MISSOULA, Mont. (CN) - In a new blow against Volkswagen, a class of people who bought cars with the illegal emissions "defeat device" asked a federal judge to let them stop making their monthly payments until the issues are resolved in court.
Lead plaintiff Will Ballew says the 1975 "FTC Holder Rule" allows him to sue Volkswagen subsidiary VW Credit, for its abuse of credit. He also wants VW ordered not to report anyone in the putative class to credit bureaus because they stop making their payments.
Ballew says he bought a 2015 Volkswagen Jetta Sportwagen because of the "CleanDiesel" system VW touted in advertisements. He financed it through VW Credit, the defendant in his Wednesday complaint in Federal Court.
More than 400 lawsuits, most of them class actions, have been filed in the United States alone since Volkswagen admitted it installed cheating software in 11 million vehicles worldwide since 2009, about 500,000 of which were sold in the United States.
So far as Courthouse News can determine, Ballew's is the first lawsuit that asks for court permission to stop making payments.
The Hagens Berman Shapiro law firm in San Diego appears to have been the first to file against VW, the day Volkswagen admitted its deception: Friday, Sept. 18.
The defeat device is a secret, parallel software system that kicks in only when the cars are being tested for emissions. On the road, the cars spew as much as 40 times the amount of some pollutants as they do when the defeat device is turned off. With pollution controls turned off, the cars get better mileage, a peppier response, and are more fun to drive.
It's been no fun for Volkswagen, though, which faces as much as $18 billion in Clean Air Act fines in the United States alone, aside from the civil lawsuits. Nations around the world are investigating, and the company could face criminal charges in Germany. It's lost about one-third of its market capitalization as well, as VW share prices have tanked since the scandal broke. Market analysts expect that the company will survive, but gone are its glory days, which it reached this summer, as the world's largest auto company, by sales.
Volkswagen CEO Martin Winterkorn, who resigned as the scandal grew, blamed the cheating software on a few "rogue engineers." But the German magazine Der Spiegel reported this week that as many as 30 VW employees may have been involved.
Volkswagen models with defeat devices include the Jetta (2009-2015), Beetle (2009-2015), Golf (2009-2015) and Passat (2014-2015).
Volkswagen claimed the CleanDiesel system cut greenhouse gas emissions by 25 percent, particulate emissions by 90 percent and nitrous oxide by 95 percent.
But that was with the defeat devices turned on.
The U.S. Environmental Protection Agency has ordered Volkswagen to recall the vehicles and modify or repair them to comply with the Clean Air Act, but Ballew claims, as have numerous other plaintiffs, that this will cause "substantial changes" in the cars' performance - and resale value.
Ballew's 14-page lawsuit asks a new question: "Do I have to continue making payments to VW?"
He says the answer is "No," according to a 1975 Federal Trade Commission rule, known as the "FTC Holder Rule."
The rule is "designed to prevent the widespread use of credit terms which compel consumers to pay a creditor even if the seller's conduct would not entitle the seller to be paid."
"That is, consumers can assert against VW Credit, Inc. and VW Credit Leasing, Ltd. the fraud of Volkswagen Group of America, Inc. and withhold payments pending resolution of their claims, including their claims for rescission due to fraud or illegality," the complaint states.
Ballew seeks class certification, an injunction to prevent VW Credit from "(1) accepting payments from consumers on contracts that relate to the violating vehicles, and (2) reporting derogatory or negative information on credit reports of consumers who currently own the violating vehicles and who are, by federal law, excused from payment due to the fraud and illegality of the contracts that they entered for the purchase or lease of the violating vehicles."
His attorney Timothy Bechtold could not be reached after hours Thursday.
Ballew also seeks rescission of contracts, restitution, and attorneys' fees.
Co-counsel with Bechtold, of Missoula, is John Heenan, with Bishop & Heenan, in Billings.
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