Imaginary VW Deadline Prompts Flood of Real Investor Lawsuits
More than 1,000 cases will be filed against VW by Sept. 19
Law journal article on deadline prompts early wave of lawsuits
Volkswagen AG investors are preparing to flood a German court with more lawsuits over the carmaker’s emissions scandal to meet a deadline that lawyers say may be imaginary.
The Braunschweig Regional Court is bringing in extra staff for Sept. 19, the first business day after the one-year anniversary of VW’s admission that it rigged its cars to cheat emissions tests. Shareholders who want to sue VW over their losses are concerned that the day may be the deadline to file. While most lawyers doubt the date is really key, few are prepared to wait.
“Nobody wants to take the risk that courts may see that differently in the end," said Thomas Asmus, a lawyer at Lindenpartners in Berlin. “The herd instinct is strong. Everybody’s filing now. I’ll do it too.”
The flood of new shareholder suits in Germany adds to the carmaker’s troubles. A year after admitting that about 11 million diesel vehicles had been equipped with software to cheat pollution tests, VW is far from resolving the fallout. It agreed to pay $16.5 billion to settle suits by some American authorities and car owners. Shareholders are incensed because the stock price dropped 35 percent in the two trading days after U.S. regulators disclosed the so-called defeat device.
The carmaker is already facing 380 pending investor suits in Braunschweig, the legal district that includes the company’s headquarters in Wolfsburg, claiming the leadership was aware as early as 2014 that U.S. authorities were probing test results and should have disclosed the investigation back then. One lawsuit bundles claims of almost 300 institutional investors and seeks 3.3 billion euros. Another group is seeking 700 million euros.
Instead of American-style class action suits, Germany gives plaintiffs a procedure that consolidates cases to centralize the evidence phase in capital-market actions in which a large number of investors claim to have been hurt by the same action.
VW continues to say the suits are unfounded because it informed the markets at each stage of the process.
"After a diligent review by internal and external legal experts, Volkswagen is of the view that the management board properly fulfilled its disclosure duties under capital-market rules," the company said Monday in an e-mailed statement.
A veteran VW engineer pleaded guilty Friday to conspiring to defraud regulators and customers, the first criminal charge in the U.S. Justice Department’s year-long investigation.
Concerns about the anniversary arose after time limits for some types of investor claims were extended in mid-2015, causing speculation about how the new rules apply to cases with links to earlier periods. Lawyers published articles in legal journals suggesting different methods to calculate the deadline with most saying claims can still be filed until the end of 2018.
Andreas Tilp, an attorney representing investors in the 3.3 billion-euro suit, wrote an article with a colleague that supported the one-year deadline. Asmus and Alexander Druckenbrodt, a litigator with Kaye Scholer in Frankfurt, contested that in separate publications.
"Mr. Tilp certainly achieved one thing -- causing a huge insecurity on the side of the investors," Druckenbrodt said. "Nothing will happen on Sept. 19. In my view, claims won’t be time barred if you don’t file your suit by then."
Asmus, Druckenbrodt and Tilp do agree on one thing: most attorneys will file suits now or take some other action to meet the possible deadline. Some investors are still shopping around to choose lawyers to represent them in the cases.
"It’s getting pretty hectic in the market at the moment, there’s a lot of movement," Asmus said.
Klaus Nieding, another attorney specialized in these kind of court actions, sent out five press releases since the beginning of August with a view to the deadline. In a statement last week he said he will accept new clients until noon on Sept. 19 to file their cases.
Tilp said he will file 1,000 suits for small stockholders in Braunschweig and he’s also in talks with more institutional investors. A forensic-economics specialist calculated that claims for about 6 billion euros could be filed, according to the attorney. He’s also preparing cases for new clients with claims of 2.6 billion euros.
His firm will also file 60 suits for individual Porsche SE investors against that company and VW. Porsche, which is VW majority shareholder, is also publicly traded. Institutional investors told him to sue Porsche for 500 million euros to seek to recover the decline of Porsche shares, which usually mirror any VW stock movement. They’ll be filed in Stuttgart, where Porsche is based.
Tilp rejects criticism over his warnings about the possible deadline.
"We never said that the time limit is definitely applying, we only said that there’s that risk," Tilp said. "We’re only doing our job as lawyers, and that’s to diligently detect any risk that may jeopardize the claims."
Druckenbrodt will stick to his view that it’s safe to file later, but he admitted it’s not his decision.
"I’m firmly convinced that Sept. 19 is irrelevant for these claims, but I’m not in the driver’s seat," he said. "In the end, the client will come and say, my dear Mr. Lawyer, I’m afraid, we need to act. The client pays and who pays the piper calls the tune."