Judge Approves Final Volkswagen Consumer Settlement

SAN FRANCISCO (CN) – A federal judge said Thursday he will give his stamp of approval to a $1.2-billion deal to settle claims with U.S. consumers over Volkswagen’s emissions cheating scandal.

Under the terms of Volkswagen’s final deal, the car manufacturer will buy back or repair some 80,000 three-liter diesel-engine vehicles that were equipped with defeat devices to mask excess emissions of nitrogen oxide – up to 40 times the amount allowed under federal law.

The settlement could set Volkswagen back by up to $4 billion if it can’t come up with regulator-approved, emissions-reducing repairs for 58,000 newer-model vehicles by deadlines in October, November and December this year. The automaker must pay fines of $500 per vehicle for each 30-day extension it seeks.

Volkswagen attorney Robert Giuffra, Jr. said today represents a milestone for the company, adding that the finalization of this settlement will mean Volkswagen has “reached a resolution for every single diesel car in the U.S. – nearly 600,000.”

“A year ago, I stood here and said Volkswagen was committed to making things right with the environment, consumers and regulators,” Giuffra said at Thursday’s hearing. “We have done that.”

The three-liter diesel settlement also includes $225 million to mitigate environmental harm caused by the excess emissions. That will be added to a $2.7 million environmental remediation package pledged in a previous settlement.

The earlier settlement concluded in a $14.7-billion deal, finalized in October 2016, to lay to rest claims over some 500,000 two-liter diesel engine vehicles tainted by emissions-cheating software.

On Thursday, U.S. District Judge Charles Breyer also approved a separate $327.5-million settlement with German auto parts maker Robert Bosch GmbH, which helped design the software that enabled vehicles to cheat emissions tests.

Addressing a handful of objectors to the settlements, Breyer said this is a case in which “the perfect” should not become “the enemy of the good.”

“There will always be unanswered questions and different approaches and suggestions as to how it should be achieved,” Breyer said. “Some may have merit. I can just say the court looked at a situation in December 2015 and said, ‘This is what has to be done. We have to get these cars fixed or off the road and give consumers confidence they know how they’re going to go forward with perhaps the biggest investment in their life or perhaps the most necessary – having a car.'”

Addressing the court Thursday morning, three objectors complained the three-liter settlement fails to adequately compensate owners of newer-model “generation 2” vehicles and those who leased the affected automobiles. Another objector said the Bosch settlement unfairly pays more to three-liter-engine vehicle owners compared to two-liter-engine car owners.

U.S. Federal Trade Commission attorney Jonathan Cohen said the FTC considered all those factors before granting its approval to the deal. For instance, he said, owners of generation 2 vehicles will receive an average of $10,000 if Volkswagen can bring the cars back to the emissions standard at which they were initially advertised and sold. Compensation for any reduced-fuel efficiency caused by those repairs is “baked into” that figure, he said.

As part of a consent decree filed with the court, Volkswagen has also agreed to reform its corporate governance, submit to third-party emissions testing and have its progress monitored by an independent auditor.

“Volkswagen has done everything it could have humanly done to make things right,” Giuffra said. “We also want to transform the company. We will be developing and selling more electric vehicles in the U.S. We want to make this a positive chapter, something positive that will come out of this for the company.”

Earlier this year, Volkswagen paid a $4.3 billion criminal fine for conspiring to defraud the U.S., obstructing justice and importing false goods. Six of its executives also face criminal charges for their roles in the scheme.

Volkswagen still faces a shareholder class action claiming it defrauded U.S. investors by concealing its use of defeat devices in some 11 million vehicles worldwide. In January, Breyer refused to relinquish jurisdiction over that suit to a German court.

Lawyers representing the consumer class are seeking $51 million in attorneys’ fees and $1 million for the $327.5-million Bosch settlement.

Lead class counsel Elizabeth Cabraser said the lawyers will submit a separate attorneys’ fees request for the $1.2-billion settlement by June 30.

Cabraser is with Lieff Cabraser Heimann & Bernstein in San Francisco. Giuffra is with Sullivan and Cromwell in New York.