Volkswagen gears up for mammoth class action lawsuit

As one trial kicks off in Germany, we untangle the multiple legal battles facing the German carmaker.

Volkswagen class action
In Germany alone, about 2.4 million cars had been equipped with software to manipulate emissions tests [Michele Tantussi/Reuters]

A class action lawsuit against German carmaker Volkswagen over the manipulation of diesel emissions data is set to begin on Monday in a first for German court proceedings. 

The suit at the Brunswick Higher Regional Court in northern Germany comes more than four years after the emissions scandal first became public in a controversy that has since reached all the way to the top of the company, with top executives being accused of market manipulation and facing major legal battles looming in several jurisdictions.

In Germany alone, about 2.4 million cars had been equipped with software to manipulate emissions tests. Worldwide, that figure grows to about 11 million cars, of which 600,000, are in the United States.

The carmaker argues that customers did not suffer any damage as all the cars could be driven and were safe. 

Germany has only allowed class action lawsuits since last year. In the Volkswagen cases, individual plaintiffs are being represented by vzbz, a German association of consumer protection groups.

Some 470,000 car buyers have joined the lawsuit. “We are of the opinion that Volkswagen deceived them and now they must face the consequences,” vzbz head Klaus Muller said.

As the carmaker gears up for the mammoth class action, here are the key legal battlegrounds it faces globally:

1. Criminal investigations

Former CEO Martin Winterkorn was charged by the public prosecutor’s office in Brunswick in April. He and four other executives are accused of serious fraud in relation to the emissions scandal. 

In the US, Winterkorn and several other defendants are accused of fraud and conspiracy, and in May 2018 an arrest warrant was issued against the ex-VW boss.

The US case focuses on the assumption that Winterkorn had already been informed about manipulations in the emissions testing of diesel cars before the issue became public in September 2015. 

The Brunswick public prosecutor’s office investigated the suspicion of market manipulation against Winterkorn – as well as against supervisory board Chairman Hans Dieter Poetsch and the current Group CEO Herbert Diess.

All three have now been charged. In addition, several suspects are under investigation for providing allegedly false CO2 and consumption data and in one case for the deletion of data.

Investigations also took place in Stuttgart. While, in Munich, ex-Audi boss Rupert Stadler and three other defendants are charged with “fraud, falsifying certifications and false advertising”.

2. Civil suits and compensation

VW has already spent about 30 billion euros ($32.7bn) dealing with the fallout of the diesel scandal.

Diesel drivers in Germany also want to claim compensation. Consumer protection groups are critical of the fact that while in the US a lot of money has been spent on those affected, in Europe injured parties have so far been left empty-handed.

There are now well over 40,000 individual judgements in private civil proceedings brought by diesel owners as plaintiffs against the company or against Volkswagen dealers – most of which have ended with dismissal.

At the end of August, there were more than 30 cases before Germany’s Federal Supreme Court. Volkswagen often attempts to reach a settlement with the plaintiffs at higher court levels in order to avoid a landmark verdict. 

In Monday’s class action in Brunswick, many individual plaintiffs are pooling their claims against VW in the hope that this will give them a better chance of obtaining compensation for their vehicles in subsequent individual lawsuits.

In the US, the company reached a settlement with plaintiff car owners and the Environmental Protection Agency (EPA) at the end of August on alleged fraudulent information about fuel consumption for models of several brands.

3. Shareholder suits

The emissions scandal has cost a lot of money – not only to Volkswagen, but also to investors. The VW share price collapsed immediately after the fraud became known in autumn 2015, with some preference shares losing almost half of their value.

This is why investors such as Deka, a subsidiary of the Sparkassen savings banks and a plaintiff in this case, are demanding compensation.

The accusation is that VW informed the markets too late about the diesel scandal. 

According to the law, news that could influence the value of a company must be published immediately. Volkswagen is accused of having failed to do exactly that.   

VW issued a statement in its defence saying that the company had not been informed at a now infamous meeting – referred to in German as the “Schadenstisch” (literally, “damage roundtable”) – with Winterkorn on 27 July, 2015 that it was a matter of a shutdown device that was not permitted under US law.

VW also stated that it had expected significantly lower financial risks as a result of the emissions scandal and had initially set aside only 30 million euros ($32.7m) for this purpose.

The class action suit at the Brunswick Higher Regional Court is now revolving around investors’ claims for damages running into billions.

In the US, the Securities and Exchange Commission started a new legal case in mid-March. 

According to the allegations, VW collected more than $13bn with bonds on the US capital market during emissions manipulations under false pretences.

Investors had been deceived because they were not told that serious violations of US environmental laws were being committed at the time. 

Source: Al Jazeera, DPA