Mucha v. Volkswagen Aktiengesellschaft
| Decision Date | 20 May 2021 |
| Docket Number | 17-cv-5092 (DLI)(PK) |
| Citation | 540 F.Supp.3d 269 |
| Parties | Wayne and Linda MUCHA, individually and on behalf of all others similarly situated, Plaintiffs, v. VOLKSWAGEN AKTIENGESELLSCHAFT, Matthias Müller, Martin Winterkorn, Frank Witter, and Hans Dieter Pötsch, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Jacob A. Goldberg, Pro Hac Vice, Leah Heifetz-Li, The Rosen Law Firm, Jenkintown, PA, Keith Robert Lorenze, Henkel & Cohen, P.A., Miami, FL, Phillip Kim, The Rosen Law Firm, New York, NY, for Plaintiffs.
Robert J. Giuffra, Jr., Suhana S. Han, Jason Kornmehl, Justin James DeCamp, Sullivan & Cromwell LLP, New York, NY, for Defendants.
Wayne and Linda Mucha ("Plaintiffs") brought this putative class action on behalf of purchasers of American Depository Receipts ("ADRs") sponsored by Volkswagen Aktiengesellschaft ("Volkswagen"), for the period from August 30, 2012 through July 21, 2017, pursuant to Sections 10(b), 15 U.S.C. § 78j(b), and 20(a), and 15 U.S.C. § 78t(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5, 17 C.F.R. § 240.10b-5. In addition to Volkswagen, Plaintiffs named as defendants current and former members of Volkswagen's Board of Management, Matthias Müller, Frank Witter, and Hans Dieter Pötsch (the "Individual Defendants," together with Volkswagen, the "Defendants") as well as Martin Winterkorn, who has not appeared in the action.
Presently before the Court are Defendants’ motions to dismiss for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2), failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), and on forum non conveniens grounds. For the reasons set forth below, the motions to dismiss on personal jurisdictional and forum non conveniens grounds are denied and the motion to dismiss for failure to state a claim is granted.
The factual background recounted below is drawn from the allegations in the Amended Complaint ("Am. Compl.," Dkt. Entry No. 20.), which are presumed to be true for purposes of deciding Defendants’ motion to dismiss. See, LaFaro v. New York Cardiothoracic Grp., PLLC , 570 F.3d 471, 475 (2d Cir. 2009).1
Volkswagen is a German corporation with a principal place of business in Wolfsburg, Germany. Am. Compl. ¶ 15. Volkswagen is the parent company of Audi and Porsche, among other luxury car brands, and is one of the world's largest automakers by sales. Id. ¶ 25.
Plaintiffs allege that, beginning in the 1990s, in response to competitive pressures from Japanese manufacturers, the so-called "Group of Five" German automakers, Volkswagen, Daimler, BMW, Audi and Porsche, formed a "cartel" to suppress competition among them and protect their profit margins. Id. ¶¶ 2, 29. The cartel was organized through more than sixty "working groups" staffed by personnel from members of each company. Id. ¶¶ 31–32. Each working group focused on a particular aspect of the manufacturing process, which facilitated the flow of sensitive, proprietary information among the Group of Five. Id. ¶ 31, 33. Plaintiffs allege that much of this cooperation was "[i]n violation of European and German law." Id. ¶ 2.
Through the working groups, the Group of Five coordinated the development of new technologies so that no one member could outpace the others and cooperated on a common strategy on the purchase of raw materials and manufacturing inputs. Id. ¶¶ 33–39. For example, cartel members established collective limits on the versatility of convertible roofs and agreed upon a common strategy for the purchase of steel that "was not exactly in the spirit of competition laws." Id. ¶¶ 38–40. The Group of Five also adopted a "coordinated approach" to the so-called "clean diesel" vehicles that were developed to compete with the hybrid cars introduced by Japanese automakers in the early 2000s. Id. ¶¶ 41–43. The diesel engines in these vehicles were made to run "clean[ly]" using a liquid solution known as "AdBlue" that can neutralize the toxic emissions produced by diesel engines. Id. After initially deciding to use a large AdBlue tank that would allow drivers to cover longer distances, the cartel members agreed to produce smaller tanks for the AdBlue mixture in order to limit costs. Id. ¶¶ 42–43. The use of a smaller AdBlue tank led Volkswagen to install a "defeat device" in its vehicles that would conserve the AdBlue mixture and only inject an amount of the substance sufficient to neutralize the toxic emissions when a vehicle was in a testing facility. Id. ¶ 44.
Plaintiffs allege that the following statements, contained in Volkswagen's annual reports, were false or misleading in light of Volkswagen's alleged anticompetitive conduct:
Plaintiffs allege that these statements are false or misleading because Volkswagen was "not competing with the other Group of Five members ... across a wide range of areas of automobile design, development, manufacturing, and sales." Id. ¶ 98.
Other allegedly false or misleading statements do not refer directly to competition or competitive pressures. Several statements concerned prices for commodities and manufacturing inputs:
These statements allegedly were false or misleading because the Group of Five had "agreed to a common strategy on steel purchasing, the so-called guidelines for material price compensation," causing commodity prices to depend on the Group's shared pricing formula rather than the other factors identified in these statements. Id. ¶ 134.
Plaintiffs also contend that Volkswagen's statements regarding compliance with international financial reporting standards were false or misleading:
Plaintiffs allege that the relevant IFRSs required Volkswagen to disclose, inter alia , its "contingent liabilities" and make a "fair presentation" of its finances. Id. ¶¶ 141–42. Plaintiffs allege Volkswagen failed to comply with these obligations by not disclosing its anticompetitive practices, rendering its accounting standards statements false or misleading. Id. ¶ 141.
On or around July 4, 2016, after Germany's Federal Cartel Office came across evidence of the cartel's existence during the course of a separate...
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