Delaware Court Rules That Vivendi Can’t Invoke French Law in Activision Shareholders Lawsuit

A Delaware Court has ruled that Vivendi cannot invoke a French law to avoid discovery in a lawsuit filed by shareholders over its stock deal with Activision. Activision announced on July 26, 2013, that Vivendi had agreed to sell back 85 percent of its majority stake for $8.17 billion. Vivendi owned 61 percent of Activision stock but allegedly owed more than $17 billion to its creditors, and desperately needed cash. Activision bought 439 million of Vivendi's shares for $5.83 billion, and an investment group led by Activision CEO Bobby Kotick and co-chairman Brian Kelly picked up 172 million shares in a private sale for $2.34 billion.

Shareholders claimed in their lawsuit that six Vivendi directors who served on Activision's board of 11 directors threatened to take actions to liquidate Vivendi if the "restructuring" deal was not approved. The lawsuit, which was consolidated in Delaware Chancery Court, claimed that the private sale was a "staggering windfall" for Kotick and Kelly, but did not benefit Activision (or its shareholders) in any way.

Vivendi said that it did not need to comply with discovery requests for documents kept on French servers related to the deal, because French law prohibits the production of materials in France for use outside of France in civil discovery (described by the Delaware court as the "Blocking Statute").

In his ruling in favor of shareholders, Vice Chancellor Travis Laster granted the motion to compel Friday, noting that complying with discovery did not conflict with the French law.

"Read literally, it encompasses any attempt by a party to transmit its own evidence outside of France for purposes of a foreign judicial proceeding," he wrote. "Complying with discovery poses no conflict with the French law, according to the ruling."

"As currently drafted, the Blocking Statute reflects France's preference for its own methods of litigation," Laster wrote. "Every country naturally prefers its own methods of litigation; otherwise it would change them. The United States and Delaware prefer their own methods of litigation and have an interest in using them. The competing interests offset, which prevents an interest in one's own system of litigation from being used effectively in a balancing test."

Laster also said that Vivendi's directors agreed to be subject to Delaware law when they became directors of Activision, and that it in past legal actions it took advantage of the less restrictive discovery laws in the United States.

"Vivendi's prior decisions to disregard the Blocking Statute when advantageous undercut its ability to invoke the Blocking Statute now, when the shoe is on the other foot," Laster said.

Shareholders have also proven to the court that the requested documents and electronic communications "are not just important, they are essential to any effort to fully and fairly litigate and try the case," he added.

Source: Courthouse News

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