PARIS — The second installment of the courtroom battle here pitting luxury giant LVMH against American investment bank Morgan Stanley ended Monday in procedural bickering as each party blamed the other of tactical posturing.
This story first appeared in the March 4, 2003 issue of WWD. Subscribe Today.
LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury group, launched its $100 million bias and conflict of interest suit against Morgan Stanley last year.
In it, LVMH assembled 41 pieces of evidence it claims will prove the bank’s chief luxury analyst, Claire Kent, intentionally underrated LVMH stock to make its arch rival Gucci, which is advised by the bank, appear attractive.
The battle began in Paris’ commercial court in January as evidence and other documents were exchanged in a brief session. A judge had set Monday as the date for Morgan Stanley to respond to the allegations.
But, in an equally expedient, closed-door session, Morgan Stanley’s lawyer’s asked that two procedural aspects be addressed before they present a defense.
Represented in Paris by the law firm Gide Loyrette Nouel, Morgan Stanley requested LVMH be required to produce evidence that the bank suspected LVMH has sheltered from the court. It also requested that LVMH be forced to explain the relevance to the case of documents on a 1,900-page CD-ROM.
Paris’ Jeantet Associes law firm represents LVMH.
When the meeting recessed, the wrangling moved outside the courtroom, as the legal teams convened impromptu press briefings.
“Morgan Stanley is throwing up smoke screens,” complained Georges Terrier, LVMH’s chief legal counsel. “They’re nitpicking over procedure without addressing the core of the case. It shows they’re in a weak position. They are buying time.”
A Morgan Stanley spokeswoman countered by saying that, “Today’s hearing was one of a number of procedural hearings. There was no mention by the court of the defense. Despite LVMH’s claim to the contrary, there was no obligation on Morgan Stanley to file its defense today.”
She added, “The court agreed today that Morgan Stanley’s application should be heard.”
A source familiar with the case said LVMH was concealing its hand and hoping to lead the bank into a legal minefield.
The source cited three recent articles in the French press in which LVMH sources hinted the group possessed undisclosed evidence to bolster its case.
“Morgan Stanley can’t defend itself if LVMH doesn’t play its cards straight,” said the source. “It has to know what it’s up against.”
The source likened LVMH’s 1,900-page CD-ROM to the equivalent of a mind-boggling maze with little relevance to the case. The source added that the documents had perplexed Morgan Stanley’s lawyers.
Meanwhile, LVMH responded to Morgan Stanley’s demand for further explanation and evidence in a short document it handed the bank’s legal team two hours before the court convened.
One source said Morgan Stanley’s lawyers had not had enough time to fully digest the document. They said, however, that LVMH had not denied possessing secret evidence.
“We’re perplexed by their position,” said LVMH attorney Terrier. “They want us to provide more documents. But they didn’t say what documents they want. They want to complicate the case.”
He continued, “They want us to explain the CD-ROM, how it pertains to the case. It’s evidence to argue our position. I don’t know how much more explicitly clear we can be.”
A spokesman for LVMH said the firm remained “confident of [its] position. This is a futile attempt to gain time.”
The judge set April 1 for a decision on the procedural questions. At that time, another date will be determined for Morgan Stanley to respond to LVMH’s accusations.
A source familiar with the case said that after the bank responds to allegations it would launch its own counterclaim against LVMH for damage done by the proceedings, as reported. The bank has not disclosed how much it would seek in damages.
The source reiterated the bank’s intention to fight the action vigorously, underlining that Monday’s proceedings were neither a sign of fear nor a means to buy time.
A clear calendar for resolution in the case has yet to emerge, both legal teams admitted. They said it could drag on for months, possibly past summer and into fall.