Federal Judge Says VW Chairman Must Remain Defendant in GM Spy Suit

10/24/96

Reuters reported that a Federal Judge in Detroit ruled that Volkswagen Chairman Ferdinand Piech and management board member Jens Neumann must continue as defendants in the GM lawsuit that charges them with industrial espionage.

U.S. District Judge Nancy Edmunds has not yet issued a written opinion, but, according to a court clerk, she told lawyers on the case that she will deny VW's motion to exclude the two executives from the scope of the lawsuit.

Judge Edmunds has also ruled that in addition to U.S. subsidiary Volkswagen of America Inc., parent company Volkswagen AG must continue to defend itself against GM's charges.

In the law suit GM alleges that Piech, Neumann and other top VW executives conspired with Volkswagen's new production chief, Jose Ignacio Lopez de Arriortua, to steal GM corporate secrets when VW hired him away from GM in March 1993. GM claims Lopez and seven other former GM executives took vital parts pricing data, future product plans, proprietary manufacturing techniques, and other information when they left GM to work for VW. The lawsuit seeks unspecified damages.

Last week Judge Edmunds denied a VW motion to dismiss the case, allowing GM to fight VW on its home territory in Detroit, instead of having to rely on German courts. The case is still under criminal investigations in both Germany and the United States, and a civil suit is still active in Braunschweig, Germany.

In a hearing last week, lawyers for GM argued that Piech and Neumann should remain defendants in the lawsuit because they allegedly conspired with Lopez to steal GM's documents when they hired him. Lawyers for VW countered that the German executives should be dismissed from the case because they rarely visited the U.S. and because GM lacked proof of direct involvement in the alleged document theft. Judge Edmunds said that GM's complaint contained much detail and merited further consideration of Piech's and Neumann's roles: "this is not a bare-bones complaint. It names names, it cites dates of lunch meetings and phone conversations."

Late this month Judge Edmunds will hear oral arguments regarding VW motions to dismiss other GM claims, including those accusing VW of copyright and trademark infringement, allegations that VW engaged in unfair trade practices, and that the alleged conspiracy violated the federal Racketeer-Influenced and Corrupt Organizations (RICO) Act. The RICO act gives prosecutors and civil litigators broad powers to pursue activity that shows a pattern of racketeering and conspiracy. It has been widely used to prosecute organized crime in the United States.

Earlier this month, just before hearings on the case began, reports that VW had hired former Clinton aide Dick Morris for PR purposes surfaced. Morris, who recently resigned from Clinton's employ amidst a tabloid-labeled prostitute scandal, denied the reports.

Paul Dever -- The Auto Channel