VW Reaches Diesel Emissions Class Action Settlement With Dealerships

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Volkswagen has reached a tentative settlement with nearly 650 American franchise dealerships over the emissions-cheating scandal.

The German automaker has agreed to compensate U.S. dealers for losses they suffered as a result of the automaker’s emissions cheating scandal, attorneys for VW and the dealerships told a federal judge last Thursday.

This settlement comes in response to a lawsuit brought forth by a number of U.S. Volkswagen dealers in April.

No specifics on how much compensation would be provided as VW and the dealers’ counsel still need to work out those details.

VW did say that compensation will come in the form of “cash payments and other benefits,” and the company expected final details will be sorted out and announced at the end of September.

Volkswagen dealerships claimed profits have taken a turn for the worse since the German automaker admitted nearly a year ago that it installed emissions cheat devices in an estimated 11 million diesel-powered vehicles worldwide.

Some 12,000 diesel vehicles have since languished on dealer lots, unable to be sold, while the businesses waited to see what the company planned to offer them.

“They have cars on their lots they can’t sell,” Steve Berman, an attorney for dealers, relayed to the court, The Wall Street Journal reported. “Their franchise value has gone down. And they have invested millions in these Volkswagen franchises.”

In April, Berman filed a lawsuit on behalf of a handful of dealers alleging they built new showrooms, purchased new facilities and heavily stocked diesel vehicles based on Volkswagen’s false marketing.

VW has admitted it installed improper software that deactivated pollution controls on more than 11 million diesel vehicles sold worldwide. In June, it made arrangements to pay restitution of up to $15.3 billion to buy back nearly 475,000 vehicles and address claims by federal regulators and 44 U.S. states.

While all this was happening, Volkswagen U.S. dealers have been prohibited from selling new diesel vehicles.

The actual terms of the Volkswagen dealership agreement in principle must still be approved by the court. Under the settlement, Volkswagen agreed to repurchase unfixable, used 2.0 liter diesel vehicles on dealers’ lots under the same terms of a consumer buy-back, according to statements issued by the dealers’ counsel.

Additionally, the auto maker said it has agreed to make cash payments and provide additional benefits to the dealers to resolve alleged past, current and future claims of losses in franchise value.

“Our investigation has uncovered no evidence that VW dealers had any idea that VW was selling them cars that had defeat devices installed,” Steve Berman, Hagens Berman’s managing partner and lead attorney for the dealership plaintiffs said in a recent statement. “We are pleased to have reached an agreement with VW under which these businesses can recover and move forward, continuing to employ thousands of Americans, while working proactively with Volkswagen to facilitate the terms of the consumer settlement reached last June.”

Volkswagen and the dealers’ counsel will now work to finalize details of the proposed settlement, including how to apportion payments to dealers in the appropriate manner.

The exact amount of payouts will vary based on the size of dealerships and the market it serves, among other factors and the parties have agreed to to keep further terms confidential as they work to finalize the deal.

“We believe this agreement in principle with Volkswagen dealers is a very important step in our commitment to making things right for all our stakeholders in the United States,” said Hinrich Woebcken, chief executive officer of the North American Region for Volkswagen.

U.S. District Judge Charles Breyer, who gave the parties until the end of September to submit a final proposal, must approve the tentative settlement.

This settlement is just one of the many large expenses VW now has to deal with following its global diesel emissions scandal. The company recently agreed to a settlement of $14.7 billion in the US, which included a consumer buyback program.

The VW Dealership plaintiffs are represented by Steve W. Berman, Thomas E. Loeser and Elizabeth A. Fegan of Hagens Berman Sobol Shapiro LLP.

The Volkswagen Diesel Emissions Lawsuit is In re: Volkswagen “Clean Diesel” Marketing, Sales Practices and Products Liability Litigation, Case No. 3:15-md-02672, in the U.S. District Court for the Northern District of California.

UPDATE: On Sept. 30, 2016, a $1.2 billion settlement has been proposed in a class action lawsuit alleging Volkswagen’s diesel emissions cover-up caused dealerships to lose business.

UPDATE 2: On Jan. 23, 2017, a federal judge granted final approval to a $1.67 billion class action settlement benefiting VW dealerships. The average award is expected to be $1.85 million per dealer.