means for calculating each Plaintiff’s damages.    See

Gushlak, 728 F.3d at 197 (explaining that an investor’s damages are generally

“equal to ‘the artificial inflation when the shares were purchased minus the

artificial inflation when the shares were sold.’” (quoting Michael Barclay & Frank

C. Torchio, A Comparison of Trading Models Used for Calculating Aggregate Damages

in Securities Litigation, 64 L. & Contemp. Probs. 105, 106 (2001))).   
78 

Vivendi’s “price impact” argument, if successful, would at most imply that

Plaintiffs could not establish reliance with respect to some of the fifty‐six relevant

misstatements.  But that would not render Nye’s testimony wholly irrelevant to

loss causation or damages; nor would it transform Nye’s calculation of actual

inflation into the product of unreliable principles or methods.  See In re Pfizer, 819

F.3d at 661 (“The dispositive question [under Rule 702] is whether the testimony

will assist the trier of fact . . . not whether the testimony satisfies the plaintiff’s

burden on the ultimate issue at trial.” (quoting Ambrosini v. Labarraque, 101 F.3d

129, 135 (D.C. Cir. 1996)).  Thus, even if Vivendi’s “price impact” argument were

correct, it would not justify concluding that Nye’s testimony is sufficiently

unreliable or unhelpful to the jury that the district court’s admission of that

testimony constituted an abuse of discretion.     

In any event, we do not accept Vivendi’s position that the “price impact”

requirement inherent in the reliance element of a private § 10(b) action means

that an alleged misstatement must be associated with an increase in inflation to

have any effect on a company’s stock price.20  A fortiori Nye’s testimony did not

 20  To be clear, we do not hold that all statements unassociated with an increase in

inflation necessarily have a “price impact.”   We merely hold that such statements do

not, as Vivendi argues, categorically lack a “price impact.”   Thus, we do not address
79 

have to show such an association for each alleged misstatement in order to

“rest[] on a reliable foundation and [be] relevant to the task at hand.”  Williams,

506 F.3d at 160 (quoting Daubert, 509 U.S. at 597).  As Vivendi has identified no

other convincing reason why Nye’s testimony fails to satisfy these basic

requirements, we conclude that the district court did not abuse its discretion in

admitting it.   

IV. Loss Causation

Finally, we address Vivendi’s challenge to the sufficiency of the evidence

to support loss causation.  “Loss causation ‘is the causal link between the alleged

misconduct and the economic harm ultimately suffered by the plaintiff.’”  Lentell

v. Merrill Lynch & Co., 396 F.3d 161, 172 (2d Cir. 2005) (quoting Emergent Capital

Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189, 197 (2d Cir. 2003)).  In some

respects, loss causation resembles the tort‐law concept of proximate cause, which

generally requires that a plaintiff’s injury be the “‘foreseeable consequence’” of

the defendant’s conduct.  Emergent Capital, 343 F.3d at 197 (quoting Castellano v.

Young & Rubicam, Inc., 257 F.3d 171, 186 (2d Cir. 2001)).    But this traditional

foreseeability test is “imperfect” in the § 10(b) context, for “it cannot ordinarily

 

whether there may be other reasons, not raised by Vivendi here, why some statements

unassociated with an increase in inflation do not affect a company’s stock price.   
80 

be said” that the alleged misstatements themselves, “as opposed to the

underlying circumstance that is concealed or misstated” “cause[]” investors’ loss.  

See Lentell, 396 F.3d at 173.    We thus clarified in Lentell that to establish loss

causation, a plaintiff must show that “the loss [was a] foreseeable” result of the

defendant’s conduct (i.e., the fraud), “and that the loss [was] caused by the

materialization of the . . . risk” concealed by the defendant’s alleged fraud.  Id.   

Put more simply, proof of loss causation requires demonstrating that “the

subject of the fraudulent statement or omission was the cause of the actual loss

suffered.”    Suez Equity, 250 F.3d at 95 (emphasis added).    If “the relationship

between the plaintiff’s investment loss and the information misstated or

concealed by the defendant . . . is sufficiently direct, loss causation is

established.”  Lentell, 396 F.3d at 174.  “[B]ut if the connection is attenuated, or if

the plaintiff fails to ‘demonstrate a causal connection between the content of the

alleged misstatements or omissions and the harm actually suffered,’ a fraud

claim will not lie.”  Id.  (quoting Emergent Capital, 343 F.3d at 199)).  

