Products Liability Law Daily VW commits $10B to settle ‘defeat device’ class action
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Wednesday, July 27, 2016

VW commits $10B to settle ‘defeat device’ class action

By Pamela C. Maloney, J.D.

Pursuant to a settlement agreement that has received preliminary approval from a federal district court in California, Volkswagen AG, Audi AG, and Volkswagen Group of America, have agreed to establish a $10.33 billion funding pool to settle class allegations that approximately 450,000 2.0 liter VW and Audi branded turbocharged direct-injection (TDI) diesel vehicles sold in the United States were equipped with defeat device software designed to reduce the effectiveness of the vehicles’ emission control systems with respect to nitrogen oxides (NOx). Under the terms of the agreement, VW either will (1) buy back, or terminate leases on, the affected vehicles or, pending regulatory approval, (2) modify the emissions systems free of charge to reduce NOx. In addition, all class members, as well as certain class members who no longer own or lease an affected vehicle, will be entitled to receive a restitution payment (In re: Volkswagen "Clean Diesel" Marketing, Sales Practices and Products Liability Litigation, July 26, 2016, Breyer, C.).

On July 15, the California Air Resources Board had rejected proposed recall plans submitted by Volkswagen/Audi and Porsche for repair of undisclosed Auxiliary Emission Control Devices (AECDs) and defeat devices in 3.0 liter, diesel passenger cars manufactured for model years 2009-2016. The CARB staff had determined that the proposed recall plans were incomplete and deficient in a number of areas. This decision affects about 16,000 3.0 liter diesel Volkswagens, Audis and Porsches sold in California (CARB News Release, July 13, 2016).

Funding pool. The funding pool, which assumes a 100 percent buyback of all purchased vehicles and a 100 percent lease termination of all leased vehicles includes the following: (1) $42,670,723 for loan forgiveness; (2) $26,000,000 to pay remaining future lease payments; and (3) $9,964,329,277 to pay vehicle value, owner restitution, lessee restituted, and seller restitution.

Notification and filing deadlines. In accordance with the agreement, VW will begin notifying class members of their rights on July 27, 2016. The notice period extends through August 19, 2016. All claims must be filed by September 16, 2016, which is also the opt-out date.

FTC Consent Order. The $10 billion funding pool is in addition to the $2.7 billion VW agreed to pay as part of a DOJ Consent Order. The $2.7 billion will be used to fund projects across the country that will reduce emissions of NOx where the 2.0 liter vehicles were, are, or will be operated. The company also agreed to invest an additional $2.0 billion to create infrastructure for and promote public awareness of zero emission vehicles or "ZEVs."

The case is No. MDL 2672 CRB (JSC).

Attorneys: Robert B. Carey (Hagens Berman Sobol Shapiro LLP) for Nicholas Benipayo. Amie Adelia Vague (Lightfoot, Franklin & White, LLC) and Casey Erin Lucier (McGuirewoods LLP) for Volkswagen Group of America, Inc. Elizabeth L. Deeley (Kirkland & Ellis LLP) Matthew Henry Marmolejo (Mayer Brown LLP) for Audi AG and Volkswagen AG.

Companies: Volkswagen Group of America, Inc.; Audi AG; Volkswagen AG

MainStory: TopStory SettlementAgreementsNews MotorVehiclesNews CaliforniaNews

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