Porsche SE must face a lawsuit claiming it hid its plan to corner the market in Volkswagen AG shares, a state judge in New York ruled, rejecting the sports-car maker’s bid to dismiss the case.
New York State Supreme Court Justice Charles Edward Ramos today said the “core” issue of the claims by 26 hedge funds including Greenlight Capital Inc. and Glenhill Capital LP is whether New York courts may hold a foreign entity responsible for fraudulent misrepresentations aimed at plaintiffs in the state. Porsche, in an e-mailed statement, said it will appeal the decision.
The court “rejects Porsche’s characterization of the issues in this action as the manipulation of the German stock market and the trade of German securities,” Ramos wrote in his opinion. “New York clearly has a vested interest in such an action.”
The funds, which bet that Volkswagen stock would fall, claim Porsche misled investors by denying through much of 2008 that it intended to acquire Volkswagen and by using manipulative trades to hide its stock positions. Porsche said on Oct. 26, 2008, that it controlled most of Volkswagen’s common stock, causing the shares to surge as short-sellers raced to cover their positions.
Under New York rules, the court “assumed the truth of the hedge funds’ allegations without ruling on the merits of their claims,” Stuttgart, Germany-based Porsche said in the statement. The company said it “continues to believe that the hedge funds’ lawsuits are without factual and legal merit.”
The case is Glenhill Capital LP v. Porsche Automobil Holding SE, 650678-2011, New York State Supreme Court (Manhattan).