F-Cubed

A rare securities class action is underway in New York, involving foreign investors who traded foreign securities on foreign markets [F3]. Plaintiffs claim that they bought shares in Vivendi, as its CEO Jean-Marie Messier was on an acquisition path, but was hiding a liquidity crises the revelation of which ultimately caused the shares to drop. The case has been around since 2002. Messier had been transforming the French water company into a media conglomerate. The class was certified, including investors from France, England, and the Netherlands. Over 30 F cubed cases were filed in the last year, against such targets as Lernout & Hauspie (Belgium), Ahold (The Netherlands), and Daimler AG (Germany). Why are we creating a litigation forum for the world? Good question. Are we trying to export legal services? Maybe. Plaintiffs still have to show a nexus between the alleged fraud and the U.S. Sometimes plaintiffs try to show accounting conduct involving a US subsidiary. Last year in a case involving National Australia Bank Ltd. the Second Circuit Appeals Court confirmed a District Court dismissal but declined to disallow all such cases saying that, “[w]e are an American court, not the world’s court, and we should not expend our resources resolving cases that do not affect Americans or involve fraud emanating from America.” Sounds good to us. The Supremes are watching.
-- Paul Marotta