United States District Court, N.D. California
IN RE VOLKSWAGEN “CLEAN DIESEL” MARKETING, SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION This Relates To: ALL CONSUMER AND RESELLER ACTIONS
ORDER GRANTING PRELIMINARY APPROVAL OF
SETTLEMENT
CHARLES R. BREYER, United States District Judge
Just a
little over 10 months ago, the public learned of
Volkswagen’s allegedly deliberate use of a defeat
device-software installed in certain Volkswagen- and
Audi-branded turbocharged direct injection
(“TDI”) diesel vehicles that was designed to
cheat emissions tests and deceive state and federal
regulators-in nearly 500, 000 cars sold in the United States.
Consumers filed hundreds of lawsuits which have been assigned
to this Court as a multidistrict litigation
(“MDL”). After five months of intensive
negotiations, and with the assistance of a Court-appointed
Settlement Master, Plaintiffs and Defendants Volkswagen AG,
Audi AG, and Volkswagen Group of America, Inc. (collectively,
“Volkswagen”) reached a settlement that resolves
consumer claims concerning certain 2.0-liter diesel TDI
vehicles. (See Dkt. No. 1685.)
The
Settlement Class Representatives now move the Court to (1)
preliminarily approve the proposed Amended Consumer Class
Action Settlement Agreement and Release
(“Settlement”) (see Dkt. No. 1685), (2)
conditionally certify a Consumer Class, (3) approve their
proposed settlement notice plan (see Dkt. Nos.
1609-2, 1680), and (4) schedule a fairness hearing. Having
reviewed the proposed settlement and with the benefit of oral
argument on July 26, 2016, the Court GRANTS the Motion for
Preliminary Approval. The Settlement is sufficiently fair,
adequate, and reasonable to the 2.0-liter diesel engine
vehicle consumers to move forward with class notice.
I.
BACKGROUND
A.
Factual Allegations
In
2009, Volkswagen began selling its Volkswagen- and
Audi-branded TDI “clean diesel” vehicles, which
they marketed as being environmentally friendly, fuel
efficient, and high performing. Unbeknownst to consumers and
regulatory authorities, Volkswagen installed in these cars a
defeat device-software that bypasses, defeats, or renders
inoperative certain elements of the vehicles’ emissions
control system-thus evading United States Environmental
Protection Agency (“EPA”) and California Air
Resources Board (“CARB”) emissions test
procedures. Specifically, the defeat device senses whether
the vehicle is undergoing testing and produces
regulation-compliant results, but operates a less effective
emissions control system when the vehicle is driven under
normal circumstances. By installing the defeat device on its
vehicles, Volkswagen was able to obtain Certificates of
Conformity (“COCs”) from EPA and Executive Orders
(“EOs”) from CARB for its 2.0- and 3.0-liter
diesel engine vehicles when in fact these vehicles release
nitrogen oxides (“NOx”) at a factor of up to 40
times over the permitted limit. Over the course of six years,
Volkswagen sold American consumers nearly 500, 000 diesel
vehicles equipped with a defeat device.
B.
Procedural History
On
September 3, 2015, Volkswagen admitted to EPA and CARB that
it installed defeat devices on its model year 2009 through
2015 Volkswagen and Audi diesel vehicles equipped with
2.0-liter engines. On September 18, 2015, the public became
aware of the defeat device when EPA issued a Notice of
Violation (“NOV”) to Volkswagen, alleging that
Volkswagen’s use of the defeat device violated
provisions of the Clean Air Act, 42 U.S.C. § 7401 et
seq. That same day, CARB sent Volkswagen a letter notifying
them that CARB had commenced an enforcement investigation
concerning the defeat device.
Two
months later, EPA issued a second NOV to Volkswagen, as well
as Dr. Ing. h.c. F. Porsche AG (“Porsche AG”) and
Porsche Cars North America, Inc. (“PCNA”), which
alleged Volkswagen had installed in its 3.0-liter diesel
engine vehicles a defeat device similar to the one described
in the September 18 NOV. CARB likewise sent a second letter
concerning the same matter.
1.
Consumer Actions
Consumers
nationwide filed hundreds of lawsuits after
Volkswagen’s use of the defeat device became public,
and on December 8, 2015, the Judicial Panel on Multidistrict
Litigation (“JPML”) transferred 56 related
actions, including numerous putative class actions, to this
Court for coordinated pretrial proceedings in the
above-captioned MDL. (Dkt. No. 1.) The JPML has since
transferred an additional 832 actions to the Court. (Dkt. No.
1676.)
