Aus der Bratpfanne ins Feuer (out of the frying pan, into the fire) for Volkswagen. The beleaguered automaker is now facing a derivative lawsuit on its home soil as 66 institutional investors prepare to sue VW for lost share value resulting from the recent emissions scandal.
According to Klaus Nieding of Nieding & Barth, the suit will be filed with a regional court in Brunswick and asks for hundreds of millions of euros on behalf of investors from the U.S. and Britain. “On top of that, we collected several thousands of private investors. Therefore we think we are the biggest platform for suits against Volkswagen in Germany.”
VW shares have tanked, losing almost one-third of their value (an estimated $24B or €22B) since the company confessed to conning U.S. regulators with hidden software. Nieding & Barth plan to implement the German version of the U.S.’ class-action system for the suit. The so-called capital market model claims use court decisions in favor of individual investors as a template for setting damages for those similarly affected.
The firm plans to argue that Volkswagen was aware of violating diesel emissions rules in advance of its first public statement in September 2014 and that the company should have come clean to the public earlier.
BaFin, Germany’s financial watchdog institution, said its probe into the Volkswagen issue was so complex it may take several months to complete. In the meantime, Bentham Europe (a litigation finance group backed by U.S. hedge fund Elliot Management and Australian IMF Bentham) said it contacted Volkswagen’s top 200 investors regarding a damages claim that could be filed as soon as next month. Retail investors filed suit in October 2015, according to German attorney Andreas Tilp.
On U.S. soil, Volkswagen is fairing no better. Affected VW owners will likely seek billions of dollars in damages and the U.S. Justice Department has already sued the company under the Clean Air Act seeking up to $46B.
The company also faces challenges developing a fix for the issue that U.S. regulators will approve. According to German newspaper Sueddeutsche Zeitung, VW is planning to hire former FBI chief Louis Freeh to assist it in dealing with investigations by U.S. authorities.
The paper reported that a special committee on the VW supervisory board is set to discuss hiring Freeh this week. The company declined to comment on “speculation.”