Homing in on the phrase “materialization of risk” from Lentell, Vivendi

contends that the loss that Plaintiffs sought to establish here was not a

materialization of the risk concealed by Vivendi’s alleged misstatements.  
81 

According to Vivendi, the risk that it allegedly concealed (i.e., the risk of a

liquidity crisis) must have materialized into a more significant problem (i.e., an

actual liquidity crisis) in order for Plaintiffs to show that Vivendi’s alleged fraud

caused them loss.    Since it is undisputed that Vivendi’s liquidity risk “never

materialized” into “an objective event such as bankruptcy, default, or

insolvency,” Vivendi asserts that Plaintiffs cannot establish loss causation.    See

Vivendi Br. 83–84 (emphasis omitted).  We disagree.   

Vivendi fails to appreciate that to show loss causation, it is enough that the

loss caused by the alleged fraud results from the “relevant truth . . . leak[ing]

out.”  Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 342 (2005); cf. also id. at 344 (“[T]he

Restatement of Torts, in setting forth the judicial consensus [on what a party

must show to demonstrate loss], says that a person who ‘misrepresents the

financial condition of a corporation in order to sell its stock’ becomes liable to a

relying purchaser ‘for the loss’ the purchaser sustains ‘when the facts . . . become

generally known’ and ‘as a result’ share value ‘depreciate[s].’” (emphasis added

and all but first alteration in original) (quoting Restatement. (Second) of Torts

§ 548A, cmt. b (1977))).  Although we have previously stated that a plaintiff can

establish loss causation either by showing a “materialization of risk” or by
82 

identifying a “corrective disclosure” that reveals the truth behind the alleged

fraud, see Carpenters Pension Trust Fund of St. Louis v. Barclays PLC, 750 F.3d 227,

233 (2d Cir. 2014); Omnicom, 597 F.3d at 513, our past holdings do not suggest

that “corrective disclosure” and “materialization of risk” create fundamentally

different pathways for proving loss causation, such that a specific corrective

disclosure is the only method by which a plaintiff may prove losses resulting

from the revelation of the truth.    Indeed, Lentell itself understood

“materialization of risk” as reflective of the principle that “to establish loss

causation, [plaintiffs must show that a] . . . misstatement or omission concealed

something from the market that, when disclosed, negatively affected the value of

the security.”    Lentell, 396 F.3d at 173 (emphases added).    Whether the truth

comes out by way of a corrective disclosure describing the precise fraud inherent

in the alleged misstatements, or through events constructively disclosing the

fraud, does not alter the basic loss‐causation calculus.   

That “corrective disclosure” and “materialization of risk” are not wholly

distinct theories of loss causation highlights the flaws of Vivendi’s position.  

Vivendi’s conception of loss causation would have the effect of insulating

companies from securities‐fraud liability whenever the thing concealed in a
83 

material misstatement never ripens from a mere risk to an out‐and‐out disaster

— unless a specific corrective disclosure issues.   

A simple hypothetical helps bring into stark relief why Vivendi cannot be

right that the Plaintiffs, short of pointing to explicit corrective disclosures, had to

point to an event, such as a bankruptcy, to demonstrate loss causation in this

case.    Suppose that a company knows that it faces tremendous risk of

bankruptcy, yet fraudulently informs the market that there is no risk of

bankruptcy.  Soon, the risk becomes too great to ignore, and a series of events

indicating that the company is on the verge of bankruptcy takes place: a major

bank backs out of a potential loan agreement with the company; a large deal with

another firm falls through after the other firm does due diligence into the

company; the company rapidly sells off an abnormally large amount of its assets

in an effort to raise capital; and so on.  The company’s stock price sinks, indeed

becomes all but valueless.   

The company in this hypothetical lied about its risk of bankruptcy — a lie

that was separate and distinct from any lie about whether the company actually

filed for bankruptcy — and events revealing the truth about the company’s risk

of bankruptcy caused investors to lose money.    Yet, Vivendi would have us
84 

believe that, absent a specific corrective disclosure, the actual filing of

bankruptcy is the necessary “materialization of risk” that must occur in order for

the company to have caused investors any loss under § 10(b).  But whether the

company caused loss to investors under § 10(b) does not turn on whether the

company actually files Chapter 11 at some point or manages to steer clear of

bankruptcy at the last minute.    “Fraud depends on the state of events when a

statement is made, not on what happens later.”  Schleicher v. Wendt, 618 F.3d 679,

684 (7th Cir. 2010); see also Pommer v. Medtest Corp., 961 F.2d 620 (7th Cir. 1992)

(“The securities laws approach matters from an ex ante perspective: just as a

statement true when made does not become fraudulent because things

unexpectedly go wrong, so a statement materially false when made does not

become acceptable because it happens to come true.  Good fortune . . . does not

make the falsehood any the less material.”  (citations omitted)).  

