Pressure has mounted on Volkswagen over the weekend with a German law firm dismissing the auto giant’s defence in the emissions testing scandal and US pension giant the California State Teachers Retirement System (CalSTRS) confirming it has hired a law firm to sue VW.
German law firm TILP, which filed the first investor-based lawsuit against VW, dismissed as “false and misleading” claims by the automaker that it acted properly by waiting until late last September to admit that it had cheated during US emissions tests.
VW defended its actions in a statement issued last week but Tübingen-based TILP, which represents around 800 retail investors and several institutional ones against the automaker, says German securities law (Wertpapierhandelsgesetz or WpHG) requires a listed company to not wait until the management board knows about a share-moving issue before disclosing it.
Instead, WpHG obliges the firm to disclose the issue as soon as knowledge of the issue “exists within the firm.” To underscore its point, TILP cited a ruling made by the Federal Court of Justice (BGH) in 2000.
TILP said it was “not understandable” why VW took no action to inform investors after former Chief Executive Martin Winterkorn was told of the emissions rigging in a memo dated May 23 2014.In its defence, VW says it does not know whether Winterkorn took the memo seriously or even read it.
The exchange between TILP and VW is important, as plaintiffs represented by the law firm may claim damages if it can be proven that the automaker violated WpHG by not informing the market in a timely manner. The VW share has shed more than one-third of its value since the scandal broke.
VW “particularly heinous” – CalSTRS’ Ehnes
It comes as CalSTRS, whose VW holding is worth €47m, says it has hired the law firm of Quinn Emanuel to sue the automaker for compensation for its alleged violation of WpHG, with CEO Jack Ehnes calling VW’s actions “particularly heinous”. It has also retained foreign litigation finance group Bentham Europe.
Including CalSTRS’ claim, there are now more than enough lawsuits filed against VW for a German court to decide which one gets “KapMu” status – that is the equivalent of the US class action. Beyond that TILP and Quinn Emanuel, there is a major claim from Frankfurt attorneys Nieding + Barth that is backed by around 80 institutional investors.