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Proposed Volkswagen Settlement Step in Right Direction

Volkswagen, the car maker that installed devices in its automobiles intentionally designed to game auto emissions testing, has proposed a series of settlements with consumers, federal authorities, state regulators, and others totalling $14.7 billion, which would be the largest payout ever by an automotive company.

This proposed settlement, while strong in many respects, nevertheless may leave states and consumers undercompensated given the egregiousness of Volkswagen’s actions. As Deputy Attorney General Sally Yates stated in announcing the proposed settlement, “By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our environment.” Because Volkswagen engaged in extraordinary acts of intentional fraud causing widespread economic harm, their remedial acts should be no less extraordinary as well.

The Terms of the Proposed Volkswagen Settlement

Of the total settlement, $4.7 billion in penalties would be assessed by the DOJ, with $2.7 billion going to fund projects to reduce nitrous oxide emissions and $2.0 billion going to support zero-emissions technology projects.

Separately, the proposed settlement with consumers nationwide is that Volkswagen would either pay affected owners the fair market value of their vehicles as of September 17, 2015 in exchange for returning the car, or allow lessees to return the vehicle to Volkswagen without further obligation or penalty under the lease. For those that want to keep their cars, Volkswagen will modify the vehicle to make it compliant with applicable environmental regulations, and provide the consumers with a second chance to return the car if the modification fails to make it compliant.

In addition, Volkswagen would offer vehicle owners a restitution payment equal to the greater of three options: 1) $5,100; 2) $3,001.88 plus 20% of the vehicle value; or 3) the amount to pay off the remaining balance on a loan obtained to buy the vehicle. For lessees, Volkswagen would make a restitution payment of $1,536.93 plus 10% of the vehicle value.

How to Comprehensively Address Volkswagen’s Fraud

While the proposed settlement goes a long way in attempting to right the wrongs intentionally committed by Volkswagen and inflicted on consumers nationwide, further steps could be taken to comprehensively address the illegal actions on the part of the carmaker and deter future fraudulent conduct.

The proposed series of settlements do not address the false advertising and fraudulent sales practices carried out by Volkswagen, and which are within the regulatory purview of states across the country. State governments could more clearly send a warning to other manufacturers and sellers that such egregiously inaccurate and fraudulent practices will not be tolerated by requiring that Volkswagen be held accountable for their advertising/sales activities, in addition to being held responsible for the economic and environmental harm that resulted from those sales activities.

Furthermore, the proposed remedy of only paying consumers who wish to return their vehicle the fair market price as of September 17, 2015, and not the price the consumers paid for the car, fails to fully put those consumers in the position they would have been in had they not been induced to purchase their car based on Volkswagen’s false advertising and sales practices. In short, consumers should not be penalized for the loss in value of their car from the time they purchased it.

Complex Litigation Attorneys at McCune Wright Arevalo, LLP

The complex litigation attorneys at McCune Wright Arevalo, LLP have experience in investigating consumer fraud and defective product matter issues in the automotive industry, and have been representing those affected by the fraudulent practices at Volkswagen.

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