The
following month the Court appointed Elizabeth J. Cabraser of
Lieff, Cabraser, Heimann & Bernstein, LLP as Lead
Plaintiffs’ Counsel and Chair of the Plaintiffs’
Steering Committee (“PSC”), to which the Court
also named 21 attorneys. (Dkt. No. 1084.) On February 22,
2016, the PSC filed its Consolidated Consumer Class Action
Complaint against 13 Defendants: VWGoA; VWAG; Audi AG; Audi
of America, LLC; Porsche AG; PCNA; Martin Winterkorn; Mattias
Müller; Michael Horn; Rupert Stadler; Robert Bosch GmbH
(“Bosch GmbH”); Robert Bosch, LLC (“Bosch
LLC”); and Volkmar Denner. (Dkt. No. 1230.) The
Consolidated Complaint asserts claims under (1) the Racketeer
Influenced and Corrupt Organizations Act, 18 U.S.C. §
1962(c)-(d), and the Magnusson-Moss Warranty Act, 15 U.S.C.
§ 2301 et seq.; (2) state fraud, breach of contract, and
unjust enrichment laws; and (3) all fifty States’
consumer protection laws. (Id. ¶¶
361-3432.)
2.
Government Actions
This
MDL also includes two actions brought by federal government
entities. The United States Department of Justice
(“DOJ”) on behalf of EPA has sued VWAG; Audi AG;
VWGoA; Volkswagen Group of America Chattanooga Operations,
LLC (“VW Chattanooga”); Porsche AG; and PCNA for
claims arising under Sections 204 and 205 of the Clean Air
Act, 42 U.S.C. §§ 7523 and 7524. The Federal Trade
Commission (“FTC”) has also brought an action
against VWGoA. The FTC brings its claims pursuant to Section
13(b) of the Federal Trade Commission Act (“FTC
Act”), 15 U.S.C. §53(b), and alleges violations of
Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
3.
PSC, DOJ, and FTC Settlement Negotiations
In
January 2016 the Court appointed former Director of the
Federal Bureau of Investigation Robert S. Mueller III as
Settlement Master to oversee settlement negotiations between
the parties. (Dkt. No. 973.) Settlement talks began almost
immediately, and by April 21, 2016, the parties reached
agreements in principle regarding 2.0-liter diesel engine
vehicles. (Dkt. No. 1439 at 4:25-6:15.) On June 28, 2016, the
DOJ, the PSC, and the FTC filed a Partial Consent Decree,
proposed Class Action Settlement, and Partial Consent Order,
respectively. (Dkt. Nos. 1605-07.) The PSC subsequently filed
an Amended Settlement on July 26, 2016. (Dkt. No. 1685.) The
amendment made slight modifications to the class definition.
Negotiations concerning 3.0-liter diesel engine vehicles
remain ongoing.
II.
SETTLEMENT TERMS
This
Order addresses the proposed Amended Class Action Settlement.
The key provisions of that Settlement are as follows.
A.
The Settlement Class
The
proposed Settlement Class consists of
a nationwide class of all persons (including individuals and
entities) who, on September 18, 2015, were registered owners
or lessees of, or, in the case of Non-Volkswagen Dealers,
held title to or held by bill of sale dated on or before
September 18, 2015, a Volkswagen or Audi 2.0-liter TDI
vehicle in the United States or its territories (an
“Eligible Vehicle”), or who, between September
18, 2015, and the end of the Claim Period, become a
registered owner of, or, in the case of Non-Volkswagen
Dealers, hold title to or hold by bill of sale dated after
September 18, 2015, but before the end of the Claims Period,
an Eligible Vehicle in the United States or its territories.
(Dkt. No. 1685 ¶ 2.16.) “Eligible Vehicles”
consist of
Model Year 2009 through 2015 Volkswagen and Audi light-duty
vehicles equipped with 2.0-liter TDI engines that are (1)
covered, or purported to be covered, by the EPA Test Groups
in the table immediately below this paragraph; (2) registered
with a state Department of Motor Vehicles or equivalent
agency or held by bill of sale by a non-Volkswagen Dealer in
the United States or its territories as of June 28, 2016; (3)
for an Eligible Owner, currently Operable or cease to be
Operable only after the Opt-Out Deadline; and (4) have not
been modified pursuant to an Approved Emissions Modification.
(Id. ¶ 2.33.) Eligible Vehicles do not include
Volkswagen or Audi vehicles that were sold outside the United
States. (Id.)
