A German court announced recently that Volkswagen AG now faces about 1,400 investor lawsuits worth about €8.2 billion ($9.1 billion) alleging that the automaker defrauded investors by concealing its involvement in a scheme to cheat emissions standards in diesel vehicles. The regional court in Braunschweig – near Volkswagen’s headquarters in Wolfsburg – said that 750 investor suits were filed one year and one day after the U.S. Environmental Protection Agency (EPA) first accused the German automotive giant of selling diesel cars equipped with software designed to evade nitrogen oxide emissions standards.
The Braunschweig court in August announced that it had referred shareholder suits totaling about €4 billion to a German court of appeals for the purposes of selecting a bellwether case. Germany lacks a class action mechanism, but under the country’s Capital Markets Model Case Act, trial courts facing a number of investor suits that pose identical questions of law or fact can issue an order of reference to a court of appeals, which will then select a model case to try first.
The court of appeals said in August it expects to select a model case by the end of this year. Once a model case is selected, the other cases will be suspended, and a decision in the bellwether will be binding on the remaining cases. The German investors contend that Volkswagen had a duty to disclose the emissions manipulation and the risk an eventual regulatory action would pose to shareholders. The investors argue the decision to install the so-called defeat devices was made as early as 2005 and that even if the company wasn’t aware of the software, it would have been put on notice when both suppliers and technicians raised the issue in 2007 and 2011.
The investors said the company also knew as early as 2008 that the EPA would impose hefty fines on automakers that breach emissions regulations. It’s the investors’ position that Volkswagen also should have been obligated to disclose the manipulation after the EPA began investigating in 2014.
The shareholders claimed they suffered damages in September 2015 when Volkswagen finally admitted it had been cheating emissions standards by installing the software in at least 11 million cars. The automaker ultimately agreed to pay $14.7 billion to consumers and the U.S. federal government.
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