The enactment of the German Capital Markets Model Case Act (Kapitalanleger-Musterverfahrensgesetz – KapMuG) in 2005 was intended to make it easier for shareholders and investors to bring claims based on false, misleading, or omitted public information by publicly traded companies. In the nearly twenty years since its inception, only a handful of cases in Germany have concluded for the benefit of investors, mainly the historic Deutsche Telekom and Hypo Real Estate settlements in which DRRT player a major role. The Court’s open interpretation of the requirements to prove standing has increased the complexity and time horizon of cases. However, recent developments allow investors to gain confidence in the German system.
In the ongoing case against Deutsche Bank AG relating to its takeover of Postbank AG, the Regional Court of Cologne indicated in its statements that it could accept the arguments brought by Postbank shareholders, that they were entitled to a higher price when Deutsche Bank took over the company 14 years ago. DRRT, along with Dr. Oliver Krauss of the law firm Bayer Krauss Hueber, represents a large group of institutional investors claiming over €750 million in damages.
Deutsche Bank published an ad hoc announcement on April 26, 2024, relating to this litigation and its consequences. Specifically, Deutsche Bank stated that this litigation might impact their profitability and capital ratios for the year. Deutsche Bank estimates the total amount of all claims, including accrued interest, at around EUR 1.3 billion.
While this case is ongoing, the Court has granted the parties the opportunity to comment at the hearing scheduled for June 12, 2024, and will decide on August 21, 2024. In the meantime, the Court suggested both parties enter settlement negotiations.
Despite the case against Deutsche Bank AG not being filed under the KapMuG, the Court has acted similarly to cases filed through a KapMuG, albeit more expediently. In particular, the Court suspended the claim filed for DRRT clients as the claim for Effecten-Spiegel proceeded, mimicking a Model Plaintiff. The Effecten-Spiegel reached the Supere Court twice. More recently, we have noted how different Courts have opposed consolidating claims in a Model Proceeding and have forced DRRT and other law firms and funders to move towards an SPV/Assignment model. DRRT continues to monitor developments in Germany; these cases and decisions help DRRT strategically decide on the best structure that allows investors to join a cost- and risk-free claimant group.
The Hypo Real Estate case took thirteen years to settle, and it has been seven years since the filing of the Deutsche Bank/Postbank case; while both these cases have had longer time horizons than anybody would like, we are confident that the positive developments in the Deutsche Bank/Postbank case will soon yield a resolution.
As the world of securities litigation in Europe, Asia, and South America continues to develop, DRRT remains committed to representing global investors in cases worldwide. With Germany being the largest capital market in Europe, DRRT will continue evaluating and representing investors in cases in Germany despite the delays.
In addition, DRRT continues to press forward with other cases, including the upcoming action against Koninklijke Philips N.V. in the Netherlands, relating to Philips’ failure to timely disclose health risks associated with the degradation of PE-PUR foam in its sleep and respiratory care products.
We welcome the opportunity to discuss the Philips case or the loss recovery industry in more detail. Feel free to reach out to clientrelations@drrt.com should you wish to schedule a call.