PARIS (AP) — Investment bank Morgan Stanley must pay at least $38.5 million in damages to luxury-goods maker LVMH Moet Hennessy Louis Vuitton for publishing research biased against its brands, a French court ruled yesterday.
In a landmark first ruling by a European court on conflicts of interest between research and investment-banking services, the Paris commercial court said the U.S. investment bank’s research had “considerably prejudiced” LVMH’s activities and reputation.
LVMH, whose products range from Vuitton bags to Moet et Chandon champagne, had demanded $128.5 million in damages.
It argued that Morgan Stanley had carried out a three-year campaign of “systematically erroneous and biased information” against LVMH, while hiding its business relationship with rival Gucci.
As it ordered the initial $38.5 million in punitive damages, the court said further financial compensation would be awarded later.
It appointed an independent expert to prepare an estimate of how much LVMH was forced to spend in advertising and other expenses to counter the bad publicity by Morgan Stanley luxury analyst Claire Kent and her team.
Presiding Judge Jean-Pierre Eck said the court agreed that Morgan Stanley’s mid-2002 decision to slash its valuation of LVMH by 10 percent had been unjustified.
Morgan Stanley vowed to appeal the ruling.
“It’s a terrifying and absurd decision and one against which we will appeal immediately,” said Patrick Ponsolle, chairman of Morgan Stanley’s French office.
He said the ruling would make it difficult for analysts to do their jobs fairly without fearing a lawsuit from any company they criticized.
Unless the judgment is overturned, Mr. Ponsolle said, “I don’t think we’ll have much critical analysis in the future.”
Please read our comment policy before commenting.