Here, although no specific corrective disclosure ever exposed the precise

extent of Vivendi’s alleged fraud, Plaintiffs’ theory of loss causation nevertheless

rested on the revelation of the truth.  According to Plaintiffs, Vivendi’s alleged

misstatements concealed its liquidity risk, and a series of events in the first half

of 2002 made the truth about that liquidity risk come to light.    According to
85 

Nye’s testimony on loss causation and damages, those events took place on nine

days, when the following news reached the market: (1) January 7, 2002 news that

Vivendi sold 55 million of its treasury shares; (2) May 3, 2002 news that Moody’s

downgraded Vivendi’s long‐term senior debt to a notch above junk status; (3)

June 21, 2002 news that Vivendi sold a stake in its subsidiary Vivendi

Environnement, despite earlier statements that it would wait to sell; (4) June 24,

2002 news just three days later that Vivendi sold an even larger stake in Vivendi

Environnement; (5) July 2, 2002 news that Moody’s downgraded Vivendi’s long‐

term senior debt to junk status, followed by S&P’s downgrade of Vivendi’s short‐

term senior debt; (6) July 3, 2002 news that Vivendi acknowledged its short‐term

liquidity problems and its €1.8 billion in obligations that were due that very

month; (7) July 10, 2002 news that rating agencies cautioned that further

downgrades were possible, and that French authorities had raided Vivendi’s

Paris headquarters to investigate possible securities fraud; (8) July 15, 2002 news

that a member of Vivendi’s board of directors was urging Vivendi quickly to sell

Canal+, which was not generating earnings as expected; and (9) August 14, 2002

news that Vivendi planned to sell €10 billion in assets over the following two

years, €5 billion of which it hoped to sell within just nine months.   
86 

There was ample evidence to support the jury’s finding of a “sufficiently

direct” “relationship between the . . . loss [that Plaintiffs suffered on these nine

days] and the information misstated or concealed by [Vivendi].”  Lentell, 396 F.3d

at 174.  To take just one example — Vivendi’s January 7, 2002 sale of 55 million

treasury shares — Nye testified at trial that a treasury‐share sale of such

magnitude indicated to the market that Vivendi “need[ed] cash badly,” and that

“academic economic literature . . . inform[ed] [this] view.”  J.A. 2768.  Vivendi’s

own witness, the company’s credit‐rating liaison at the time of the transaction,

testified to the effect that there was “no question” that the sale implied to the

market that Vivendi needed cash.    J.A. 2770–71.    This and other evidence

presented at trial were sufficient for the jury to conclude that the nine events

identified by Nye revealed the truth about Vivendi’s liquidity risk, and that

concealment of “the subject” of Vivendi’s alleged misstatements — its liquidity

risk — was therefore “the cause of the actual loss suffered” by Plaintiffs.  Suez

Equity, 250 F.3d at 95 (emphasis added).

V. Plaintiffs’ Cross‐Appeal

Plaintiffs set forth two additional contentions on cross‐appeal, challenging

prior judgments of the district court.  Neither has merit.
87 

Plaintiffs first maintain that, at the class certification stage, the district

court improperly excluded certain foreign shareholders from the class based on a

concern that some foreign courts may not give preclusive effect to a class

judgment.    We review a district court’s conclusions as to whether the

requirements of Federal Rule of Civil Procedure 23 were met, and in turn

whether class certification was appropriate, for abuse of discretion.    Gallego v.

Northland Grp. Inc., 814 F.3d 123, 129 (2d Cir. 2016); In re Initial Public Offerings

Secs. Litig., 471 F.3d 24, 31‐32 (2d Cir. 2006).    “That standard of review is

deferential: the district court is empowered to make a decision — of its choosing

— that falls within a range of permissible decisions, and we will only find ‘abuse’

when the district court’s decision rests on an error of law or a clearly erroneous

factual finding, or its decision cannot be located within the range of permissible

decisions.”  Gallego, 814 F.3d at 129 (internal quotation marks omitted).  

As an initial matter, the district court did not abuse its discretion when, in

assessing whether the class action would be “superior to other available methods

for fairly and efficiently adjudicating [a] controversy,” Fed. R. Civ. P. 23(b)(3), it

considered whether a class judgment would be given preclusive effect in foreign

courts.    Concerns about foreign recognition of our judgments are reasonably
88 

related to superiority.  As Judge Friendly recognized in Bersch v. Drexel Firestone,

Inc., “if defendants prevail against a class[,] they are entitled to a victory no less

broad than a defeat would have been,” and so the risk that a foreign court will

not grant preclusive effect to a class judgment may, as it did in Bersch, counsel

against the inclusion of some foreign claimants.    519 F.2d 974, 996–97 (2d Cir.

1975), abrogated in part on other grounds, Morrison v. Nat’l Austl. Bank Ltd., 561 U.S.

247 (2010).  It was therefore within the district court’s discretion to take that risk

into account.   

