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Morgan Stanley told to pay LVMH $38.5m

PARIS -- The maker of Louis Vuitton handbags and Moet champagne won a court judgment ordering investment bank Morgan Stanley to pay at least $38.5 million in damages for biased research that hurt LVMH's image and helped its rival Gucci.

In the first major ruling by a European court on conflicts of interest between research and investment banking services, the Paris commercial court said Morgan Stanley had "considerably prejudiced" LVMH and helped Gucci, its own client.

LVMH, whose brands include Vuitton bags, the Kenzo and Givenchy fashion lines, Tag Heuer watches, and Moet et Chandon champagne, had demanded euro100 million ($128.5 million) in damages.

It argued successfully that Morgan Stanley carried out a three-year campaign of "systematically erroneous and biased information" against LVMH while hiding its business relationship with Gucci.

Imposing $38.5 million in punitive damages at yesterday's hearing, the court said further compensation would be awarded for the financial loss LVMH was found to have made as a result of Morgan Stanley's research bias. It appointed an independent expert to produce an estimate within three months.

The court also rejected Morgan Stanley's contention that the lawsuit was motivated by lasting enmity over the bank's 1999 role in helping Gucci evade a planned LVMH takeover.

Presiding judge Jean-Pierre Eck said the court agreed that the decision by Morgan Stanley luxury analyst Claire Kent and her team in mid-2002 to slash their valuation of LVMH by 10 percent had been unjustified.

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