PARIS — The appeals court here set June 30 as the date it will deliver its decision as Morgan Stanley seeks to fend off a January 2004 ruling of “gross misconduct” and a 30 million euro, or $36 million, penalty related to its equity research about LVMH Moët Hennessy Louis Vuitton.
During a marathon hearing Friday that stretched over two crowded and stuffy courtrooms, lawyers for the investment bank and the luxury firm sparred anew over familiar grievances, with assertions about LVMH’s debt rating and the supposed “maturity” of the Louis Vuitton brand among the most contentious points.
A succession of four lawyers presented Morgan Stanley’s argument, insisting LVMH “built its case on sand” and that among the principle motives for the suit were “fundamental violence” and the fact that its chairman, luxury titan Bernard Arnault, “can’t stand criticism.”
For its part, LVMH characterized itself as the victim of an orchestrated and premeditated campaign by Morgan Stanley and its star analyst Claire Kent to discredit it while glorifying rival Gucci Group, a client of the investment bank.
The hearing occasionally resembled an economics lesson, with both sides niggling over financial details, such as the exact size of LVMH’s debt load at certain times over the period in question, 1999 to 2002.
Among the new facts that came to light was that LVMH had been planning to issue convertible bonds in 2001, which the firm said was thwarted when Kent warned of a possible deterioration of its credit rating. LVMH said it was forced to abandon the issue and seek a standard bond loan, which prevented it from realizing a savings of 106.9 million euros.
That amount is part of the additional 182.9 million euros, or $219.5 million, the luxury group is seeking in damages. An expert is still tabulating material damages at the behest of the commercial court.
But counsel for Morgan Stanley argued its research was accurate, honest and not misleading — taking pains to highlight instances in which Kent gave flattering portrayals of LVMH, and Arnault was complimentary of Gucci.
“This idea of discrimination is false,” said one Morgan Stanley lawyer. “LVMH has no proof of the existence of prejudice.”
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The investment firm reiterated its counterclaim, saying it is seeking 10 million euros, or $12 million, in damages caused by the proceedings.
LVMH’s rebuttal, led by feisty lawyer Georges Terrier, was swift. “It’s not a question of proof. It’s a question of facts,” he said. “Analysts are allowed to be wrong, but they must explain why. You can’t just say anything that you want.”
For example, he argued that Morgan Stanley did not adequately explain a range of actions: its discounting of LVMH shares, its assertion the French group was particularly exposed to yen fluctuations or boilerplate statements in its reports that stated 95 times that Morgan Stanley and LVMH had a director in common.
Terrier, frequently flailing his arms in his big-sleeved black robe, railed at Morgan Stanley for what he deemed a glaring conflict of interest: failing to mention its business dealings with Gucci.
He asserted the luxury industry “is very sensitive to the reputation of its image.”