(CN) - Vivendi must produce documents related to its $8 billion sale of discounted Activision Blizzard stock to that company, a federal judge ruled, granting a motion to compel by shareholders.
Known for blockbuster video game franchises such as "Call of Duty," Activision announced on July 26, 2013, that French multinational Vivendi had agreed to sell back 85 percent of its majority stake for $8.17 billion.
Vivendi owned 61 percent of Activision stock but allegedly owed more than $17 billion to its creditors, and desperately needed cash.
Activision bought 439 million of Vivendi's shares for $5.83 billion, and an investment group headed by company insiders CEO Bobby Kotick and co-chairman Brian Kelly picked up 172 million shares in a private sale for $2.34 billion.
The prices included a 10 percent discount on Activision's closing price the day before the deal's announcement.
Coupled with the jolt to Activision's stock price, the discounted sale price earned the Kotick-led investment group an unrealized gain of more than $725 million on the first day of trading after the deal closed.
In subsequent derivative actions
, shareholders claimed that six Vivendi directors who served on Activision's board of 11 directors threatened to take actions to liquidate Vivendi if the "restructuring" deal was not approved.
Consolidated in Delaware Chancery Court, the actions claim that the private sale was a "staggering windfall" for Kotick and Kelly, but did not benefit Activision in any way.
Vivendi refused to comply with discovery requests for documents kept on French servers related to the deal, however, because it said French law prohibits the production of materials in France for use outside of France in civil discovery.
Vice Chancellor Travis Laster described the law as the "Blocking Statute" in a judgment granting the shareholders' motion to compel Friday.
"Read literally, it encompasses any attempt by a party to transmit its own evidence outside of France for purposes of a foreign judicial proceeding," he wrote.
Complying with discovery poses no conflict with the French law, according to the ruling.
"As currently drafted, the Blocking Statute reflects France's preference for its own methods of litigation," Laster wrote. "Every country naturally prefers its own methods of litigation; otherwise it would change them. The United States and Delaware prefer their own methods of litigation and have an interest in using them. The competing interests offset, which prevents an interest in one's own system of litigation from being used effectively in a balancing test."
Vivendi's directors agreed to be subject to Delaware law when they became directors of Activision, he added.
And, notably, Vivendi previously chose to sue in the United States to take advantage of America's less restrictive discovery laws, and specifically cited its "desire to litigate in a forum that would maximize its access to evidence," according to the ruling.
"Vivendi's prior decisions to disregard the Blocking Statute when advantageous undercut its ability to invoke the Blocking Statute now, when the shoe is on the other foot," Laster said.
The shareholders have also amply shown that the requested documents and electronic communications "are not just important, they are essential to any effort to fully and fairly litigate and try the case," he added.