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German class action lawsuit over VW emissions begins

30.09.2019

Four years after Volkswagen's Dieselgate scandal broke, more than 400,000 Germans are part of fresh legal action against the carmaker. But some lawyers warn against joining Germany's first-ever class action lawsuit.

According to the German Justice Ministry, some 446,000 plaintiffs have joined the class action lawsuit, which is jointly organized by the Federation of German Consumer Organizations (vzbv) and the country's largest motoring club, ADAC.

On Monday, the Braunschweig Higher Regional Court began hearing VW customers who are seeking refunds on the full purchase price of their car.

In November 2018, Parliament paved the way for the introduction of the American-style legal framework into German law by adopting the so-called Musterfeststellungsklage, which translates into Model Declaratory Proceedings.

The decision was prompted by Volkswagen's diesel emissions manipulations unveiled in 2015 which are said to affect around 11 million cars around the world, 2.4 million of which were bought by Germans. But while consumers for example in the United States and Australia were able to pursue their claims of compensation collectively, affected VW customers here had been barred from this until 2018, and had to pursue their claims on an individual basis.

VW has been in hot water since US regulators showed in 2015 that the company had installed so-called defeat devices in its cars, enabling them to perform within emissions guidelines during testing, even if they emitted much higher levels of hazardous exhausts during normal driving conditions.

Dieselgate: A timeline
The disaster unfolds — September 2015

About two weeks after Volkswagen admitted behind closed doors to US environmental regulators that it had installed cheating software in some 11 million of its diesel vehicles worldwide, the Environmental Protection Agency shared that information with the public. It was September 18, 2015. The ensuing crisis would eventually take a few unexpected turns.

Dieselgate: A timeline
The boss must go, long live the boss — September 2015

Volkswagen's then-CEO Martin Winterkorn (above) had little choice but to step down several days after news of the scandal broke. In September 2015, he tendered his resignation, but retained his other posts within the Volkswagen Group. Winterkorn's successor was Matthias Müller. Until taking the reins at VW, Müller had been the chairman at Porsche, a VW subsidiary.

Dieselgate: A timeline
Raiding headquarters — October 2015

Regulators in the US weren't the only ones investigating VW. Authorities in Lower Saxony, the German state in which VW is based, were also scrutinizing the company. On October 8 2015, state prosecutors raided VW's headquarters along with several other corporate locations.

Dieselgate: A timeline
Hell breaks loose — January 2016

On January 4, 2016, the US government filed a lawsuit against VW in Detroit, accusing the German automaker of fraud and violations of American climate protection regulations. The lawsuit sought up to $46 billion for violations of the Clean Air Act.

Dieselgate: A timeline
Quit or forced out? — March 2016

In March 2016, the head of VW in the US, Michael Horn, resigned. In the initial days and weeks after the scandal broke, he was the one US authorities turned to for information. He issued an official apology on behalf of the automaker, asking for the public's forgiveness.

Dieselgate: A timeline
Settlement — October 2016

On October 25 2016, a US judge approved a final settlement that would have VW pay $15.3 billion. In addition, affected cars would be retrofitted with better, non-deceptive hardware and software, or else VW would buy them back completely from customers.

Dieselgate: A timeline
Imitators — July 2017

When dieselgate first emerged in 2015, analysts said it was likely other car makers were also cheating tests. But it wasn't until 2017 that other companies were targeted in probes. In July, German authorities launched investigations into luxury car makers Porsche and Daimler for allegedly cheating emissions tests. Others, such as Audi and Chrysler, have also been hit by similar allegations.

Dieselgate: A timeline
Public still supportive — December 2017

Despite dieselgate, VW has managed to keep the emissions scandal from utterly tarnishing its image. According to several polls, between 55 to 67 percent of Germans continue to trust the automaker. In the US, polls show that roughly 50 percent still believe the German company produces worthwhile vehicles.

Dieselgate: A timeline
Fuming over monkeys — January 2018

In late January, however, VW suffered another heavy blow over reports that the company experimented on monkeys and made the animals inhale diesel fumes. To make matters worse, a separate experiment that had humans inhale relatively harmless nitrogen dioxide was revealed at the same time. Some media wrongly interpreted this to mean humans were also inhaling toxic fumes.

Dieselgate: A timeline
Canadian court demands millions — January 2020

Years after the scandal that caused Volkswagen to pay CAN$2.4 billion (US$1.83 billion), a court in Toronto order a further fine of CAN$196.5 million. Volkswagen pleaded guilty of violating in environmental laws. Prosecutor Tom Lemon noted that the fine was "26 times the highest fine ever for a Canadian environmental offence."

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New law

The cars bought by the plaintiffs range from Volkswagen's key brand VW to subsidiaries Audi, Seat and Skoda, and were all equipped with exhaust-gas manipulated diesel motors of the EA 189 type.

VW has rejected the aim of the lawsuit, arguing that customers have no such claim because the cars remained perfectly functional. The carmaker has also repeatedly stressed that the software fixes it has offered have removed the problem of illegal emissions levels.

In a statement released on September 20, the vzbv consumer group said the sheer number of people signing up shows that the suit is important to them. It noted that the legal action has halted the statute of limitations for the claims of hundreds of thousands of VW diesel car owners.

As a matter of fact, the new law allows people to be heard in court, who might otherwise have been afraid to do so due to financial concerns. Nevertheless, some lawyers are advising VW diesel owners to withdraw from the lawsuit and take individual action against the carmaker.

02:50 mins.
Business | 09.11.2018

'Cheated' German Volkswagen diesel car owners retrofitting their vehicles

The risk of losing out

Law firms, including Dr Hoffman and Partners in Nuremberg, warned this summer that the Braunschweig court will only determine whether Volkswagen owes consumers damages, in principle. This was, however "of little use to the individual plaintiff," the lawyers said in a statement.

"At best, they will only see their preliminary questions on consumer-related matters clarified … and will not receive any money for a long time," Dr Hoffman and Partners warned.

Even if the lawsuit were to be successful in court, the lawyers added, the plaintiffs would then have to take their individual damage claims to court by themselves. In the event of a legal defeat, however, claims can no longer be asserted before another, possibly more "consumer-friendly" court, they said.

More than 26,000 German VW customers so far have taken their own course of action, with most of the cases ending in a settlement. There are however signs that German courts increasingly back customers' claims for full compensation.

Two weeks ago, judges at the Higher Regional Court in Frankfurt said that the buyer of a VW car with an illegal defeat device was deliberately and "contra bonos mores" damaged by the carmaker, which subsequently required full reimbursement of the car's purchase price.

Framed as "preliminary legal view," which is not binding on lower courts but could guide their deliberations, the opinion came after an owner of a VW car appealed a ruling in favor of the auto giant.

Since admitting to Dieselgate in 2015, the scandal has cost VW some €30 billion (32.8 billion) for fines, compensation, buybacks and refits, Frank Witter, VW Group board member responsible for finance, said recently. Much of that sum has poured out to 500,000 customers in the US. But the carmaker has "provisionally" booked another €1 billion for legal risks, saying additional costs "could not be ruled out."

Uwe Hessler