SAN FRANCISCO (CN) — Volkswagen has agreed to pay $15 billion to settle the largest consumer class action in American history, involving the deception of drivers who bought half a million polluting cars while believing they were protecting the environment.
U.S. District Judge Charles Breyer on Tuesday preliminarily approved a settlement covering certain Volkswagen and Audi “clean diesel” vehicles with 2.0-liter TDI engines and provisionally certified the settlement class, saying the agreement achieves both parties’ goals of compensating consumers and reducing excess vehicle emissions.
But while Breyer praised the proposed settlement for its twin focus on consumers and the environment, he warned that preliminary approval doesn’t guarantee he will grant final approval this fall. That depends on what he hears from consumers between now and then, when the court is scheduled to issue its final ruling, he said.
“We must consider the views of people who have not spoken today, who have not been heard from,” Breyer said. “So that is a process that will be engaged in from today forward.”
Breyer emphasized throughout the hearing that class members must be well informed about the settlement in order to decide whether to opt in or out, and tasked plaintiffs’ counsel with answering their questions and listening to their concerns regarding the settlement.
“Any questions they may have, I want those questions answered,” Breyer said. “I want people to have the opportunity in every state in this country to look at this settlement, ask questions about it, and make up their own minds if this settlement is appropriate.”
Steve Berman, a member of the plaintiffs’ steering committee, told Breyer that his team conducted surveys to gauge what class members want to see in a settlement, and class counsel Elizabeth Cabraser said that class members have responded favorably to the proposed settlement so far.
Volkswagen counsel Robert Giuffra added that the U.S. Department of Justice, Environmental Protection Agency and 44 state attorneys general support the settlement.
In February, Volkswagen drivers accused the German automaker of fraud, breach of contract, unjust enrichment and racketeering, and of violating consumer protection laws in every state after the company admitted this past September that it had installed software in its TDI “clean diesel” cars to cheat emissions tests so that regulators would allow the cars on the road.
The cars pollute at 40 times the legal limit despite Volkswagen billing itself as a clean diesel pioneer, according to the proposed settlement.
“Volkswagen accepted responsibility for what happened here,” Giuffra said. “The company did not litigate this case. We really wanted do the right thing and get this thing to a resolution directly.”
Under the settlement and a related Federal Trade Commission consent order, Volkswagen will pay $10.33 billion to help class members either get rid of their cars or modify them to reduce the emissions they produce.
Class members can sell their cars to Volkswagen at trade-in value, which will not depreciate over the claim period, plus a compensation payment totaling at least $5,100. Lessees can cancel their leases without paying a penalty and will also receive their car’s trade-in value and a compensation payment.
If class members choose to keep their cars, Volkswagen will modify for free the cars’ emissions systems to reduce emissions to acceptable levels. These class members will also receive compensation.
The emissions modifications must be approved by the EPA and the California Air Resources Board.
The settlement will be implemented by Volkswagen Group of America COO Mark McNab, according to VW’s lawyers.
Both parties told the court on Tuesday that they were happy with the settlement because it gives consumers a choice in how they are compensated.
“We have designed a settlement in conjunction with government parties that places the consumers in a central decisive role because this settlement gives them choices,” Cabraser said. “Bringing this settlement to the class restores to them a more important choice, the choice they thought they had when they bought these cars. They thought they were making a choice of low emissions and they were deprived of that choice. The settlement seeks to restore that choice to them.”
Under the related Justice Department consent decree, Volkswagen will also pay $2.7 billion to remediate the effects of its cars’ excess pollution on the environment, and $2 billion to create a public awareness campaign on zero-emissions vehicles which will accompany direct-mail notices to class members.
Breyer said he was pleased that both parties had focused on remediating environmental damage, and particularly with a provision that the cars Volkswagen buys back can’t be resold abroad without first bringing them up to code.
“I think that is one of most important aspects of the program because it appears to me that it is not responsible to resolve a nationwide class action by virtue of taking those cars and giving them to some other country where they could potentially damage the environment of that country and the world,” Breyer said.
While attorney’s fees and costs have not yet been determined, the parties have agreed that they will not be part of the settlement, according to Breyer.
Consumers nationwide filed more than 500 class actions against Volkswagen after it admitted to rigging its cars. The Justice Department also filed a complaint at the request of the EPA, and the Federal Trade Commission and several state attorneys general filed lawsuits or launched investigations.
In December, the federal suits were transferred to the Northern District of California.
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