VW Emissions Scandal Class Action Suit
June 15, 2016
Concerned stakeholders and shareholders are following the latest developments in one of the largest investor class-action suits of the year as legal action is brought against Volkswagen AG in connection with its recent emissions scandal. The lawsuit is being filed in Germany on behalf of over 280 major institutional investors all over the world—the list includes investors from the U.S. and the U.K., Canada, Asia, Australia, and Europe. The VW emissions scandal lawsuit aims to recover losses in the amount of over $3.5 billion U.S. The legal action is supported by U.S. investor law firms Kessler Topaz Meltzer & Check and Grant & Eisenhofer, as well as international investor protection law firm DRRT.
In September 2015, Volkswagen admitted to the use of “defeat devices,” which had the ability to detect when a car was being tested. The device could then modify the car’s performance to ensure that emissions were suppressed and that the car would pass. The scandal has resulted in far-reaching effects, not only for the automobile industry, but also in the global investment community as well. The lawsuit alleges that Volkswagen AG breached its duties to investors by failing to timely publish important information connected with the company’s recent emissions scandal.
The scandal affected some 600,000 automobiles sold in the U.S. as well as thousands of other vehicles sold internationally. Besides the affected automobiles, Volkswagen’s stocks plummeted about 40% once news of the scandal broke. The case is the largest shareholder litigation case to be filed in Germany.
Several Funds Join the VW Emissions Scandal Lawsuit
Several major funds have joined in the Volkswagen emissions scandal class-action lawsuit. The funds cite significant losses resulting from the scandal as an impetus in their decision to join the suit. The case illustrates the importance of investors safeguarding their fund holdings.
The lawsuit also brings attention to an overall focus more on ethically and environmentally conscious investments, and on allowing shareholders to be given more of a say in German corporate governance. While there are no formal decisions yet to divest in Volkswagen, investors do want to see changes made toward its corporate governance structure.
U.S. Department of Justice Also Brings Lawsuit Against VW
In addition to the shareholder litigation action, the U.S. Department of Justice has also filed a separate lawsuit against Volkswagen. This revolves mainly around civil matters (the DOJ stopped short of criminal charges), focusing on corporate wrongdoings and difficulties in cooperating with regulators.
For instance, federal prosecutors alleged that Volkswagen had “impeded” inquiries and also provided misleading information. There are also indications that Volkswagen may be seeking ways to avoid federal legal action.
The VW shareholder lawsuit may present some of the most important and significant legal issues to come in future years. Even at such an early stage in the proceedings, there are already important takeaways to consider, including:
- The broad impact of questionable company practices on shareholder stakes
- The importance of timely communication with shareholders regarding potential legal issues
- The costly impact associated with unethical business practices (VW is reportedly setting aside around $18 billion to cover costs related to recalls, repurchases, criminal actions, and other legal proceedings)
Lastly, there is the potential for the Volkswagen case to yield large plaintiff recoveries given the number of investors and shareholders affected. The case was not initiated by Kessler Topaz, but the Firm will be taking a leading role in providing litigation support for the case. Kessler Topaz has been responsible for several of the largest recorded plaintiff’s recoveries, both in the U.S. and globally. If you have any legal inquiries or disputes concerning shareholder disputes, fraud, and other issues, contact us today at Kessler Topaz. Our team of attorneys has been instrumental in achieving not only financial compensation, but also significant corporate reforms to prevent future legal violations.