By Nate Raymond  

How much is a €765 million jury verdict really worth?

That seemingly easy question was the subject of a 15-page ruling by U.S. District Judge Shira Scheindlin of Manhattan on Wednesday, in Liberty Media's fraud and breach of contract suit against Vivendi. A federal jury handed Liberty the award -- in euros -- in June, and since September the companies have battled not only over what the jury verdict is worth in dollars but also over the judge's power to render a judgment in a currency other than U.S. dollars. The answer, according to Scheindlin's ruling: The award is worth 765 million and that's how judgment will be entered.

The suit, filed in 2003, was based on a 2001 stock-for-stock deal in which Vivendi acquired a stake in Liberty's USA Networks. Liberty argued that Vivendi misled it about its finances when the company was in a liquidity crisis and asserted claims of securities fraud and breach of contract. Last summer's jury verdict, which came two years after a separate jury ruled against Vivendi in a related securities fraud class action, was reported that day to be worth $954.6 million.

Liberty's lawyers at Baker Botts moved in September for final judgment to be entered in euros and converted to dollars, based on the rate prevailing on the day the judge entered her order, which would put the value of the verdict at almost $1 billon. But Vivendi, represented by Cravath, Swaine & Moore and Weil, Gotshal & Manges, countered that the proper conversion rate was as of the day of the 2001 merger, which would bring the award down to $691.3 million. Vivendi also argued that the judgment had to be entered in U.S. dollars, pointing to a 1951 decision by the 2nd Circuit Court of Appeals that held that a U.S. judgment must be in U.S. currency.

Scheindlin's reasoning took a different route. In the years since the 1951 case, she wrote, the 2nd Circuit has suggested that judgments in foreign currencies may be permissible, notably in a 1986 ruling in which the appeals court said the presumption against foreign currency judgments should probably be reexamined in light of the repeal of a section of the Coinage Act of 1792. (Yes, 1792.) Scheindlin also pointed to what appears to be the single subsequent instance in which a New York federal judge entered a foreign currency judgment: This was done in 1995 by her colleague Miriam Cedarbaum, in a case in which Mitsui & Co Ltd sought to confirm two arbitration awards for a combined 2.12 billion Japanese yen.

While the law may be murky in the 2nd Circuit, at least two other appellate panels have signaled they are OK with foreign currency judgments. The 7th Circuit seems to have been the first, in a 1992 opinion awarding the equivalent of about $200 million in francs to the French government and towns suing Amoco Oil Company over the 1978 Amoco Cadiz oil spill. The 4th Circuit followed suit in 1999, when it upheld an jury award of 2.82 million Deutsche marks to Sea-Roy Corporation in a lawsuit against German trench roller manufacturer Rammax Maschinenbau.

In the Liberty case, Scheindlin said, it was "beyond dispute" that Liberty bore risk and suffered losses in euros, since Vivendi shares were priced in euros. "This option best respects the will of the jury which calculated the amount of damages in euros," she added in a footnote.

For Liberty, the judge's decision to enter judgment in euros and not convert it to dollars averts a roughly $309 million haircut in damages based only on currency conversion rates. Scheindlin said in a footnote that if she had to convert the jury award to U.S. dollars, she would use Vivendi's method. Vivendi also succeeded in swaying the judge to calculate prejudgment interest based on the yield of a one-year Treasury bill rather than the 9 percent annual rate Liberty Media said New York law requires.

Vivendi counsel James Quinn of Weil Gotshal declined to comment, but his client said in a statement that it would appeal the underlying verdict. "Vivendi strongly believes that it did no wrong and intends to pursue its appeal to the fullest extent possible," the company said. A spokeswoman for Liberty declined to comment, and Liberty counsel R. Stan Mortenson of Baker Botts didn't respond to requests for comment.

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