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In re Volkswagen "Clean Diesel" Marketing, Sales Practices, And Products Liability Litigation

United States District Court, N.D. California

July 19, 2017



          CHARLES R. BREYER United States District Judge

         On October 25, 2016, the Court approved a settlement between Volkswagen and a class of owners and lessees of 2.0-liter TDI diesel engine vehicles. The vehicles all contained a defeat device installed by Volkswagen to cheat emissions tests. The Settlement established a Funding Pool of slightly more than $10 billion for the benefit of the Class Members. (See Dkt. No. 1685 ¶ 2.42.) On March 17, 2017, the Court also granted Class Counsel's motion for attorneys' fees and costs related to the 2.0-liter Settlement. (Dkt. No. 3053.)

         Now before the Court is Class Member Jolian Kangas's motion to set aside the 2.0-liter Settlement and the Court's award of fees and costs, pursuant to Federal Rule of Civil Procedure 60(b). (Dkt. No. 3080; see also Amended Notices and Motion, Dkt. Nos. 3091, 3137.) Class Counsel, Volkswagen, and Class Member Matthew Comlish oppose the motion. (Dkt. Nos. 3135, 3139, 3143.) For the reasons set forth below, Kangas's motion is DENIED.


         Even assuming Kangas has standing and that his motion is timely, issues that Class Counsel, Volkswagen, and Class Member Comlish challenge (see Dkt. Nos. 3135 at 2-3; 3139 at 4-5; 3143 at 5-7), Kangas fails to establish a basis for relief. “Reconsideration for any of the reasons set forth in Rule 60(b) is an extraordinary remedy that works against the interest of finality and should be applied only in exceptional circumstances.” Audionics Sys., Inc. v. AAMP of Fl., Inc., No. 12-cv-10763 MMM, 2015 WL 11201243, at *7 (C.D. Cal. Nov. 4, 2015) (internal quotation marks omitted). Here, Kangas seeks relief under Rule 60(b)(3), which permits the Court to relieve a party from a final judgment because of fraud, misrepresentation, or misconduct by an opposing party. Fed.R.Civ.P. 60(b)(3). Kangas argues that relief is warranted under Rule 60(b)(3) for two reasons.

         First, Kangas contends that Class Counsel's expert, Andrew Kull, misled the Court into believing that if Volkswagen did not settle with the 2.0-liter Class, Volkswagen likely would have defended against the action, which would have threatened Plaintiffs' recovery. (See Dkt. Nos. 2102 at 16-18; 3091 at 4.) In support of this argument, Kangas notes that, after the Court approved the Settlement, Volkswagen AG pled guilty to three criminal felony counts related to the defeat-device fraud. (See United States v. Volkswagen AG, No. 16-CR-20394, Dkt. 68 (E.D. Cal. Mich. Jan. 11, 2017).) Thus, Kangas continues, “Class counsel's expert misled the Court into believing Volkswagen could defend the indefensible.” (Dkt. No. 3091 at 4.)

         Second, Kangas argues that the settling parties mislead the Court by representing that the Class could “receive less or nothing at all [if they did not settle], . . . not only because of the risks of litigation, but also because of the solvency risks such prolonged and expanding litigation could impose upon Volkswagen.” (Dkt. No. 3091 at 5 (quoting Dkt. No. 3053 at 4).) Kangas notes that subsequent to the Court's approval order, on March 23, 2017, Volkswagen Financial Services released data stating that 2016 “was a very successful year for Volkswagen, ” and that “the Group's operating profit was €14.6 billion-the highest ever in the history of our company.” (Id. (quoting Mar. 23, 2017 Press Release, attached as Ex. 2).) Given Volkswagen's financial success, Kangas asserts that, “Any claims of insolvency made to the Court by Class Counsel and/or their expert [were] a misrepresentation.” (Id.)

         Neither of Kangas's arguments support relief under Rule 60(b)(3). First, Volkswagen AG's guilty plea did not render Mr. Kull's opinion misleading. Mr. Kull did not opine that Volkswagen would challenge liability if it did not settle. To the contrary, Plaintiffs conceded that “[l]iability is not an issue” because “Volkswagen admitted to installing and failing to disclose the defeat device in its TDI diesel engine vehicles[.]” (Dkt. No. 2102 at 16.) Instead, Plaintiffs noted that the amount of recovery was in dispute, and Mr. Kull opined that Volkswagen could reasonably be expected to challenge “a number of threshold issues regarding rescission, ” a potential remedy. (Id. at 18 (emphasis added).) A challenge by Volkswagen to Plaintiffs' remedies would have lengthened the duration and cost of litigation and posed a risk to Plaintiffs' ultimate recovery. The Court concluded that this risk weighed in favor of the Settlement, and that conclusion is not affected by Volkswagen AG's guilty plea.

         Second, there is no conflict between the Court's prior discussion of solvency risk and Volkswagen's financial success. Although Volkswagen had a successful year, at the time of the Settlement Volkswagen faced considerable exposure as a result of the emissions fraud and was still negotiating settlements with the Franchise Dealers and 3.0-liter class members, civil and criminal penalties with the United States, and resolving other private and public claims for “clean diesel” vehicles sold outside the United States. (See Dkt. Nos. 3139 at 7-8; 3143 at 12.) Further, if Volkswagen had not settled the 2.0-liter claims and Plaintiffs had prevailed on their RICO claim, Plaintiffs may have recovered three times their actual damages, which would have imposed additional financial burdens on Volkswagen.

         More importantly, solvency risk was only one of many factors contributing to the Court's conclusion that the Settlement was fair, adequate, and reasonable. Other factors weighing in favor of the Settlement included the likely duration of further litigation, the amount offered in the Settlement (over $10 billion, which fully compensated Class Members for their losses), the government participants and the Settlement Master's strong support for the Settlement, and Class Members' positive reactions to the Settlement (only 0.7% of the Class opted out and only 0.09% objected to the Settlement). (See Dkt. No. 2102 at 16-26.) The risk of Volkswagen's insolvency was thus not material to the Court's approval, which makes relief under Rule 60(b)(3) inappropriate. See Nehara v. California, No. 10-cv-00491 JLT, 2013 WL 3968173, at *7 (E.D. Cal. July 31, 2013) (“[U]nder Rule 60(b)(3), the misconduct must have been material because such a motion ‘is aimed at judgments which were unfairly obtained, not at those which are factually incorrect.'” (quoting In re M/V Peacock, 809 F.2d 1403, 1405 (9th Cir. 1987))).

         Kangas does not independently challenge the Court's order granting Class Counsel's award of fees and costs related to the 2.0-liter Settlement. Instead, Kangas argues that the Court should set aside the award because, “Class Counsel would have little financial incentive to negotiate a better deal if the Settlement is vacated and the Fee Award stood.” (Dkt. No. 3091 at 3.) Because the Court does not vacate the Settlement it does not need to vacate the fee award.

         Kangas's ...

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