SAN FRANCISCO (Legal Newsline) - Earlier this week, a federal judge approved a $14.7 billion settlement in the class action lawsuits filed against Volkswagen over its emissions scandal.

On Tuesday, Judge Charles Breyer of the U.S. District Court for the Northern District of California granted final approval to the settlement agreement between Volkswagen and private plaintiffs represented by a court-appointed Plaintiffs’ Steering Committee (PSC) to resolve civil claims regarding eligible Volkswagen and Audi 2.0L TDI vehicles in the United States.

Breyer also approved a Consent Decree between Volkswagen and the U.S. Department of Justice on behalf of the Environmental Protection Agency (EPA) and the State of California by and through the California Air Resources Board (CARB) and the California Attorney General; and a Consent Order between Volkswagen and the U.S. Federal Trade Commission.

Under the settlement, the German automaker is required to spend up to $10 billion on vehicle buybacks and owner compensation. It also must pay $2.7 billion into a trust to support environmental programs and reduce emissions, and spend an additional $2 billion on investments and promotion of zero emissions vehicles.

According to the final approval order, the settlement also requires Volkswagen to pay reasonable attorneys’ fees and costs. Class counsel has agreed to seek no more than $324 million, plus no more than $8.5 million in actual and reasonable out-of-pocket costs, for expenses incurred through Oct. 18, 2016.

Breyer said the settlement, considered to be the largest auto-scandal settlement in U.S. history, is “fair, reasonable and adequate.”

“Given the risks of prolonged litigation, the immediate settlement of this matter is far preferable,” the judge noted in the final approval order.

“As the Court stated at the outset, the priority was to get the polluting cars off the road as soon as possible. The Settlement does that. It requires Volkswagen to make the funds to compensate Class Members available within ten days of the Court’s final approval order, and the Buyback program will begin immediately upon final approval of the Settlement and entry of the United States’ Consent Decree.”

The judge continued, “For those Class Members who elect a Fix, the Consent Decree sets forth a schedule for Volkswagen to submit proposed Fixes; the last deadline for Volkswagen’s final submittal is October 30, 2017. And, if no Fix is approved, Class Members may instead participate in a Buyback. The Settlement thus ensures Class Members that a remedy -- whether a Buyback or a Fix -- is available immediately or, at the latest, 2018.”

In particular, under the settlement, Volkswagen has agreed to: buy back, terminate leases or provide approved emissions modifications for nearly 475,000 2.0-liter TDI diesel cars in the United States; provide cash payments to owners/lessees? pay for environmental remediation? and promote zero emissions vehicle technology.

The following 2.0L TDI engine vehicles are included in the settlement program: VW Beetle, 2013-15; VW Golf, 2010-15; VW Jetta, 2009-15; VW Passat, 2012-15; and Audi A3, 2010-13 and 2015.

Basically, owners and lessees can choose to have Volkswagen buy back their cars or do an early lease termination, and receive cash; or they can have their cars modified to improve emissions and receive a cash payment. However, any modifications must be approved by the EPA and CARB.

Last year, Volkswagen admitted to intentionally programming turbocharged direct injection, or TDI, diesel engines to activate certain emissions controls only during laboratory emissions testing.

Volkswagen and Audi owners began filing class actions soon after, claiming fraud and breach of contract due to expected reductions in horsepower and fuel efficiency. Investors lawsuits also were filed to seek compensation for the drop in stock value due to the scandal.

“Final approval of the 2.0L TDI settlement is an important milestone in our journey to making things right in the United States, and we appreciate the efforts of all parties involved in this process,” said Hinrich J. Woebcken, president and CEO of Volkswagen Group of America Inc.

“Volkswagen is committed to ensuring that the program is now carried out as seamlessly as possible for our affected customers and has devoted significant resources and personnel to making their experience a positive one.”

The company said it “remains focused” on resolving other outstanding issues in the United States and continues to work towards an agreed resolution for customers with affected 3.0L TDI V6 diesel engines.

California Attorney General Kamala Harris, whose office helped negotiate the settlement, said she was pleased with the settlement’s terms.

“Curbing emissions is vital to protecting our planet for future generations and the deceit Volkswagen practiced in pursuit of profit is unconscionable,” she said in a statement. “This agreement holds the company accountable for violating California and federal environmental protection laws and requires major investments in our environment and zero emission technology, including over a billion dollars for California alone.”

In addition to providing consumer relief funding, California will receive $1.18 billion, representing more than one-quarter of the funding VW must provide for environmental projects in states injured by the company’s conduct and investments it must make in zero emission technology.

Harris also secured an additional $86 million in civil penalties as part of a second partial settlement over the company’s use of “defeat devices” to evade emissions testing in its diesel vehicles.

But not all were pleased with the terms of the agreement.

The Competitive Enterprise Institute’s Center for Class Action Fairness called it “disappointing.”

The Washington, D.C.-based public-interest law firm, which represents class members against unfair class action procedures and settlements, argues the agreement provides zero marginal benefit for the class.

“This $10 billion settlement is a bad deal for consumers -- the actual value to consumers will be far less than that and would have been available to consumers even without this class action settlement,” said CEI attorney Anna St. John, who argued against the settlement approval before the court in San Francisco last week. “What’s worse is how inadequately the plaintiffs’ attorneys represented their clients in this case.

“Class counsel violated their fiduciary duty by misinforming and ultimately duping 475,000 class members into a settlement that will potentially pay their attorneys hundreds of millions of dollars for providing them next to nothing. These dollars should be going to the class, but instead, the lawyers' decision to structure the settlement with self-dealing gimmicks may have cost Volkswagen owners more than a billion dollars.”

St. John put down Breyer’s adoption of class counsel’s claim that the attorneys’ fees will not diminish the benefits award to class members under the settlement.

“Volkswagen is an economic actor with rational expectations, and the expected excessive attorney-fee request was baked into its reservation price and adversely affected what consumers received,” she said.

According to a January order by the federal court, Elizabeth J. Cabraser of San Francisco firm Lieff Cabraser Heimann & Bernstein LLP was appointed plaintiffs’ lead counsel and chair of the PSC. Among those firms listed as members of the steering committee were Charleston, W.Va., firm Bailey and Glasser LLP; Seattle firm Keller Rohrback LLP; South Carolina firm Motley Rice LLC; New York firm Weitz & Luxenberg PC; Seattle firm Hagens Berman Sobol Shapiro LLP; and Encino, Calif., firm Baron Budd PC.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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California Office of the Attorney General
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U.S. District Court for the Northern District of California
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U.S. Environmental Protection Agency (EPA)
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