Federal Court of Justice Issues Landmark Decision on Prospectus Liability in Closed-End Funds
April, 2021 - Germany
In a landmark decision, the Federal Court of Justice removed the basis for most lawsuits filed by investors in closed-end funds. In a decision announced on March 26, 2021, the Federal Court of Justice held that founding shareholders were not liable under the general principles of culpa in contrahendo if they provided information with an incorrect, incomplete, or misleading prospectus prior to investors joining the fund. According to the Federal Court of Justice, the special statutory provisions of prospectus liability supersede the general rules on pre-contractual disclosure duties. Alleged prospectus defects are then no longer relevant (Federal Court of Justice XI ZB 35/18).
This means that the legal position taken by Dr. Jochen Böning, Partner at Ahlers & Vogel, Dr. Thomas Wambach, Partner at Heuking Kühn Lüer Wojtek, and Dr. Thomas Winter of Rohnke Winter on behalf of the founding shareholders has prevailed.
As a consequence of this landmark decision of the Federal Court of Justice, the vast majority of lawsuits and test case motions filed by investors is set to fail. Complaints about prospectuses will remain unsuccessful if the claims on which investors base their action have no merit simply on fundamental grounds. The claims based on special statutory provisions referred to by the Federal Court of Justice had already been time-barred at the time the actions were filed, so that the investors were forced to rely on general principles. The Federal Court of Justice has now removed the basis for any such claims.
Dr. Thomas Wambach and Dr. Jochen Böning are considering the decision as a breakthrough for their legal position, viewing it as a turning point for the pending cases of investors against the founding shareholders of public traded partnerships due to prospectus defects.
Counsel to founding shareholders:
Dr. Jochen Böning, Ahlers & Vogel
Dr. Thomas Wambach, Heuking Kühn Lüer Wojtek
Dr. Thomas Winter, Rohnke Winter (Federal Court of Justice)
Counsel to plaintiffs:
Martin Kühler, Tilp Rechtsanwaltsgesellschaft mbH
D. Guido Toussaint, Toussaint Schmitt (Federal Court of Justice)
Courts:
Hanseatic Higher Regional Court, 13th Civil Division
Federal Court of Justice, 11th Civil Division
