Antitrust Law Daily Wrap Up, RICO NEWS: Volkswagen’s ‘Dieselgate’ scandal sparks racketeering class action, (Dec 18, 2015)

By Greg Hammond, J.D.

Volkswagen has allegedly violated the Racketeer Influenced and Corrupt Organizations Act (RICO), along with the consumer protection and unfair and deceptive trade practices laws of 15 states, through a conspiracy to deceive consumers concerning the efficiency of its clean diesel passenger cars, a scandal popularly referred to as “Dieselgate,” according to a complaint filed in the U.S. District Court in the Northern District of California (Reid v. Volkswagen AG, December 17, 2015).

The consumers claim that, between 2009 and September 2015, Volkswagen aggressively marketed its Clean Diesel Turbocharged Direct Injection light passenger vehicles as environmentally-friendly, fuel-efficient, powerful, and reasonably priced. The U.S. Environmental 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 ease. 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 approximately 500,000 in the United States.

The complaint alleges RICO violations on behalf of a nationwide class, claiming that Volkswagen engaged in a fraudulent scheme, common course of conduct, and a conspiracy to increase market share and revenue for Volkswagen and for authorized dealerships associated with Volkswagen. To achieve these goals, Volkswagen purportedly designed, manufactured, and distributed for sale the defeat device vehicles and disseminated virtually uniform sales materials for use by authorized dealerships in the marketing and sale of the defeat device vehicles.

In addition to the nationwide class, the consumers alleged a number of state subclasses, bringing claims for unfair and deceptive trade practices, false advertising, fraud, misrepresentation, and breach of contract under Alabama, Arizona, Arkansas, California, Florida, Georgia, Maryland, Mississippi, Oregon, Pennsylvania, Texas, Tennessee, Virginia, Washington, and West Virginia unfair and deceptive trade practices and consumer protection laws.

The consumers seek actual, general, special, incidental, statutory, compensatory, and consequential damages, as well as exemplary and punitive damages; an order requiring Volkswagen to disgorge, restore, and return all monies wrongfully obtained together with interest; an order enjoining the alleged wrongful conduct; as well as costs, interest, and attorney fees.

The case is No. 3:15-cv-05805.

Attorneys: Stephen R. Basser (Barrack, Rodos & Bacine), John G. Emerson (Emerson Scott, LLP), J. Gerard Stranch, IV (Branstetter, Stranch & Jennings, PLLC), Manfred P. Muecke (Bonnett, Fairbourn, Friedman & Balint, P.C.), J. Andrew Meyer (Leavengood, Dauval, Boyle & Meyer, P.A.), Merrida Coxwell (Coxwell & Associates, PLLC), Christopher D. Jennings (Johnson Vines PLLC), Clay Ragsdale (Ragsdale LLC), and William Crowder (Crowder McGaha, LLP) for plaintiffs.

Companies: Volkswagen AG, Volkswagen Group of America, Inc. Audi AG; Audi of America; Porsche AG; Porsche Cars of North America

News: Advertising ConsumerProtection RICO StateUnfairTradePractices