Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings Se, Docket No. 11–397–cv(L).

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Writing for the CourtJudge LEVAL joins in this PER CURIAM opinion and concurs in a separate opinion.
Citation763 F.3d 198
PartiesPARKCENTRAL GLOBAL HUB LIMITED, et al., Plaintiffs–Appellants, v. PORSCHE AUTOMOBILE HOLDINGS SE, f/k/a Dr. Ing. H.C. F. Porsche AG, Wendelin Wiedeking, Holger P. Härter, Defendants–Appellees.
Docket NumberDocket No. 11–447–cv(CON).,Docket No. 11–397–cv(L).,Docket No. 11–416–cv(CON).,Docket No. 11–403–cv(CON).,Docket No. 11–418–cv(CON).,Docket No. 11–428–cv(CON).
Decision Date15 August 2014

763 F.3d 198

PARKCENTRAL GLOBAL HUB LIMITED, et al., Plaintiffs–Appellants,
v.
PORSCHE AUTOMOBILE HOLDINGS SE, f/k/a Dr. Ing.
H.C. F. Porsche AG, Wendelin Wiedeking, Holger P. Härter, Defendants–Appellees.**

Docket Nos. 11–397–cv(L),* 11–403–cv(CON), 11–416–cv(CON),* 11–418–cv(CON), 11–428–cv(CON), 11–447–cv(CON).

United States Court of Appeals,
Second Circuit.

Argued: Feb. 24, 2012.
Decided: Aug. 15, 2014.


[763 F.3d 200]


James B. Heaton, III (Kaspar J. Stoffelmayr, on the brief), Bartlit Beck Herman Palenchar & Scott LLP, Chicago, IL, David Parker, Kleinberg, Kaplan, Wolff & Cohen P.C., New York, N.Y., Jay W. Eisenhofer, James J. Sabella, Grant & Eisenhofer P.A., New York, N.Y., Thomas E. Redburn, Jr., Sheila A. Sadighi, Lowenstein Sandler PC, Roseland, NJ, Marc L. Greenwald, Quinn Emanuel Urquhart & Sullivan, LLP, New York, N.Y., for Plaintiffs–Appellants.

Robert J. Giuffra, Jr. (John L. Warden, William J. Williams, Jr., Suhana S. Han, Alexander J. Willscher, on the brief), Sullivan & Cromwell LLP, New York, N.Y., for Defendant–Appellee Porsche Automobil Holding SE.


Jay B. Kasner, Scott D. Musoff, Skadden, Arps, Slate, Meagher & Flom LLP, New York, N.Y., for Defendant–Appellee Dr. Wendelin Wiedeking.

Michael J. Chepiga, Paul C. Curnin, Emma Lindsay, Alexandra C. Pitney, Simpson Thacher & Bartlett LLP, New York, N.Y., for Defendant–Appellee Holger P. Härter. Meredith E. Kotler, Cleary Gottlieb Steen & Hamilton LLP, New York, N.Y., Giovanni P. Prezioso, Lee F. Berger, Cleary Gottlieb Steen & Hamilton LLP, Washington, DC, for Amici Curiae Securities Industry and Financial Markets Association and Chamber of Commerce of the United States of America.

Ira D. Hammerman, Kevin M. Carroll, Securities Industry and Financial Markets Association, Washington, DC, for Amicus Curiae Securities Industry and Financial Markets Association.

Robin S. Conrad, Sheldon Gilbert, National Chamber Litigation Center Inc., Washington, DC, for Amicus Curiae Chamber of Commerce of the United States of America.

Andrew J. Pincus, Marc R. Cohen, Alex C. Lakatos, Paul W. Hughes, Mayer Brown LLP, Washington, DC, for Amici Curiae The Federation of German Industries, Mouvement Des Entreprises De France, Economiesuisse, European Banking Federation, Association of Bankers Association.

Richard W. Painter, University of Minnesota Law School, Minneapolis, MN, Ronald J. Colombo, Hofstra University Law School, Hempstead, N.Y., for Amici Curiae Law Professors.

Before: LEVAL, SACK, and HALL, Circuit Judges.

Judge LEVAL joins in this PER CURIAM opinion and concurs in a separate opinion.

