Porsche announced yesterday that it has reached an agreement with 26 hedge funds who had sued Porsche in U.S. courts for damages allegedly suffered by Porsche’s shorting of Volkswagen shares in 2008. Under the agreements, “plaintiffs have agreed to waive any appeal of the decision of the Appellate Division of the New York State Supreme Court dismissing their complaints, and Porsche SE has agreed not to raise any statute of limitations defense with respect to claims filed by Plaintiffs before a court in Germany within 90 days.” This agreement comes after the Appellate Division of the New York State Supreme Court at the end of December 2012 had found in favour of Porsche. It had reversed an earlier denial of Porsche’s motion to dismiss the U.S. lawsuits by the New York State Supreme Court, finding that New York is not an appropriate forum for the resolution of the hedge funds’ claims. Porsche appeared to be in a comfortable position, so why this agreement?
So let’s engage in some second-guessing: The first impression is that Porsche must be very confident that on the merits, it will win in Germany. Hence, the benefit of terminating the New York proceedings outweighs the risk of giving up the limitation defence. But still, the funds were fighting an up-hill battle on jurisdiction anyway, having already been thrown out in Federal Court in 2010, and now having to overturn the Appellate Division’s ruling. Why would Porsche concede the limitation defence if they already had the upper hand, with not much gained in return.
But if one digs somewhat deeper, it looks like Porsche has not conceded that much after all: There is German case law that filing an action in another jurisdiction suspends the limitation period (Sec. 204 German Code of Civil Procedure, BGB) and has, more or less, the same effect as filing in Germany. Some legal commentators argue that this would apply even if a judgment in that jurisdiction would not be recognized in Germany. On that basis, the plaintiff hedge funds would have had a good case to argue that their claims had not become time-barred as the U.S. actions had been started on time. On that basis, at first sight, anyone with a U.S. action filed before the end of 2011 might be able to transfer his claim to Braunschweig.