Products Liability Law Daily 2d partial settlement in VW MDL calls for $225M fine and recall of 83,000 3.0L diesel vehicles
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Wednesday, December 21, 2016

2d partial settlement in VW MDL calls for $225M fine and recall of 83,000 3.0L diesel vehicles

By Colleen Kave, J.D.

A second partial settlement agreement has been reached by the U.S. Environmental Protection Agency (EPA), the Department of Justice (DOJ), the State of California, and automakers Volkswagen AG, Audi AG, Porsche AG, and related entities (collectively referred to as Volkswagen) in the ongoing multidistrict litigation stemming from Volkswagen’s diesel emissions cheating scandal. The agreement, in the form of a proposed Consent Decree, addresses civil claims regarding approximately 83,000 3.0L TDI V6 diesel engine vehicles in the United States. In accordance with its terms VW will be required to pay a fine of $225 million and conduct a recall of 3.0L diesel vehicles. The state of California has secured a separate resolution for the 3.0 liter violations that addresses issues specific to vehicles and consumers in California (In re: Volkswagen "Clean Diesel" Marketing, Sales Practices, And Products Liability Litigation, December 20, 2016).

The Justice Department, on behalf of the EPA, filed a civil complaint against Volkswagen in January 2016 (which was subsequently amended in October 2016) alleging that the automaker equipped its 3.0 liter diesel vehicles with illegal software, or a "defeat device," that detects when the car is being tested for compliance with EPA or California emissions standards and turns on required emissions controls only during that testing process. By using a defeat device, these cars meet emissions standards in the laboratory, but emit up to nine times or more above the EPA-compliant levels for nitrogen oxide (NOx) during normal on-road driving conditions. An initial partial $10 billion settlement order was signed by the federal district court on October 25, 2016. That settlement will allow owners of certain Volkswagen and Audi 2.0 liter diesel cars to receive compensation for the vehicles they purchased (FTC v. Volkswagen Group of America, Inc., Dkt. No. 3:16-cv-01534, FTC File No. 162-3006). The order also resolved all of the FTC’s allegations related to Volkswagen’s 2.0-liter TDI "Clean Diesel" vehicles, except it reserves the FTC’s allegations regarding lessees of the automaker’s 2.0-liter TDI "Clean Diesel" vehicles whose leases terminated before September 18, 2015. The order also does not resolve the FTC’s allegations regarding Volkswagen’s 3.0-liter TDI "Clean Diesel" vehicles.

Under the most recent proposed Consent Decree, Volkswagen agreed to buy back or terminate the leases of approximately 20,000 older vehicles with so-called Generation 1 engines, including 2009-2012 Volkswagen Touareg and Audi Q7 diesel models. These vehicles cannot be modified to meet EPA-certified exhaust emissions standards, but if Volkswagen proposes a plan for an emissions modification that is approved by EPA and California Air Resources Board (CARB), the company will also have to offer that option so as to allow owners and lessees to keep their vehicles. With respect to around 63,000 newer vehicles with Generation 2 engines, including the 2013-2016 Volkswagen Touareg diesels, 2013-2015 Audi Q7 diesels, 2013-2016 Porsche Cayenne diesels, and 2014-2016 Audi A6 quattro, A7 quattro, A8, A8L and Q5 diesel models, Volkswagen agreed to recall and repair these vehicles to bring them into compliance with the emissions standards to which they were certified, as long as the modifications are approved by environmental regulators. If Volkswagen cannot demonstrate that it can make the vehicles compliant, the manufacturer must offer to buy back or terminate the leases on these vehicles. Volkswagen must achieve an overall recall rate of at least 85% for each of the Generation 1 and Generation 2 recall programs or pay additional sums into the mitigation trust fund established under the partial settlement for the 2L vehicles.

Additionally, the consent decree requires Volkswagen to contribute $225 million to the mitigation trust fund to finance projects that will reduce NOx emissions. These funds are intended to mitigate the past and future NOx emissions from the 3.0 liter vehicles. Finally, Volkswagen has agreed to pay $25 million to CARB to support the use of zero emissions vehicles (ZEVs) in the state of California.

Affected consumers do not need to take any action currently and will receive updated information from Volkswagen, Audi, and Porsche concerning their available buyback or modification options after the partial settlement is approved by the court, which will likely be in spring of 2017. Information can also be found on the EPA website.

The case is No. 3:15-md-02672-CRB.

Companies: Volkswagen AG; Audi AG; Porsche AG

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