Lawyers predict fee bonanza from owners demanding VW buys back their cars

The only sin greater than a business that knowingly wants break the rules is to pick the USA as the place to do it. Crazy. The American Way promotes honest endeavour – but heavily punishes those who break its rules. As German-headquartered carmaker Volkswagen is going to discover the hard way. First there are well resourced State-employed attorneys eager to promote their careers by on potentially popular cases. Then there are regulators with little concern for economic consequences of massive fines, especially on foreign companies. Worst of all for corporate fraudsters, there is a legal system where every man – and business entity – is equal under the law. That creates an ever present threat of company-destroying class action suits from a multitude of well-educated lawyers happy to work on a share of what they can extract. Volkswagen’s diesel emission fraud has only been in the public domain for a day and already American lawyers are predicting a fee bonanza. Some believe that because VW has admitted its crime, owners can demand the company buys back each of the 482 000 Audi and Volkswagen sold into the US market over the past six years. – Alec Hogg   

The fuel economy and smog ratings are shown on the sticker price of a 2015 Passat limited edition vehicle at a Volkswagen dealership in Escondido, California, September 21, 2015. Lawmakers on a panel in the House of Representatives will hold a hearing on Volkswagen's emissions from diesel vehicles in coming weeks, lawmakers said on Monday. The House Oversight and Investigations subcommittee will hold a hearing on Volkswagen's issues with diesel cars sold in the United States from 2008 to 2015. The Environmental Protection Agency on Friday accused Volkswagen of including software in the diesel vehicles that allowed them to emit pollutants above legal limits pollutants while on the road, but reduced the pollution during emissions tests. REUTERS/Mike Blake TPX IMAGES OF THE DAY
The fuel economy and smog ratings are shown on the sticker price of a 2015 Passat limited edition vehicle at a Volkswagen dealership in Escondido, California, September 21, 2015. Lawmakers on a panel in the House of Representatives will hold a hearing on Volkswagen’s emissions from diesel vehicles in coming weeks, lawmakers said on Monday. The House Oversight and Investigations subcommittee will hold a hearing on Volkswagen’s issues with diesel cars sold in the United States from 2008 to 2015. The Environmental Protection Agency on Friday accused Volkswagen of including software in the diesel vehicles that allowed them to emit pollutants above legal limits pollutants while on the road, but reduced the pollution during emissions tests. REUTERS/Mike Blake

by Jeff Plungis, Alan Levin and Alison Vekshin

(Bloomberg) — John Decker bought his 2013 Volkswagen Jetta diesel thinking he was doing his part to improve the environment and reduce his carbon footprint.

Now that the German automaker has admitted its claims about the model’s performance were false, he just wants the company to buy it back from him.

“I feel completely deceived by Volkswagen,” Decker, of Sacramento, California, said in an interview. “I’m extremely upset about it. I feel defrauded.”

Read also: Bloomberg View: VW’s breathtaking duplicity demands US must wield big stick

Decker is in good company: 482,000 Audi and Volkswagen cars sold in recent years came with software that turns on full pollution controls only when the car is undergoing emissions testing. At other times, the cars pollute 10 times to 40 times the legal limits.

The U.S. Justice Department, the Environmental Protection Agency and regulators in California are all investigating. Eventually, the cars may be recalled and cash settlements — or a buyback like Decker wants — may be negotiated. Volkswagen has suspended sales of the affected models in the meantime.

Edmunds.com, which operates an online car-buying guide, is advising Volkswagen owners to hold onto theirs for now — if for no other reason than they’re likely to get lower prices in a sale or a trade-in at a dealer. Owners who bought diesels for their environmental benefits may feel a moral objection to driving them until there’s an emission fix, said Jessica Caldwell, the website’s director of industry analysis.

EPA Recalls

“The good news for these owners is that there is no imminent safety threat in driving these vehicles,” Caldwell said. “But until Volkswagen reveals a plan for how they will either buy back the cars or fix them so that they truly meet emissions standards, all affected owners will have to wait and see.”

Read also: Mighty Volkswagen faces bleak future after deceit on 500 000 polluting cars

The affected vehicles are diesel-powered versions of some of VW’s most popular U.S. cars: the Beetle, the Jetta, the Golf and the Passat for model years 2009-2015. The Audi A3 is also part of the investigation.

The cars haven’t been recalled, but the EPA has the power and expects to invoke it, according to agency spokeswoman Liz Purchia. Vehicle owners will get notices after Volkswagen and Audi have developed a way to fix the cars’ emissions controls, Purchia said.

Justice Department

“Determinations regarding potential penalties and other remedies will be assessed as part of the investigation EPA has opened in conjunction with the U.S. Department of Justice,” Purchia said.

