An Analyst in Court: LVMH, Morgan Stanley Case Kicks Off Today

PARIS — LVMH Moët Hennessy Louis Vuitton may be parading couture on the runways this week — but it’s airing a bitter grievance in a...

It is believed that LVMH’s lawyers will attack the ethics of Morgan Stanley and paint a scenario that puts Kent squarely in Gucci’s corner from the early days of the battle for control of Gucci to her present-day writings on the luxury sector. One source said LVMH may allege that Kent was present at a pivotal meeting in spring 1999 regarding the French group’s attempt to gain creeping control of Gucci.

More recently, LVMH’s beefs with Kent are said to center on her praise of Gucci Group strategy and, in particular, her confidence in the turnaround potential at Yves Saint Laurent, despite the fact that break-even targets have been delayed by Gucci. It is also believed LVMH might call into question Kent’s impartiality regarding other luxury issues, including Burberry. Morgan Stanley helped lead Burberry’s initial pubic offering last summer.

Another key issue is said to be a boilerplate statement in the bank’s research reports last year stating it expected to receive or seek compensation for investment-banking services from LVMH. The boilerplate also mentioned that Morgan Stanley shared a director in common with LVMH. WWD has learned LVMH took legal action on the former in the commercial court here last fall, before the $100 million bias lawsuit was filed. Morgan Stanley removed and rectified the offending statements before the court took any action.

Morgan Stanley declined to comment on today’s hearing or its defense strategy, reiterating that it rejects LVMH’s claim and plans to defend the lawsuit vigorously. It is believed Morgan Stanley’s rebuttals will be based on Kent’s track record as a top-rated analyst, arguing her ratings of LVMH were correct and her writings on the sector balanced.

But the case could take some interesting turns, according to legal experts here.

Metais noted that the court has the authority to appoint an outside expert with special competence in the field of dispute. This expert would have the power to request documents and evidence and launch investigations, ultimately compiling a final report for the judges. However, the court would likely appoint such an expert only at the request of one of the parties, he noted.

Another Paris legal source said the court could also appoint a mediator, if the two parties requested. That would allow the dispute to be contested confidentially outside the court, avoiding the glare of the media.
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