Class
Members are further categorized as Eligible Lessees, Eligible
Owners, or Eligible Sellers. An Eligible Lessee is
(1) the current lessee or lessees of an Eligible Vehicle with
a lease issued by VW Credit, Inc.; (2) the former lessee or
lessees of an Eligible Vehicle who had an active lease issued
by VW Credit, Inc. as of September 18, 2015 and who
surrendered or surrenders the leased Eligible Vehicle to
Volkswagen; or (3) the owner of an Eligible Vehicle who had
an active lease issued by VW Credit, Inc. as of September 18,
2015, and who acquired ownership of the previously leased
Eligible Vehicle at the conclusion of the lease after June
28, 2016.
(Id. ¶ 2.29.) An Eligible Owner refers to
the registered owner or owners of an Eligible Vehicle on June
28, 2016, or the registered owner or owners who acquire an
Eligible Vehicle after June 28, 2016, but before the end of
the Claim Period, except that the owner of an Eligible
Vehicle who had an active lease issued by VW Credit, Inc. as
of September 18, 2015, and purchased an Eligible Vehicle
previously leased by that owner after June 28, 2016, shall be
an Eligible Lessee.
(Id. ¶ 2.30.) Finally, an Eligible Seller is
one “who purchased or otherwise acquired an Eligible
Vehicle on or before September 18, 2015, and sold or
otherwise transferred ownership of such vehicle after
September 18, 2015, but before June 28, 2016.”
(Id. ¶ 2.31.) Eligible Sellers are also
“any owner (1) who acquired his, her, or its Eligible
Vehicle on or before September 18, 2015, (2) whose Eligible
Vehicle was totaled, and (3) who consequently transferred
title of his, her, or its vehicle to an insurance company
after September 18, 2015, but before June 28, 2016.”
(Id.)
B.
Consumer Remedies
The
Settlement gives Class Members choices as to remedies.
Eligible Owners have two options: Volkswagen will pay cash
(“Owner Restitution”) and either (1) buy
the Class Member’s Eligible Vehicle at its pre-defeat
device disclosure value, (“the Buyback”) or (2)
fix the Class Member’s vehicle when and if EPA and CARB
approve an emissions modification (a
“Fix”).[1]
Eligible
Lessees may (1) terminate their leases without penalty plus
receive additional cash (“Lessee Restitution”),
or (2) if a Fix is approved, have their leased car fixed plus
receive Lessee Restitution. Finally, Eligible Sellers, that
is, consumers who sold their Eligible Vehicle prior to the
filing of the proposed Settlement, receive cash
(“Seller Restitution”). In general, the condition
of the Eligible Vehicle is irrelevant; however, the Vehicle
must be operable (i.e., driven under its own power).
The
Settlement requires Volkswagen to render those Eligible
Vehicles returned in a Buyback inoperable by removing and
recycling, to the extent permitted by law, the
vehicle’s Engine Control Unit. (Dkt. No. 1685 ¶
4.4.3.) Volkswagen cannot render the vehicle operable until
the vehicle has received a Fix; only under those
circumstances does the Settlement permit Volkswagen to
re-sell the Eligible Vehicle in the United States or export
it. (Id.; see Dkt. No. 1605-1 ¶
7.2.3.) In other words, the Settlement ensures that the
defective vehicles will not operate in the United States-or
anywhere else in the world-unless and until they are fixed in
a manner approved by EPA and CARB.
1.
Base Value and Vehicle Value
The
amount of cash a Class Member receives depends on an Eligible
Vehicle’s Base Value or Vehicle Value. Base Value
refers to, where available, the Clean Trade value of the
vehicle based on the National Automobile Dealers Association
(“NADA”) Vehicle Identification Code
(“VIC”) for each Eligible Vehicle in the
September 2015 NADA Used Car Guide published in or around
August 2015. (Dkt. No. 1685 ¶ 2.5; Dkt. No. 1685-1
¶ 11.) In some instances, like with Model Year 2015
Eligible Vehicles, no value was published by NADA as of
September 2015. For those Eligible Vehicles, the Base Value
is calculated by multiplying the Manufacturer’s
Suggested Retail Price (“MSRP”) for each
individual vehicle by 0.717. (Id. (both).) The 0.717
figure is the ratio of average September 2015 Clean Trade
values to average MSRPs for Model Year 2015 Passats. (Dkt.
No. 1685-1 ¶ 11.)
Vehicle
Value refers to the Eligible Vehicle’s Base Value,
adjusted for Original Equipment Manufacturer
(“OEM”)-installed options and mileage.
