August 2002: Morgan Stanley analyst Claire Kent downgrades the shares of LVMH Moët Hennessy Louis Vuitton to “neutral” from “outperform.”
This story first appeared in the January 13, 2004 issue of WWD. Subscribe Today.
Nov. 26, 2002: LVMH hits back, filing a 100 million euro lawsuit against Morgan Stanley and Kent. The suit alleges Morgan Stanley is biased and has a conflict of interest because it represents Gucci Group, while LVMH charges that Kent has an anti-LVMH bias in her writings and ratings.
Jan. 21, 2003: The case kicks off in Paris commercial court, with LVMH bringing 41 pieces of evidence to support its case. Morgan Stanley lashes back at LVMH, filing its own 10 million euro counter-claim and labeling the LVMH suit “vexatious, without merit and an abuse of the French Court system.” The court gave Morgan Stanley until March 3 to respond to some of LVMH’s charges.
Meanwhile, LVMH’s papers filed with the court are filled with invective and exclamation points. Of Kent, LVMH says that she “continued her destructive work…totally strange in her role as a financial analyst, spreading as widely as possible her commentaries and negative opinions about LVMH.” By contrast, Kent always “finds all the right excuses” for Gucci and offers a gentler interpretation of even disappointing financial results, it adds.
March 3, 2003: The bickering continues, with a hearing bogged down by procedural matters during which lawyers for both sides charge the other with tactical posturing.
April 1, 2003: Lawyers for LVMH and Morgan Stanley meet in the private chambers of magistrate Jean-Pierre Eck at Paris Commercial Court. Eck has been asked to rule on two Morgan Stanley demands: that the court compel LVMH to confirm that it’s not sheltering evidence, and that LVMH pinpoint exactly what’s germane to its case among 1,900 pages of documents on a CD-ROM it filed as evidence.
April 28, 2003: LVMH wins a small victory as Eck rules that LVMH need not pinpoint what’s germane to its case on the CD-ROM, nor is it compelled to present any evidence it might be sheltering. But Eck assures Morgan Stanley’s lawyers that they would get all the time they need to respond to any new LVMH submissions throughout the legal proceedings.
May 26, 2003: Morgan Stanley files its 10 million euro countersuit and calls an unusual witness on its behalf: LVMH chairman Bernard Arnault. Arguing that Claire Kent’s comments on LVMH were “completely justified,” Morgan Stanley’s defense quotes Arnault as agreeing with her on such topics as the impact of yen weakness and the Iraqi conflict on the luxury sector.
But the investment bank also disagrees sharply with LVMH, accusing it of “truncating and manipulating” Kent’s writing to construct its case. It calls LVMH’s lawsuit “abusive.”
Sept. 29, 2003: Eck announces in court that the two sides will be able to argue their cases before a panel of judges on Nov. 17.
Nov. 17, 2003: In a harbinger of the commercial court’s eventual decision, and at the end of a marathon hearing, French prosecutor Jean-Louis Lecue says he detected fault and prejudice under French tort law. Talking to the court’s five judges, Lecue suggests that, while LVMH didn’t provide enough evidence to show exactly how much Morgan Stanley’s opinions dented its stock price, he understood how its image, vital in the luxury goods sector, could have been damaged. The judges set Jan. 12, 2004, as the date when they will issue their final decision.