Legal translation services for class action and MDL litigation often involve documents written in the German language. In 2015, news broke that Volkswagen allegedly used a device to alter emissions tests in 500,000 vehicles sold in the United States and deceive state and federal regulators. The device allegedly allowed the vehicles to pass the emissions tests despite the fact that the vehicles emitted as much as 40 times the legal limit of nitrous oxide. Many lawsuits against Volkswagen ensued, including class action securities fraud lawsuits filed pursuant to the Private Securities Litigation Reform Act (“PSLRA”).
In one such class action, a group of individuals who purchased Volkswagen-sponsored Level 1 American Depositary Receipts (“ADRs”) in 2010 filed claims against Volkswagen under the PSLRA. According to Volkswagen’s website:
“An American Depository Receipt (“ADR”) is a U.S. dollar denominated form of equity ownership in a non-U.S. company. It represents the foreign shares of the company held on deposit by a custodian bank in the company’s home country and carries the corporate and economic rights of the foreign shares, subject to the terms specified on the ADR certificate.”
In their class action lawsuit the plaintiffs claimed that Volkswagen misrepresented the vehicles’ emissions regulations compliance and also misrepresented the company’s financial status, thereby leading to a decline in the value of the plaintiffs’ ADRs. Specifically, the plaintiffs alleged that as a result of Volkswagen’s allegedly illegal conduct, the price of the ordinary ADR declined from $38.03 on September 17, 2015 to $28.34 on January 5, 2016.
The defendants filed a motion to dismiss on the grounds of lack of personal jurisdiction. Among other things, the defendants claimed that the plaintiffs’ claims fell outside of the territorial reach of Section 10(b) in Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010) and also alleged that the lawsuit should be dismissed because Germany was the superior forum for resolving the plaintiffs’ claims.
With respect to their first argument, the Defendants asserted that the character of the securities at issue in the Plaintiffs’ lawsuit was “predominately foreign” because all of the relevant actions giving rise to the plaintiffs’ claims occurred primarily in Germany. The defendants argued that the claims therefore exceeded the “territorial reach” of the Securities Exchange Act. Following the Morrison decision, courts have applied a two part test to determine whether a securities transaction is within the reach of the Section 10(b): (1) whether the transaction is in “securities listed on domestic exchanges,” and 2) whether the transaction is a “domestic transaction” in other securities. See Morrison, 561 U.S. at 267-273.
The court rejected the defendants’ argument. In doing so, the court found that Volkswagen had taken affirmative steps to market securities to U.S. investors. For example, the court noted that Volkswagen was required to provide, and did provide, certain disclosures translated from German into English on its website in order to comply with SEC rules and regulations. Because of these German to English financial translations aimed at U.S. investors, the court held that it could not be said that no relevant actions occurred in the United States. Accordingly, the court denied the defendants’ motion to dismiss on the grounds that the plaintiffs’ claims exceed the reach of the SEC.
The court also rejected the defendants’ argument that Germany is a more appropriate forum in which to litigate plaintiffs’ claims. The court held that considerable deference should be given to the plaintiffs because they are U.S. citizens whose claims are based on U.S. securities laws: specifically, sections 10(b) and 20(a) of the Securities and Exchange Act. The court also noted that Volkswagen had engaged in sufficient conduct in the United States by offering the ADRs to Americans through a New-York financial institution and by making the alleged misrepresentations about the vehicles in the United States.
Legal Document Translation Services for Class Action Litigation
The court further held that the “access to evidence” factor favored keeping the case in the United States because many of the documents necessary to plaintiffs’ claims had already been produced in the United States. Although the defendants argued that it would take a significant amount of effort to translate the German documents and testimony into English, the court observed that much of the necessary documents had already been produced in other related lawsuits against Volkswagen in the United States. In fact, the court explained, the plaintiffs had already referred to a number of documents which were originally written in German in their complaint.
The defendants moved to dismiss other claims on other grounds, including claims against certain individuals, which the court granted in part and denied in part.
The case is In Re: Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, MDL No. 2672 CRB, decided on January 4, 2017 by the United States District Court for the Northern District of California. (Update: after the court’s ruling on the defendants’ original motion to dismiss, the plaintiffs thereafter filed an amended complaint, which the defendants again moved to dismiss. On June 28, 2017, the court granted in part, and denied in part, the defendants’ motion to dismiss.)
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