Porsche won an appeals court ruling dismissing a lawsuit by hedge funds that accused the German carmaker of concealing a plan to corner the market in Volkswagen AG (VOW) shares.
By David McLaughlin to Bloomberg
There is an “inadequate connection” between New York and the events at issue in the case, with only e-mails and phone calls taking place in New York, the Appellate Division of the state Supreme Court said in a decision today.
“We find that these connections failed to create a substantial nexus with New York, given that the events of the underlying transaction otherwise occurred entirely in a foreign jurisdiction,” an appellate panel said.
Porsche in November asked the appeals court to reverse a lower court’s decision rejecting its motion to dismiss the 2011 suit by 26 hedge funds including David Einhorn’s Greenlight Capital Inc.
The funds, which bet that Volkswagen stock would fall, claimed Stuttgart, Germany-based Porsche misled investors by denying through much of 2008 that it intended to acquire Volkswagen and by using manipulative trades to hide its stock positions. The plaintiffs sought more than $1 billion in damages.
“This is an important victory for Porsche. The appeals court squarely held that these cases do not belong in a New York state court,” said Robert Giuffra, an attorney for Porsche at Sullivan & Cromwell LLP, said in a statement.
Porsche is also being sued in Europe over the issue.
The appeals court said witnesses and documents in the case are located in Germany, which provide an “adequate alternative forum.”
James B. Heaton, an attorney for the plaintiffs, declined to comment about the decision.
Porsche said on Oct. 26, 2008, that it controlled 74.1 percent of Volkswagen, partly through options, and was seeking an eventual takeover. The disclosures caused the shares to surge as short-sellers raced to cover their positions.
Investors in Germany and the U.S. have claimed Porsche lied about its intentions to take over the carmaker. The failed bid led Porsche to agree to sell its sports-car business to Wolfsburg, Germany-based Volkswagen as debt soared. That transaction was completed on Aug. 1 when Volkswagen purchased the remaining shares in the maker of the 911 sports car for 4.5 billion euros.
The case is Viking Global Equities LP v. Porsche Automobil Holdings SE, 650435/2011, New York State Supreme Court, New York County (Manhattan).