Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Volkswagen named in yet another class action for “Dieselgate” scandal, (Oct 26, 2015)

By Greg Hammond, J.D.

A California consumer has filed the latest complaint against Volkswagen AG for allegedly violating the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as California law through a conspiracy to deceive consumers and state and federal government agencies concerning the efficiency of its clean diesel passenger cars, a scandal popularly referred to as “Dieselgate” (Yi v. Volkswagen AG, October 23, 2015).

In a complaint filed in the federal district court in Los Angeles, the consumer claims that between 2009 and September 2015, Volkswagen aggressively marketed its Clean Diesel Turbocharged Direct Injection (TDI) light passenger vehicles as environmentally-friendly, fuel-efficient, powerful, and reasonably priced. The U.S. Environmental Protection Agency (EPA) and California Air Resources Board (CARB), however, notified Volkswagen in September 2015 that it violated federal and state laws and regulations by using a “defeat device,” software designed to circumvent emission test procedures established by the EPA and CARB. According to the complaint, the defeat device detects when the car is undergoing emissions testing, passing those tests with “flying colors.” While these vehicles are operating under normal conditions, however, they shift off the emissions control systems, allowing the cars to emit 10 to 40 times the allowable amount of pollutants. Volkswagen has admitted to installing the defeat devices in 11 million diesel vehicles sold around the world, including nearly 500,000 in the United States.

The complaint sets forth monopolization and attempted monopolization claims, asserting that Volkswagen has monopoly power in the clean diesel car market and that, through its anticompetitive use of the defeat device and deceptive advertising, Volkswagen has willfully acquired and/or maintained a monopoly of the clean diesel car market. These violations harmed competition, according to the complaint, because the purchase or lease price of the class vehicles was higher than it would have been in a competitive market; the supply and selection of products was lower than it would have been in a competitive market; innovation was stifled; and the number and effectiveness of competitors in the market has been diminished by unlawful means.

The California consumer also alleges that Volkswagen violated the RICO Act by engaging in a common course of conduct and conspiracy with the common purpose of defrauding consumers into purchasing TDI light passenger vehicles at artificially inflated prices. In addition, the complaint asserts claims for violations of the Magnuson-Moss Warranty Act, California’s Consumers Legal Remedies Act, and California’s False Advertising Law.

The plaintiff seeks to represent a class of all persons and entities that purchased or leased a class vehicle from a Volkswagen authorized dealer in the United States. He requests (1) the appointment of an independent external compliance monitor to ensure compliance with state and federal environmental laws; (2) an order requiring Volkswagen to pay a portion of annual net profits into a fund to be distributed to non-profit organizations to monitor, educate, and/or remediate the environmental effects of vehicular diesel fuel emissions; (3) judgment in favor of the class, including damages and trebled damages; (4) an injunction prohibiting Volkswagen from continuing to violate state and federal law; and (5) restitution or damages, pre- and post-judgment interest, reasonable attorney fees, and costs.

West Virginia Attorney General Patrick Morrisey filed suit against Volkswagen shortly after the EPA and CARB notified Volkswagen in September 2015 that its use of the “defeat device” software violated federal and state laws and regulations. The Attorney general brought claims for violations of West Virginia’s Consumer Credit and Protection Act. Class action complaints have also previously been filed by consumers and dealerships in California, Michigan, Tennessee, and Virginia.

The case number is 2:15-cv-08327.

Attorneys: Maxwell M. Blecher (Blecher Collins Pepperman & Joye, P.C.) for Cash Yi.

Companies: Volkswagen AG; Volkswagen of America Group, Inc.; Volkswagen of America, Inc.; Audi of America, LLC; Audi AG

News: Advertising Antitrust ConsumerProtection RICO StateUnfairTradePractices CaliforniaNews