U.S. District Judge Charles Breyer said last month he will approve a $1.2 billion settlement ending claims Volkswagen AG installed emission-cheating software on its pricier 3.0-liter-engine vehicles. This is the latest in a series of settlements for VW totaling more than $17 billion. The settlement with drivers of 88,500 3.0-liter cars is worth an estimated $1.2 billion, and under a related consent decree with the U.S. Department of Justice, Volkswagen will pay an additional $225 million to mitigate the environmental effects of nitrogen oxide pollution.
Another $327.5 million settlement that resolves claims between drivers and parts manufacturer Robert Bosch GmbH for its role in designing the emissions cheat software also received approval from Judge Breyer on the same day. The 3.0-liter settlement comes after an October $14.7 billion settlement over the 2.0-liter vehicles, which includes $2.7 billion for environmental remediation. Those consumer settlements, in addition to the $1.6 billion settlement with dealers reached in January, made the total $17.5 billion. This is “the largest civil penalty ever under the Clean Air Act,” according to Department of Justice lawyer Josh Van Eaton, who represented the U.S. Environmental Protection Agency (EPA) in the matter. Van Eaton hopes the litigation “sends the message to Volkswagen and to others considering gaming the system that it does not pay to cheat.”
The multidistrict litigation stems from the Environmental Protection Agency’s discovery in 2015 that the German automotive maker was selling diesel cars equipped with software designed to evade federal nitrogen oxide emissions standards in violation of the Clean Air Act. Van Eaton reminded the court during the hearing that the emissions cheating and the cover-up was “so egregious, it was criminal,” with the company pleading guilty to conspiracy and obstruction of justice charges. VW’s behavior demonstrated “contempt not just for the law but for the Americans who breathe the air,” Van Eaton said.
It took a tremendous amount of work to make these settlements happen. Judge Breyer praised VW, the Plaintiffs’ Steering Committee and the government. He had this to say:
Some are critical, asking, Why do we need 21 lawyers in a case where Volkswagen had conceded liability? We wouldn’t be here today without the unique and significant skills of all the lawyers in plaintiffs’ steering committee.
However, not everyone is happy with the settlement. Four objectors spoke during the hearing before Judge Breyer, saying the settlement was prejudicial to lessees and to people still paying off their cars, that the payout disparity between 3.0-liter and 2.0-liter vehicles was unfair; because it was negligent in not catching the emission test software in the first place and that the EPA shouldn’t profit from the deal.
The deal approved divides the 3.0-liter cars into two “generations” according to engine type. VW has already determined it can’t fix older “Generation One” cars. Owners will get to individually decide whether to sell their vehicles to VW or have them modified to be more fuel-efficient. They will also get cash compensation ranging from $7,755 to $13,880. Lessees will be able to opt out of their leases.
VW remains uncertain of whether it can make the remaining “Generation Two” cars fully compliant with the emissions standards they were originally certified for. If a fix is found, VW will implement it and drivers will get a cash compensation ranging from $7,039 to $16,114. If not, owners will have the option to sell their cars back to VW and lessees will be able to opt out of their leases. That could bring the compensation total up to $4.04 billion.
Steering committee chair Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein LLP said each subclass had a less than 1 percent objection rate, and that “the proof is in the pudding.” She said:
We couldn’t negotiate a settlement with every single situation in mind. We did the best we could. The buyback values for virtually all members should put them in a situation they would be in if not for the emissions scandal.
Judge Breyer agreed, overruling the objections. He subsequently issued his order approving the settlement.
The Plaintiffs are represented by Lieff Cabraser Heimann & Bernstein LLP, Boies Schiller & Flexner LLP and Robbins Geller Rudman & Dowd LLP, among others. The case is In re: Volkswagen “Clean Diesel” Marketing, Sales Practices and Product Liability Litigation (case number 3:15-md-02672) in the U.S. District Court for the Northern District of California.