(Id. ¶ 12.) Options adjustments to Base Values
are determined by using Volkswagen OEM-installed options, as
valued by the September 2015 NADA Used Car Guide.
(Id. ¶ 12(a).) Mileage adjustments to Base
Values are determined by the actual mileage at the time the
vehicle is surrendered in the Buyback or brought in for a Fix
using the mileage adjustment table in the September 2015 NADA
Used Car Guide with an allowance for standard NADA mileage of
12, 500 miles per year, prorated monthly from September 2015
to the month of surrender. (Id. ¶ 12(b).)
2.
Restitution Calculation
Eligible
Owners who purchased their Eligible Vehicles before September
18, 2015 are entitled to a minimum Restitution Payment of $5,
100. (Dkt. No. 1685-1 ¶ 5(a); Dkt. No. 1685-3 at 2.)
Restitution is calculated by adding (1) 20% of the Vehicle
Value plus (2) the greater of $2, 986.73 or the amount
necessary to ensure that Owner Restitution is not less than
$5, 100. (Dkt. No. 1685-1 ¶ 5(a).) In some cases,
Eligible Owners will receive more than the minimum $5, 100 to
as much as $10, 000. (See id.) Eligible Owners who
purchased their Eligible Vehicles after September 18, 2015
are entitled to 50% of Owner Restitution as calculated above,
plus a share of an unused portion of the funds set aside to
pay Seller Restitution as discussed below. (Id.
¶ 5(b).)
Eligible
Lessees are also guaranteed a Restitution Payment. (Dkt. No.
1685-1 ¶ 9.) Lessee Restitution has two components: (1)
a variable component plus (2) a fixed component. (Dkt. No.
1685-1 ¶ 9.) The variable component is 10% of the
Eligible Vehicle’s Base Value adjusted for options, but
not mileage. (Id.) The fixed component is $1, 529.
(Id.) Eligible Lessees are entitled to Lessee
Restitution even if their leases terminated after September
18, 2015. (Dkt. No. 1685 ¶ 4.2.4.)
For
Eligible Sellers, Restitution is calculated as 10% of the
Vehicle Value plus $1, 493.36. (Id. ¶ 7; Dkt.
No. 1685-3 at 8, 15.) Eligible Sellers are guaranteed a
minimum of $2, 550 in Seller Restitution; however, if the sum
total of 10% of the Vehicle Value plus $1, 493.36 is greater
than $2, 550, the Eligible Seller is entitled to the higher
amount. (Id. at 15.)
C.
Claims Process
The
Settlement sets forth a five-step Claims Program, and Class
Members have from the date of entry of this Order until
September 1, 2018 to submit a claim. (Dkt. No. 1685 ¶
2.11; Dkt. No. 1685-4 ¶ 7.) Eligible Sellers, however,
must identify themselves within 45 days of entry of this
Order (the “Eligible Seller Identification
Period”). (Dkt. No. 1685 ¶ 2.31; Dkt. No. 1685-4
¶ 7(a).)
At Step
One, Class Members learn about their available remedies and
compensation. (Dkt. No. 1685 ¶ 5.1; Dkt. No. 1685-4
¶ 1.) There are at least two ways Class Members can do
this. Those who wish to obtain information online can visit
the Settlement Website (www.VWCourtSettlement.com)
and register at the Online Claims Portal. There, Class
Members provide their (1) name; (2) contact information,
including email, mailing address, and phone number; (3)
address of vehicle registration; (4) Vehicle Identification
Number (“VIN”); (5) vehicle mileage, if the Class
Member is a current owner or lessee; and (6) information
regarding vehicle financing, i.e., whether the Class Member
is a current owner or lessee. (Dkt. No. 1685-4 ¶ 1(a).)
The Claims Portal will display individualized preliminary
offers for each Class Member. (Id.) Alternatively,
Class Members can call 1-844-98-CLAIM and provide the same
information to receive their individualized preliminary
offers. (Id. ¶ 1(b).)
At Step
Two, Class Members submit a Claim Form that contains
information about his or her Eligible Vehicle, as well as the
required documentation. (Dkt. No. 1685 ¶ 5.1; Dkt. No.
1685-4 ¶ 2.) Class Members can submit their Claim Forms
online via the Settlement Website, by fax, or by mail.
(Id. ¶ 2(a)(i)-(iii).) However Class Members
choose to submit their Claim Forms, they must also provide
information or documentation including: (1) a driver’s
license or other government-issued identification; (2) the
dates the Class Member owned or leased the Eligible Vehicle;
(3) proof of ownership, including title (if applicable) and
financing or lease information, including financial consent
forms (if applicable). (Id.) Class Members will
receive a Claim Number once the Claim is received.