PER CURIAM:

In Morrison v. National Australia Bank Ltd., 561 U.S. 247, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010), the Supreme Court established that, by virtue of the presumption against extraterritorial application of U.S. statutes, § 10(b) of the Securities Exchange Act of 1934, the basic antifraud provision of the U.S. securities laws, has no extraterritorial application, and no civil suit under that section may be brought unless predicated on a purchase or sale of a security listed on a domestic

[763 F.3d 201]

exchange or on a domestic purchase or sale of another security. See id. at 267, 130 S.Ct. 2869 (“And it is in our view only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which § 10(b) applies.”). In Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir.2012), this Court set forth the means to be used to determine when a transaction in securities is “domestic” such that it may furnish the basis for a suit under that section. We concluded that in order for such a transaction to qualify as domestic, “the parties [must] incur irrevocable liability to carry out the transaction within the United States or ... title [to the securities must be] passed within the United States.” Id. at 69.

In this case, the securities transactions upon which the plaintiffs brought suit were so-called “securities-based swap agreements” relating to the stock of Volkswagen AG (“VW”), a German corporation; the amount of gain and loss in the transactions depended on prices of VW stock recorded on foreign exchanges. The parties accused of fraud are Porsche Automobil Holding SE (“Porsche”), also a major German corporation, and its executives. Their allegedly fraudulent statements consisted of assertions about Porsche's intentions with respect to the stock of VW; their statements were made primarily in Germany, but were also accessible in the United States and were repeated here by the defendants. The thorny issue presented by this appeal is how to apply the rules established by the Morrison and Absolute Activist decisions to this case.

The plaintiffs, more than thirty international hedge funds, employed securities-based swap agreements pegged to the price of VW shares, which trade on European stock exchanges, to bet that VW stock would decline in value. The positions they took through their swap agreements were roughly economically equivalent to short positions in VW stock, in that they would gain to the extent VW stock declined in value and would lose to the extent it rose. Plaintiffs allege that, in 2008, defendants made various fraudulent statements and took various manipulative actions to deny and conceal Porsche's intention to take over VW. The plaintiffs allege that they relied on defendants' fraudulent denial of Porsche's intention to take over VW in making their swap agreements. When, in October 2008, Porsche made its true intentions public, the price of VW shares rose dramatically, causing the plaintiffs to suffer large losses.

The plaintiffs brought the instant complaints in the United States District Court for the Southern District of New York against Porsche and two of its corporate officers alleging, among other things, that the defendants' fraudulent statements and manipulative actions violated U.S. securities laws. Following the Supreme Court's decision in Morrison, the defendants moved to dismiss the complaint because the plaintiffs' swap agreements referenced securities trading on foreign exchanges. The district court (Harold Baer, Jr., Judge ) granted the defendants' motion, concluding that the swaps were essentially transactions in securities on foreign exchanges.

We affirm the judgment, although on the basis of different reasoning. In our view, the imposition of liability under § 10(b) on these foreign defendants with no alleged involvement in plaintiffs' transactions, on the basis of the defendants' largely foreign conduct, for losses incurred by the plaintiffs in securities-based swap agreements based on the price movements of foreign securities would constitute an impermissibly extraterritorial extension of the statute. Our ultimate conclusion that

[763 F.3d 202]

this suit seeks impermissibly to extend § 10(b) extraterritorially depends in some part on the particular character of the unusual security at issue. For reasons explained below, we express no view whether we would have reached the same result if the suit were based on different transactions. Out of an abundance of caution, however, we remand the matter to the district court so that it may consider motions, if any, by one or more of the plaintiffs to amend their complaints in response to our decision on this appeal.

BACKGROUND

Because this case comes to us on appeal from the district court's grant of the defendants' motion to dismiss, the facts are drawn from the plaintiffs' complaints, “accepting all well-pleaded allegations in the complaint as true and drawing all reasonable inferences in the plaintiff[s'] favor,” Bigio v. Coca–Cola Co., 675 F.3d 163, 169 (2d Cir.2012) (internal quotation marks and brackets omitted), and augmented by matters of which we may and do take judicial notice, see Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) (“[C]ourts must consider the complaint in its entirety, as well as other sources ..., in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.”); ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) (“[W]e may consider ... legally required public disclosure documents filed with the SEC, and documents possessed by or known to the plaintiff and upon which it relied in bringing the suit.”).

Porsche's Alleged Scheme to Acquire VW

Porsche, the well-known German automobile manufacturer, is also an active investor in various securities and derivatives. Indeed, in the fiscal year ending July 31, 2008, the company, under the direction of defendants Chief Executive Officer Wendelin Wiedeking and Chief Financial Officer Holger Härter, derived eighty-eight percent of its total profits from its investments and twelve percent of its total profits from selling motor vehicles.

