Judge Signs Off on VW’s|$15B Payout to Drivers

     SAN FRANCISCO (CN) – After a week of tense anticipation, a federal judge on Tuesday granted final approval of Volkswagen’s $15 billion settlement with VW and Audi owners regarding the automaker’s emissions cheating scandal – perhaps the largest payout of its kind in U.S. history.
     U.S. District Judge Charles Breyer declined to rule on the settlement at a fairness hearing last Tuesday, telling the packed courtroom he would first weigh objections to the proposed settlement and possibly make modifications.
     Most of the objections came from class members who wanted a bigger payout or who said the settlement didn’t go far enough to address the damage the emissions test-cheating software wreaked on the environment.
     In a ruling issued Tuesday, Breyer made no modifications and found the settlement meets the standards for approval: the $15 billion price tag fairly and adequately compensates class members, class members have reacted to it favorably and government agencies participated in the negotiations.
     Breyer also noted that the settlement will have immediate benefits for the environment.
     “Given the risks of prolonged litigation, the immediate settlement of this matter is far preferable,” Breyer said in a 48-page order. “As the court stated at the outset, the priority was to get the polluting cars off the road as soon as possible. The settlement does that.”
     The settlement covers certain Volkswagen and Audi “clean diesel” vehicles with 2.0-liter TDI engines. The parties are still negotiating claims related to 3.0-liter engines.
     After the German automaker admitted in September 2015 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, Volkswagen drivers sued the company for fraud, breach of contract, unjust enrichment and racketeering, and violations of consumer protection laws in every state.
     The cars pollute at 40 times the legal limit despite Volkswagen billing itself as a clean diesel pioneer, according to the proposed settlement.
     Under the agreement, Volkswagen will pay just over $10 billion to help class members either get rid of their cars or modify them to reduce emissions.
     Under settlements with the U.S. Environmental Protection Agency and the California Air Resources Board, which are incorporated into the class action agreement, 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.
     If Volkswagen fails to remove or modify 85 percent of the covered cars on the road by June 2019, it must pay additional funds into a mitigation trust.
     Class counsel has agreed to seek no more than $324 million in attorneys’ fees and $8.5 million in costs, according to the ruling. At last Tuesday’s hearing, Breyer said the fees and costs will not come out of the settlement fund.
     Volkswagen has also reached agreements with the Justice Department, the Federal Trade Commission and 44 state attorneys general.
     “The settlement is something the company believes is good for consumers, good for the environment and good for Volkswagen to regain the trust of customers,” Volkswagen attorney Robert Giuffra told Breyer at last week’s hearing.
     About 462 people had lodged objections to the settlement as of late September. Eighteen objectors spoke at the hearing, most of them telling Breyer they don’t approve of the settlement because it doesn’t pay enough to various types of class members.
     Among those are owners who lost money selling their cars after the emissions scandal broke, those who want a full refund on their cars instead of the amount their car was worth the day the allegations became public, and some who objected to the trade-in amount they would receive.
     However, Breyer found that their contentions didn’t deter from the fairness of the settlement.
     In the case of the 89 objectors who demanded a full refund, Breyer said “the court is not persuaded by these objections.”
     Breyer said these class member could only get a full refund if they never drove their cars and returned them in the same condition in which they bought them, a scenario he called “virtually inconceivable as it is highly unlikely class members never used their vehicles after purchasing them.”
     He also noted that requiring Volkswagen to give class members full refunds could bankrupt the automaker.
     Turning to objections that the settlement doesn’t adequately address damage to the environment, Breyer noted that the company had agreed to pay $4.7 billion to promote zero-emissions vehicles and reduce the excess emissions its cars had released into the atmosphere.
     “The settlement provides cash benefits that are consistent with the recovery provided by state and federal laws and are reasonable under the circumstances,” Breyer said, adding that the money paid toward environmental remediation “address[es] the environmental damage caused by eligible vehicles.”
     Giuffra addressed some of the objectors’ concerns at last week’s hearing.
     “Like any settlement, this is a product of compromise, and a lot of compromise has been made,” he said. “I really think we have fixed the problem and have done so in record time.”
     Most class members seem to agree. As of Sept. 29, nearly 64 percent of the class had registered for benefits under the settlement, according to Breyer’s ruling. Only about 0.7 percent opted out, and that figure is falling as class members revoke their requests for exclusion.
     California Attorney General Kamala Harris expressed approval of the settlement on Tuesday.
     “The deceit Volkswagen practiced in pursuit of profit is unconscionable,” Harris, who negotiated part of the settlement alongside the state air resources board, said in a statement. “This agreement holds the company accountable for violating California and federal environmental protection laws.”
     Lead class counsel Elizabeth Cabraser urged class members on Tuesday to participate in the settlement, and noted that the parties are working on a comparable settlement for owners of 3.0 liter cars.
     “We encourage all class members to take advantage of the significant compensation this settlement provides, which also fixes or removes these polluting cars from our roads,” Cabraser said in a statement. “Those with depreciated and polluting 3.0-liter vehicles deserve a similarly fair and speedy resolution.”

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