(Id. ¶ 2).
While
Class Members need not select a remedy at Step Two, they must
submit their claims prior to September 1, 2018. (Id.
¶ 1(a).) Eligible Sellers, however, must identify
themselves within 45 days of entry of this Order. They can do
this via (1) electronic registration on the Settlement
Website or (2) submission of an Eligible Seller
identification form by mail or fax. (Dkt. No. 1685 ¶
2.32; Dkt. No. 1685-4 ¶ 7(a).)
Step
Three involves a determination of the Class Member’s
eligibility. (Dkt. No. 1685 ¶ 5.1; Dkt. No. 1685-4
¶ 3.) The parties propose Ankura Consulting Group, LLC
to act as Claims Supervisor and to review the submitted
claims and verify a class member’s eligibility. (Dkt.
No. 1685 ¶¶ 2.15, 5.2; Dkt. No. 1685-4 ¶ 3.)
Per the proposed FTC Consent Order, Volkswagen will notify
Class Members within at least 10 business days that their
claim is either complete or deficient.[2] (Dkt. No. 1607 at
33.) Within at least 10 business days of receiving a
completed application, Volkswagen will notify the Class
Member whether he or she is eligible for the elected remedy.
(Id.) The Class Member thereafter receives a formal
offer if he or she is deemed an eligible
“Claimant.” (Dkt. No. 1685-4 ¶ 4(a).)
At Step
Four, Claimants confirm their selection of an offered remedy,
accept the formal offer, and schedule an appointment with a
Volkswagen or Audi Dealer. (Dkt. No. 1685 ¶ 5.1; Dkt.
No. 1685-4 ¶ 4.) Claimants who submitted an online Claim
will receive their formal offers through the Claims Portal or
via email. (Id. ¶ 4(a).) Claimants who faxed or
mailed a Claim will receive their formal offers via mail or,
if they so choose, by email. (Id.)
Claimants
may then accept their formal offers either through the Claims
Portal or by submitting a paper acceptance form.
(Id. ¶ 4(b).) Claimants need not accept an
offer immediately; rather, they can defer selection until the
Fix is approved or choose a different remedy if one is
available. (Id.; id. ¶ 4(c).)
Claimants eligible for a Buyback, Lease Termination, or a Fix
may also change their remedy selection up until Step Four is
completed, even if they have accepted a formal offer, though
this may require additional documentation to verify
eligibility. (Id. ¶ 4(b).) In other words,
Claimants may wait until EPA and CARB approve a Fix, if any,
before selecting their remedy. Upon formal acceptance,
Claimants must also execute an Individual Release, described
in more detail in Section II.F, infra.
(Id.)
Claimants
can schedule an appointment for a Buyback or a Fix within 90
days of his or her acceptance of a formal offer.
(Id. ¶ 4(c).) Appointments for a Lease
Termination will be available within 45 days of the
Claimant’s acceptance of a formal offer. (Id.)
Claimants will be notified via the Claims Portal, email, or
mail when the ability to schedule an appointment is
available. (Id.)
Claimants
schedule appointments for a Buyback or Lease Termination
online through the Claims Portal or by calling
1-844-98-CLAIM; they cannot schedule appointments directly
with the Volkswagen or Audi Dealer. (Id. ¶
4(d).) Appointments for a Fix, on the other hand, may be
scheduled either by directly calling the Claimant’s
preferred Volkswagen or Audi Dealer or through the Claims
Portal. (Id. ¶ 4(e).)
At Step
Five, Claimants obtain their selected remedy. (Dkt. No. 1685
¶ 5.1; Dkt. No. 1685-4 ¶ 5.) Claimants who opt for
a Buyback or Lease Termination will meet with a Settlement
Specialist at a Volkswagen or Audi Dealer to complete the
process and receive payment. (Dkt. No. 1685-4 ¶ 5(b).)
Claimants who elect a Fix will bring their Eligible Vehicles
to a Volkswagen or Audi Dealer to obtain, at
Volkswagen’s expense, the Approved Emissions
Modification. (Id. ¶ 5(c).)
Class
Members or Claimants who dispute an eligibility determination
or calculation of compensation may appeal that decision by
mailing a form to the Claims Review Committee
(“CRC”). (Dkt. No. 1685-4 ¶ 6.) The CRC will
be comprised of three individuals: one representative from
Volkswagen, one representative from Class Counsel, and one
Court-appointed individual. (Id. ¶ 5.3.)
D.
Distribution of ...