By and  on March 31, 2006

PARIS — LVMH Moët Hennessy Louis Vuitton and Morgan Stan­ley will present their cases in the appeals court here today in LVMH's long-running bias suit against the investment bank.

The latest arguments in the case, which has been grinding its way through the courts since November 2002, are expected to be an all-day affair, with judges unlikely to announce a decision for several months. But the hearing could be explosive, with both sides airing old grievances in a long and bitter luxury war.

In January 2004, the Paris commercial court ordered Morgan Stanley to pay LVMH 30 million euros, or $36 million at current exchange, for "gross misconduct" related to equity research LVMH claimed was biased toward rival Gucci Group, a client of the investment bank.

LVMH accuses Morgan Stan­ley and its star, analyst Claire Kent, of a premeditated and systematic effort to denigrate it. Kent suspended coverage of the firm's stock in the wake of the ruling.

The luxury group is seeking an additional 182.9 million euros, or $219.5 million at current exchange, in damages. An expert is still tabulating material damages at the behest of the commercial court.

Proceedings today are likely to kick off with a question-and-answer session, after which each side will present its arguments. According to legal experts, neither side is able to introduce new evidence in this civil case. The appeals court will review the same facts as did the commercial court in 2003 and 2004 — although the information may be presented in new, and presumably more vigorous ways.

Lawyers for Morgan Stanley, which claims no wrongdoing, are likely to reiterate that LVMH has presented no proof of inaccuracies or ill will in Kent's equity research, nor any proof of damages. They are also likely to tout a report by the French stock market regulator, compiled at the request of the appeals court, which found no correlation between the opinions of Morgan Stanley and the performance of LVMH's stock.

The investment bank's lawyers are also likely to urge judges to consider what Morgan Stanley deems is a dangerous precedent set by the commercial court ruling, which sent a chill through the investment analyst community.Meanwhile, LVMH's lawyers are bound to downplay the findings of the stock market regulator, asserting that its systems are geared to detect fraud and irregularities, but not the subtleties of opinion. The regulator is also not in a position to evaluate the stock performance of rival Gucci Group, which is registered in the Netherlands.

LVMH is also likely to accentuate alleged wrongful acts by Morgan Stanley: erroneous statements about the "maturity" of the Louis Vuitton brand; incorrect information about its debt position, credit rating and currency exposure, and boilerplate statements in its reports that stated Morgan Stanley and LVMH had a director in common.

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