A fix that improves the emissions may reduce on-the-road performance, said Bill Visnic, an independent auto analyst in Weirton, West Virginia. It would be very difficult for Volkswagen to add new pollution-control equipment to the existing engines, so the only way to fix it may be to cut horsepower and fuel economy performance to lower the pollution output once the software is eliminated, he said.

That would diminish one of the primary selling points of the vehicles.

Decker, a photographer, said he was impressed with the performance of his Jetta TDI sportwagon, especially compared to other cars that are environmentally friendly, such as the Toyota Motor Corp. hybrid Prius.

Sporty Drive

“I settled on the Volkswagen because it was fun and sporty to drive and the Prius was doggy and slow and wasn’t very powerful,” Decker said. “It was definitely a consideration to get a vehicle that was fun to drive and good for the environment was what I thought I was buying into.”

Decker wants Volkswagen to compensate him for the purchase. He said he has been in contact with the law firm of Hagens Berman Sobol Shapiro LLP in Seattle, which announced Sept. 18 that it was filing a federal lawsuit against Volkswagen. The firm estimates that some consumers paid as much as $7,000 more for a diesel model.

Read also: VW could face $18bn fine for false emission data, share price sheds 20%

Consumer Compensation

“I don’t want my car anymore, frankly,” Decker said. “I’d like Volkswagen to buy it back from me. I really don’t want it. I don’t want to drive it. I don’t want anything to do with Volkswagen.”

The primary goal of environmental regulators will be to clean up emissions. It remains to be seen what kind of compensation consumers will get. Websites like VolkswagenOwnersClub.com were abuzz with members asking how they could join class-action lawsuits and whether emission fixes would harm their cars’ performance.

All U.S. states follow either federal or California rules on limiting tailpipe pollution, said Paul Miller, deputy director of the Northeast States for Coordinated Air Use Management, an organization that helps set policy for New York, New Jersey, Massachusetts and five other states.

State Regulators

Regulators probably won’t order cars off the road since that would punish the drivers, who didn’t do anything wrong, he said.

“I think what they’re pursuing based on what I’ve seen is a swift requirement that VW go back at no cost and fix the software defeat device that they put into the cars,” Miller said.

In some cases where regulators have determined cars don’t meet safety or other standards, car owners get cash. Last year, Ford Motor Co. offered $200 to $1,050 in rebates to 200,000 consumers for inflated fuel-economy claims.

In a recent safety-related recall, the Transportation Department went even further, forcing Fiat Chrysler to buy back defective Jeeps. It’s not clear whether the EPA has the same authority, but with potential fines of as much as $18 billion, the automaker may be willing to negotiate a settlement.

Company CEO

“We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us,” VW Chief Executive Officer Martin Winterkorn said on Saturday. Jeannine Ginivan, a spokeswoman at the company’s North American headquarters in Herndon, Virginia, declined to comment beyond Winterkorn’s statement.

Then there are civil lawsuits.

“This is as big a thing as I’ve seen on the legal landscape in a long time,” said Robert A. Clifford, a Chicago lawyer who has filed a lawsuit on behalf of VW owners.

Read also: Acid test for VW’s reputation as US chief admits “we screwed up”. And how.

Value Loss

While it’s too early to say how VW diesel owners would be compensated, possibilities include payment for a vehicle’s loss of value, punitive damages for the company’s intentional misconduct and even money for people’s emotional distress, according to Clifford, a partner with Clifford Law Offices.

“This is one of those cases where the creative juices of the organized bar are going to come out in full display,” he said.

Consumers who own cars that aren’t doing what they’re intended to do will expect compensation, said Mark Rechtin, Consumer Reports autos editor.

Loyal Customers

“If you get fewer horsepower, or the fuel economy is what you’d get in a cheaper gasoline version of the same car, what’s the damage to your wallet?” Rechtin said.

Even though Volkswagen has admitted it fooled the EPA’s tests, some loyal customers say they remain skeptical about the findings.

“I think it’s too early to throw Volkswagen under the bus,” Perry Meade, a Volkswagen collector from Greenfield, Indiana, said in an interview.

Among the almost 100 Volkswagens Meade has owned in the last 25 years is a Jetta diesel with about 300,000 miles on it, he said. While that car was built before the alleged fraud began in 2009, he said he is considering buying a new one.

“They better not quit selling diesels here,” he said. “I will be upset.”

Meade, whose City of First Volkswagen Club in Kokomo, Indiana, is holding an Oktoberfest “cruise-in” Sept. 25, said he wouldn’t mind if emission fixes harmed performance on diesel models.

“I’m fine with losing a little bit of horsepower to have the longevity and reliability of a good power plant,” he said.