Antitrust Law Daily Wrap Up, TOP STORY: Class actions filed against Volkswagen based on deceptive “clean diesel” testing, (Sep 25, 2015)

By Edward L. Puzzo, J.D.

In some of the first in what is expected to be a wave of class action lawsuits against Volkswagen in connection with its “clean diesel” vehicles, a car dealer in California and a consumer in Michigan have filed class action claims based on VW’s alleged use of deception to defeat federal and state emission testing requirements.

In a complaint filed in the federal district court in Los Angeles (Koudsi, Inc. v. Volkswagen Group of America, Inc., September 24, 2015), Koudsi, Inc., on behalf of all non-franchised California dealerships selling VW-manufactured vehicles with diesel engines during the period of 2009-2015, alleged that VW violated California’s Unfair Competition Law (UCL) and Fair Advertising Law (FAL) by deceptively using software “defeat devices” to allow the vehicles to pass federal and state emission testing when, under non-testing circumstances, the vehicles emitted as much as 40 times the amount of pollution allowed by law. Ever since the government investigation revealing this deception became public, the VW-manufactured diesel vehicles have become unmerchantable, Koudsi alleged. VW has offered to compensate VW and Audi dealerships, but has not done so with dealerships that are not franchised dealers. Koudsi’s complaint seeks an injunction against further deceptive practices, compensatory, exemplary, and statutory damages, including interest, restitution, and costs.

In a separate complaint filed in the federal district court in Detroit (Brown v. Volkswagen Group of America, Inc., September 24, 2015), Scott Brown, consumer and purchaser of one of the vehicles in question, brought a putative class action against VW alleging Clayton Act, Sherman Act, and Michigan antitrust violations, unjust enrichment, and unfair competition and consumer protection violations. Brown’s complaint charges that VW’s actions to defeat EPA-mandated testing constituted unfair competition against other automakers not employing “defeat” devices and who consequently reported lower mileage and horsepower than VW’s diesel vehicles. Brown complained that he would not have paid over $3,000 more for an allegedly “clean diesel” vehicle over a gasoline-powered model had he known of the deceptive emission testing. He charged that the advertising for this class of vehicles was deceptive. The “defeat” device had the effect of fixing, raising, stabilizing, and controlling prices for diesel and vehicles marked as ecologically friendly or “clean”, thereby creating anticompetitive effects. Brown sought treble damages, restitution, and attorney fees.

The Attorney General’s Office in Maryland announced it will be opening investigations into VW’s deceptive emissions mechanisms in its diesel vehicles, and will examine ways to compensate vehicle owners and protect against future environmental harm. VW has confirmed that more than 480,000 vehicles containing the so-called “defeat devices” were sold in the United States. The Attorney General of Texas announced that he is part of the executive committee of a multi-state investigation of VW.

The case numbers are 2:15-cv-07477(Koudsi) and 2:15-cv-13373-MFL-DRG (Brown)

Attorneys: Robert L. Starr and Adam Rose (Law Office Of Robert L. Starr, APC) and Stephen M. Harris (Law Office Of Stephen M. Harris, APC) for Koudsi, Inc. James Dunn, Aaron D. Cox and Andrew T. Strahan for Scott Xavier Brown.

Companies: Koudsi, Inc., Volkswagen Group of America, Inc., Volkswagen Manufacturing Corporation of America, Suburban Imports of Farmington Hills, Inc.

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