New York State Supreme Court Justice Charles Edward Ramos has rejected a motion by Porsche SE to dismiss a lawsuit alleging that the carmaker hid plans to corner the market in Volkswagen AG shares. According to Ramos, the core of the claims against Porsche by 26 hedge funds including Greenlight Capital Inc. and Glenhill Capital LP is whether New York courts may hold a foreign entity responsible for fraudulent misrepresentations aimed at plaintiffs in the state.
Porsche vowed to appeal the ruling. The court rejected Porsche's characterization of the issues in lawsuit as the manipulation of the German stock market and the trade of German securities.
Ramos wrote in his opinion that New York has a vested interest in such an action. The hedge funds, which bet that Volkswagen stock would drop, claim that Porsche misled investors by denying through much of 2008 that it planned to buy Volkswagen and by using manipulative trades to hide its stock positions.
Porsche disclosed on Oct. 26, 2008, that it controlled most of Volkswagen's common stock, causing the shares to soar with short-sellers racing to cover their positions. Under New York rules, the court "assumed the truth of the hedge funds' allegations without ruling on the merits of their claims," Porsche said in the statement. The carmaker said it continues to believe that the hedge funds' lawsuits are without factual and legal merit.