In re Grupo Televisa Securities Litigation

Background

The plaintiffs sought certification of a class of investors who alleged that Grupo Televisa’s public statements omitted information about bribery connected to media rights for World Cup soccer tournaments. The defendants opposed certification on two grounds: they argued that Televisa’s market price did not respond to public reports about the alleged bribery, and they argued that Colleges of Applied Arts and Technology Pension Plan (CAAT) was not a typical class representative.

Market-price impact and reliance

The court considered four events that allegedly disclosed information about Televisa’s conduct. The first was a December 2016 Reuters report linking a Televisa affiliate to a FIFA bribery investigation. The court found that the article did not clearly accuse Televisa or its affiliate of bribery and that neither company had been charged. The court also considered an October 2017 New York Times article, which discussed the affiliate’s World Cup rights and its connections to people involved in the FIFA investigation. Televisa’s price rose slightly that day, and the court concluded that the article did not clearly disclose that Televisa had participated in bribery. A later drop followed a discouraging earnings report, not the article.

The third event was testimony by Alejandro Burzaco in November 2017. The court said this testimony directly identified Televisa as involved in paying bribes for soccer-media rights. Televisa’s closing prices fell by about 7% over the four-day period, which the plaintiffs’ economist described as highly unusual from random market movement alone. The fourth event was a January 2018 disclosure that Televisa had material weaknesses in its internal controls. The court found that this disclosure caused, at most, a small price decline and did not indicate that the weaknesses had led to improper activity or inaccurate financial statements.

The court concluded that three events were unlikely to cause an unusual market reaction, so their lack of a significant reaction did not undermine the plaintiffs’ theory. The November 2017 testimony, by contrast, conveyed concrete information and produced a statistically significant price drop. The court therefore found no sufficient showing to overcome the presumption that Televisa’s market price reflected the publicly available information and the alleged omissions. That presumption is associated with the Supreme Court’s decision in Basic Inc. v. Levinson and can support an inference that investors relied on public information in an efficient market.

CAAT’s typicality

Federal Rule of Civil Procedure 23(a)(3) requires the claims of a class representative to be typical of the class’s claims. The court explained that a representative must share the class members’ interests and suffer the same injury.

During the class period, CAAT held 146,400 Televisa American depositary receipts and claimed losses of approximately $968,000. But CAAT also owned 75% of the Arrowstreet fund, which held a substantial short position in Televisa securities. That short position produced a gain of more than $10.94 million—roughly three times CAAT’s loss on its long position.

The court rejected CAAT’s argument that the short sales should be treated as separate because Arrowstreet, rather than CAAT directly, owned and made decisions about the securities. The court focused on the economic effect: the price decline that injured other proposed class members increased CAAT’s overall economic position by much more than it harmed CAAT. The court consequently found that CAAT was not typical of the proposed class.

Disposition

Judge Louis L. Stanton denied the motion for class certification. The opinion does not state that the underlying securities claims were dismissed or otherwise resolved on their merits.