The long running controversy over warped equity research took a startling turn yesterday after a Paris court ruled that a Morgan Stanley research report into luxury goods manufacturer LVMH had defamed the company.
After a 14-month legal battle, the Paris Commercial Court upheld allegations by LVMH that Morgan Stanley’s equity research had been biased against it, and awarded Euros 30 million ($38.5 million) in compensation. The five-judge tribunal under Judge Jean-Pierre Eck also appointed an “expert” to evaluate the extent of material damages against LVMH, which said it had evidence that could prove these damages would exceed Euros 70 million. In addition to the Euros 30 million, Morgan Stanley is liable to pay Euros 10,000 in material damages, and Euros 80,000 in court costs. Patrick Ponsolle, chairman of Morgan Stanley’s French operation, says the judgment is “terrifying” and that the company would seek to have the ruling overturned in the Court of Appeal.