With respect to the district court’s ultimate determination to exclude some

foreign shareholders on superiority grounds, it was Plaintiffs’ burden to

establish, by a preponderance of the evidence, that its proposed class met the

requirements of Rule 23.   See In re Am. Int’l Grp., Inc. Secs. Litig., 689 F.3d 229,

237–38 (2d Cir. 2012); Myers v. Hertz Corp., 624 F.3d 537, 547 (2d Cir. 2010).  We

recognize that assessing superiority is a fact‐specific inquiry, and we do not

opine on how likely it must be that a foreign court will recognize a class

judgment in order for Rule 23’s superiority requirement to be met.    Here,

however, Plaintiffs do not identify any evidence that they presented to the

district court which suggested that foreign courts in the countries at issue would
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grant preclusive effect to a class judgment.21  The district court accordingly did

not abuse its discretion in concluding that, except for shareholders from a few

countries, Plaintiffs had not demonstrated superiority.    

Plaintiffs’ second contention is that, after trial, the district court incorrectly

dismissed claims by American purchasers of ordinary shares under Morrison v.

Nat’l Austl. Bank Ltd., 561 U.S. 247 (2010).    Plaintiffs contend that (1) Vivendi

forfeited any Morrison‐based defense because it did not bring its motion to

dismiss the claims until after trial, and (2) in any event, the district court should

not have dismissed these claims because the purchasers incurred “irrevocable

liability” within the United States, and thus were covered by § 10(b).  We review

the district court’s decision de novo.  In re Air Cargo Shipping Servs. Antitrust Litig.,

697 F.3d 154, 157 (2d Cir. 2012).

Vivendi did not forfeit its Morrison argument because, prior to Morrison, its

motion was foreclosed by controlling precedent in this Circuit, and parties are

not required to raise arguments “directly contrary to controlling precedent” to

avoid waiving them.  Hawknet, 590 F.3d at 92 (2d Cir. 2009); see also Holzsager, 646

 21 The only evidence that Plaintiffs identify is Vivendi’s suggestion in a prior brief

that Canada typically grants preclusive effect to class judgments when there are a

significant number of Canadian class members.    Plaintiffs do not contend that they

informed the district court of this alleged admission, however, nor was the district court

obligated to search the record for evidence that it was Plaintiffs’ burden to produce.  
90 

F.2d at 796 (“[A] party cannot be deemed to have waived objections or defenses

which were not known to be available at the time they could have first been

made, especially when it does raise the objections as soon as their cognizability is

made apparent.”).    Here, before the Supreme Court decided Morrison in June

2010 (less than a month before Vivendi filed its motion), this Circuit’s conduct

and effects tests were the “north star of [its] § 10(b) jurisprudence.”  Morrison, 561

U.S. at 257.  In Morrison, the Supreme Court struck down those tests and made

clear that § 10(b) applies only to “transactions in securities listed on domestic

exchanges, and domestic transactions in other securities,” id. at 267, thereby

providing, for the first time, a legal basis for Vivendi’s argument that the claims

of American purchasers of ordinary shares were not covered by § 10(b).  Vivendi

accordingly did not forfeit its right to seek dismissal of those claims under

Morrison.   

Plaintiffs also maintain that under this Court’s decision in Absolute Activist

Value Master Fund Ltd. v. Ficeto, American purchasers of ordinary shares, and

specifically those who acquired shares in the course of the three‐way merger

between Vivendi, S.A., Canal+, and Seagram, are protected by § 10(b) because

they incurred “irrevocable liability” while present in the United States, 677 F.3d
91 

60, 67 (2d Cir. 2012).  We disagree.  In Absolute Activist, we used the concept of

“irrevocable liability” to determine what constitutes a “domestic purchase or

sale” under Morrison.   Id. at 67–68.   We reasoned that when the “parties” to a

transaction incur irrevocable liability in the United States, defined as

“becom[ing] bound to effectuate the transaction” or “entering into a binding

contract to purchase or sell securities,” the transaction is domestic and § 10(b)

applies.    Id. at 67.    To the extent that Plaintiffs rely on the merger as the

transaction at issue, the location of the Americans who acquired ordinary shares

as a result of the merger, who Plaintiffs admit were not parties to it, is not

relevant to the question of whether the merger qualifies as a “domestic purchase

or sale.”  Plaintiffs do not otherwise point to any evidence that the parties to the

merger incurred irrevocable liability in the United States.    The district court

therefore appropriately determined that American purchasers of ordinary shares

were not protected by § 10(b) under Morrison.

CONCLUSION

We have considered Vivendi’s remaining arguments, as well as Plaintiffs’

remaining cross‐appeal arguments, and find them to be without merit.    The

partial judgment of the district court is therefore AFFIRMED.