VW Faces First U.S. Jury Trial Over Cheater Diesels
Volkswagen has already paid out more than $23 billion to make amends about the cheater diesels it sold in North America.
Now VW faces a whole new threat: jury trials that could lead to a new round of huge punitive damage awards regarding its wayward ways.
Not really, VW has admitted.
In case you missed it, VW admitted back in September 2015 that it had rigged 11 million of its diesels to run clean during emission tests but dirty in real-world driving conditions.
Only about 555,000 of those cars ended up in the litigious U.S. But that’s where the punishment has been by far the most severe.
The penalties VW has paid in the U.S. to date—all in the form of court-led settlements—are breathtaking.
In 2016, the company agreed to disburse $15.3 billion in remediation payments for 4-cylinder diesels it sold in the U.S. The plan involved repairing or buying back affected cars, setting up an environmental remediation trust fund and supporting zero-emission vehicles in the U.S. (largely by installing charging stations for electric cars).
A year later, VW reached a deal to pay out another $1.2 billion to fix or buy back 82,000 Audi, Porsche and VW brand vehicles equipped with 6-cylinder cheater diesels. In some cases, the buybacks came to $58,000 per vehicle.
The company also consented to compensate its U.S. dealers $1.2 billion for leaving them for months with inventories of brand new diesel cars and SUVs they couldn’t legally sell.
Separately, VW reached a settlement worth $4.3 billion to resolve assorted civil and criminal charges for deceiving state and federal regulators about just how “clean” its diesels really were. The district court judge in Detroit who handled that settlement described VW’s behavior as “a deliberate, massive fraud” by VW management.
Let the Trials Begin
But amid all the settlements, there were hundreds of affected customers in the U.S. who opted out of those deals and decided to take their chances in court.
The first of those jury trials begins today in the U.S. District Court in San Francisco, Bloomberg News reports. The case, which represents 10 plaintiffs, will serve as a bellwether to indicate what VW and other plaintiffs can expect in the remaining cases.
The plaintiffs are suing VW for fraud. Legal experts say compensation for that charge will be trivial compared to what juries may impose in punitive damages.
Certainly, there’s a messy history to justify the punishment to date. VW management went to elaborate lengths to hide its cheating. It hired an independent law firm, Jones Day, to investigate the scandal but has suppressed the findings.
VW Group has been less than transparent about how far up the chain of command the responsibility went, initially blaming it all on a cadre of midlevel managers. But the scandal has led to the departure of many high-level executives, starting with CEO Martin Winterkorn.
Among other scandal-related departures are former Audi CEO Rupert Stadler, several senior engineering executives, its powertrain electronics leader, the head of VW’s U.S. operations, the company’s U.S. emission certification chief, its overall head of quality control and four Audi board members.
In Germany, the investigations continue. Just last month prosecutors indicted six more VW executives for their role in the scandal.
Bloomberg notes that the San Francisco judge handling the jury trial has made pretrial rulings that favor the company. One decision will allow VW to present details about how much it has already paid out in arguing that additional punitive damages would not be justified.
The judge also agreed not to allow Louis Freeh, a former FBI director, from testifying as an expert witness. Bloomberg says Freeh has estimated that a $2.8 billion fine levied against VW by the U.S. Dept. of Justice should have been for $34 billion-$68 billion.
Payback, Part 2?
It’s anyone’s guess what a jury will decide about VW’s bad behavior, regardless of the company’s numerous acts of contrition to date. But if America’s history of liability judgments against car companies is any indicator, VW’s top management has reason to be nervous.
Lynn Tilton—the flamboyant financier of distressed companies and CEO of Dura Automotive Systems Inc.—has put her controversial Zohar investment funds into Chapter 11 bankruptcy.
Oliver Schmidt, the Volkswagen AG manager found guilty of violating U.S. emission laws, says his superiors and “high-ranking” company lawyers coached him how to lie about the cheating.
A Florida software company has been ordered to pay $6.3 million in fines and repairs after selling 363,000 aftermarket software kits designed to disable emission control systems.