Volkswagen Settles with Dealerships over Emissions Scandal for $1.6 Billion

Last October, we discussed Volkswagen’s (the “Company”) $14.7 billion settlement for car owners of VW and Audi 2-liter diesel vehicles that were affected by the emissions scandal. On January 23, 2017, the Company paid an additional $1.6 billion to resolve lawsuits filed by Volkswagen AG franchise dealerships (“Dealers”).

In 2008, Volkswagen installed illegal engine control software that increased the engine’s emission controls in order to pass inspections but was shut down during normal use, prompting the cars to release 40 times as many pollutants. As a result of the scandal, Dealers estimated lost profits of between $1.47 billion to $1.62 billion. Accordingly, the Dealers alleged violations under the Automobile Dealers’ Day in Court Act, the Racketeer Influenced and Corrupt Organizations Act, and Florida and Illinois state statutes.

The settlement covers a nationwide class of 652 authorized Dealers that operated dealerships pursuant to the Volkswagen Dealer Agreement. Volkswagen will divide $1.208 billion among dealerships based on their pro rata share of the monthly financial assistance payments that Volkswagen paid to eligible Dealers in November 2015. It will also continue incentives to Dealers for an additional 12 months, give Dealers the option to defer their obligations to renovate or make capital investments in their facilities, and buy back affected vehicles that are not fixable.

Some Dealers objected to the settlement because they felt it improperly excludes vehicles that they sold into an “open point,” which was when Volkswagen did not have dealer representation. However, U.S. District Judge Charles R. Breyer, despite these concerns, believed that the settlement formula was fair and reasonable to the class.

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Atikins, Dorothy. “Volkswagen’s $1.6B Dealership Settlement Gets Final OK,” Law 360. Last modified on January 23, 2017.