From late 2005 through 2007, Porsche gradually increased its investment in VW, another well-known German automobile manufacturer, whose shares trade primarily on European exchanges. At the time, a German statute known as the “VW Law” limited any one VW shareholder's voting rights to twenty percent of the total voting rights, regardless of how many VW shares the shareholder actually owned. In the face of public speculation that the European Court of Justice would soon invalidate the VW Law, Porsche claimed publicly that its acquisition of these shares was intended to prevent a hostile takeover of VW, with which it had important business relationships. Porsche also disavowed any intention to obtain a controlling interest in VW—then defined by the VW Law as eighty percent of the company's outstanding shares, or seventy-five percent of the shares in the event that other stakeholders agreed to vote in favor of a “domination agreement.” 1 By the end of 2007, Porsche had become VW's largest shareholder, owning thirty-one percent of the company.

The plaintiffs allege that in spite of its public assurances to the...

To continue reading

Request your trial
154 practice notes
  • Hosking v. TPG Capital Mgmt., L.P. (In re Hellas Telecomms. (Luxembourg) II Sca), Case No. 12–10631 (MG)
    • United States
    • U.S. Bankruptcy Court — Southern District of New York
    • January 29, 2015
    ...extraterritorial reach of statutes as a choice-of-law and/or comity principle); Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 220 (2d Cir.2014) (“The question whether the application of [a securities fraud statute] to a particular set of transnational facts would b......
  • Levy v. Maggiore, No. 13–CV–2219 MKB.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • September 29, 2014
    ...under which they were made, not misleading.” 17 C.F.R. § 240.10b–5 ; Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 209 (2d Cir.2014) (same). A statement is considered materially misleading under § 10(b) when its “representations, viewed as a whole, would have misle......
  • Levy v. Dominic Maggiore, Jason Santiago, Thomas Pragias, John Kamen, Hugh Ward & Raiche Ende Malter & Co., No. 13–CV–2219 (MKB).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • September 29, 2014
    ...under which they were made, not misleading.” 17 C.F.R. § 240.10b–5; Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 209 (2d Cir.2014) (same). A statement is considered materially misleading under § 10(b) when its “representations, viewed as a whole, would have misled......
  • De Dandrade v. U.S. Dep't of Homeland Sec., 17-cv-9604 (PKC)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • February 15, 2019
    ...that the plaintiff[s'] claims are barred as a matter of law.’ " 367 F.Supp.3d 181 Parkcentral Glob. Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 208–09 (2d Cir. 2014) (quoting Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 86 (2d Cir. 2000) ). A motion to dismiss under Rule 12(b)(1), Fed......
  • Request a trial to view additional results
152 cases
  • Hosking v. TPG Capital Mgmt., L.P. (In re Hellas Telecomms. (Luxembourg) II Sca), Case No. 12–10631 (MG)
    • United States
    • U.S. Bankruptcy Court — Southern District of New York
    • January 29, 2015
    ...extraterritorial reach of statutes as a choice-of-law and/or comity principle); Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 220 (2d Cir.2014) (“The question whether the application of [a securities fraud statute] to a particular set of transnational facts would b......
  • Levy v. Maggiore, No. 13–CV–2219 MKB.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • September 29, 2014
    ...under which they were made, not misleading.” 17 C.F.R. § 240.10b–5 ; Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 209 (2d Cir.2014) (same). A statement is considered materially misleading under § 10(b) when its “representations, viewed as a whole, would have misle......
  • Levy v. Dominic Maggiore, Jason Santiago, Thomas Pragias, John Kamen, Hugh Ward & Raiche Ende Malter & Co., No. 13–CV–2219 (MKB).
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • September 29, 2014
    ...under which they were made, not misleading.” 17 C.F.R. § 240.10b–5; Parkcentral Global Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 209 (2d Cir.2014) (same). A statement is considered materially misleading under § 10(b) when its “representations, viewed as a whole, would have misled......
  • De Dandrade v. U.S. Dep't of Homeland Sec., 17-cv-9604 (PKC)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • February 15, 2019
    ...that the plaintiff[s'] claims are barred as a matter of law.’ " 367 F.Supp.3d 181 Parkcentral Glob. Hub Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 198, 208–09 (2d Cir. 2014) (quoting Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 86 (2d Cir. 2000) ). A motion to dismiss under Rule 12(b)(1), Fed......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT