PARIS, Jan 12, 2004/ FW/ --- The legal battle between French luxury giant LVMH and U.S. investment firm Morgan Stanley was decided today in Paris with the Paris Commercial Court ruling that “the claims brought by LVMH against Morgan Stanley demonstrate “gross misconduct” against LVMH, causing it “considerable financial and reputational harm” and ordered the bank to pay LVMH euro 30 million in damages.”

The lawsuit, which began last October 30, 2002, claimed that Morgan Stanley’s “persistent and serious breaches of its obligation to provide independent and impartial financial research and analysis of the luxury goods sector.”

A statement released today by LVMH says, “From 1999 to 2002, while acting as the investment banking advisor to Gucci, Morgan Stanley systematically denigrated LVMH through the publication of false or biased information in the financial press, as well as its own weekly report on the luxury goods sector (Luxury Goods Weekly).”

The court ruling in Paris upheld LVHM’s claim, declaring that “Morgan Stanley engaged in grossly wrongfully conduct by failing to ensure the independence of its research analysts and, instead, linked their activities to the bank’s investment banking activities.”

Among Morgan Stanley’s wrongful acts that the Court considered gross misconduct were the bank’s erroneous July 2002 announcement of an impending downgrade of LVMH’s credit rating, the statements of analysts regarding the supposed “maturity” of the Louis Vuitton brand, the baseless assertion that LVMH’s management destroyed shareholder value and the inaccurate presentation of the bank’s conflicts of interest, through multiple incorrect footnotes.

The Paris Commercial Court’s decision establishes a legal precedent requiring from now on that banks ensure the absolute separation of their investment banking and financial research and analysis activities.