Volkswagen’s legal troubles have further deepened due to a fresh lawsuit from a US institutional investor seeking compensation for the steep drop in VW’s share price caused by the auto giant’s diesel emissions scandal.
According to Klaus Nieding, a Frankfurt lawyer who is to file the suit later this week, up to 65 other institutional investors could join the claim. They are primarily from the US and, together, seek hundreds of millions of euros in compensation following the steep drop in VW’s share price over the scandal. Nieding – who is also Vice President of German shareholder association DSW – did not name the investors.
Nieding has also previously been involved in attempts to get Deutsche Bank audited to find out whether the bank’s governance has been strengthened to prevent future scandals like Libor rigging.
The VW plaintiffs will argue the car giant violated German securities laws by waiting too long to disclose the fact that it had cheated during tests of its diesel engines in the US. In late September, VW admitted in a market statement that it had installed a ‘defeat device’ in its diesel engines so that they would have lower emissions during the tests. According to German press reports, US regulators and even VW engineers were aware of the cheating before the statement.
The scandal has prompted VW to stop having its environmental record assessed by the CDP and cancel its membership in the United Nations Global Compact, the UN’s corporate sustainability initiative. Just last week the European Investment Bank said it had stopped making loans to VW.To prepare the case and represent the investors, Nieding’s firm Nieding + Barth is working with MüllerSeidelVos, a fellow German firm, and Robbins Geller Rudman and Dowd, the US class actions law firm (see Robbins Geller’s VW page here).
The latest claim against VW, as well as a separate one filed by Tübingen law firm TILP almost immediately after the scandal broke, seek so-called ‘KapMu’ status – that is the equivalent of the class-action lawsuit in the US. The process starts when 10 or more investors file claims against the same defendant and based on the same facts with an appellate court (Oberlandesgericht or OLG in German).
The OLG then decides if the claims are legitimate and which of them gets KapMu status – that is serves as a “model” for the rest. The court then hears just that case. The KapMu also differs from the US class action in that if the court decides for the plaintiffs, the defendant does not pay out the compensation in a lump sum. Instead, compensation for each investor is calculated separately.
Meanwhile, the Financial Times reported today (January 18) that additional class actions had been filed against VW by investors. The Arkansas State Highway Employees Retirement System, a $1.4bn (€1.28bn) pension fund, was named the lead plaintiff in the US class action. And earlier this month, the US Justice Department sued the Wolfsburg-based automaker for violating the country’s Clean Air Act. That lawsuit could result in fines of $90bn or more, according to press reports.