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From Products Liability Law Daily, September 23, 2015

Volkswagen CEO resigns as emissions class actions filed

By John W. Scanlan, J.D.

The CEO of Volkswagen has resigned as a result of the growing controversy over a U.S. EPA report that many of its diesel cars will turn on full emissions controls only during emissions test but produce significantly higher emissions during normal operations. In addition, at least two putative class action lawsuits have been brought against Volkswagen by car buyers with cars that are allegedly affected (Dell’Aquila v. Volkswagen Group of America, Inc., September 21, 2015) and (Clinton v. Volkswagen Group of America, Inc., September 22, 2015).

Background. On September 18, the EPA issued Volkswagen a notice of violation of the Clean Air Act that asserted that Volkswagen had installed software in four-cylinder Volkswagen and Audi diesel cars in model years 2009-2015 that detect when a car is undergoing emissions testing and turn on full emissions controls only during the test. Otherwise, the cars emit nitrogen oxides at 10 to 40 times above EPA compliance levels [see Products Liability Law Daily’s September 18, 2015 analysis]. Volkswagen recalled eight vehicle models that were manufactured with its Turbo Diesel Ignition (TDI) Clean Diesel engines. On September 23, Volkswagen CEO Martin Winterkorn issued a brief statement announcing that he had asked the Board to terminate his function as CEO. Stating that he was aware of no wrongdoing on his part, he said that he nevertheless believes that Volkswagen needs a “fresh start.”

Class action suits. Meanwhile, among the putative class action lawsuits brought against Volkswagen Group of America, two were by owners of reportedly affected Volkswagen vehicles. According to the plaintiffs, Volkswagen sold 11 million affected vehicles worldwide, including to 500,000 in the United States, which contained an algorithm (which each suit referred to as a “defeat device”) in the electronic control model (ECM) that concealed the vehicles’ actual emission of nitrogen oxide. The allegedly affected vehicles include: 2009-2015 Jetta, 2009-2014 Jetta Sportwagen, 2012-2015 Beetle, 2012-2015 Beetle Convertible, 2010-2015 Audi A3, 2010-2015 Golf, 2015 Golf Sportwagen, and 2012-2015 Passat.

The plaintiffs alleged that Volkswagen willfully represented in its marketing campaigns the environmental benefits of the TDI Clean Diesel engines, and that they (and the putative class members) relied upon these representations and paid an additional cost to obtain the purportedly cleaner-running vehicles. They asserted that they would not have purchased their vehicles had they known of the “defeat device” because it made their vehicles unfit for their ordinary use because they cannot be lawfully operated in compliance with federal and state emission standards. Further, they alleged that they had suffered damages because their vehicles have now decreased in value due to the recent disclosures about the emissions issue, and they also will have to purchase clean diesel fuel at higher prices than conventional gasoline.

Specific allegations. The plaintiffs in Dell’Aquila v. Volkswagen Group of America, who filed suit in the Central District of California, alleged claims on behalf of a national class for fraud by concealment, negligent misrepresentation, unfair competition, negligence, breach of implied and express warranties of merchantability, Magnuson-Moss Warranty Act violations, and unjust enrichment. On behalf of a California subclass, they alleged claims for California Consumers Legal Remedies Act violations, breach of implied warranty of merchantability, and Song-Beverly Warranty Act violations for breach of implied warranty of merchantability. The plaintiffs in Clinton v. Volkswagen Group of America, who filed suit in the Eastern District of New York, alleged Magnuson-Moss Warranty Act violations on behalf of a national class. They also alleged claims of deceptive acts or practices, false advertising, fraudulent concealment, and unjust enrichment on behalf of a New York subclass, as well as claims for violations of the Arizona Consumer Fraud Act, fraudulent concealment, and unjust enrichment on behalf of an Arizona subclass.

Relief sought. Each suit asked for class certification. The California plaintiffs also asked for an injunction against Volkswagen for continuing its allegedly unlawful business practices, a program for recall or free replacement, damages and disgorgement, revocation of acceptance, Magnuson-Moss damages, treble and/or punitive damages, and attorneys’ fees and costs. The New York/Arizona plaintiffs asked for actual, statutory, punitive, and other damage allowable under the cited statutes; an order providing for disgorgement or other equitable relief; an order directing Volkswagen to disclose and remedy the defeat device and enjoining it from incorporating such a device in its vehicles in the future; and attorneys’ fees and costs.

The cases are Nos. 8:15-cv-01525 and 1:15-cv-05497.

Attorneys: Richard E. Donahoo (Donahoo & Associates) for Jorge Dell’Aquila and Carrie Ullmer. Robin Greenwald (Weitz & Luxenberg PC) for Benjamin Clinton and Hannah Rose Schonwald.

Companies: Volkswagen Group of America, Inc.; Volkswagen of America, Inc.

MainStory: TopStory MotorVehiclesNews MotorEquipmentNews

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