Volkswagen Pays $14.7 Billion to Settle Clean Diesel Emissions Fraud Affecting 500,000 U.S. Owners

On September 18, 2015, the U.S. Environmental Protection Agency issued a notice of violation of the Clean Air Act to Volkswagen Group, revealing that the automaker had secretly installed software in roughly 500,000 American diesel vehicles. The software, known as a defeat device, detected when a car was being tested on a dynamometer and activated full emissions controls only in that setting. During ordinary street driving, the controls were suppressed, and tailpipe nitrogen oxide emissions ran as high as 40 times the legally permitted level.

The affected vehicles were 2.0-liter TDI diesel models sold under the Volkswagen and Audi brands from model years 2009 through 2015. Drivers had bought these cars partly on the strength of marketing that promoted them as clean, fuel-efficient alternatives to gasoline engines. The deception exposed owners to potential resale losses, left regulators unable to enforce air quality standards, and contributed to elevated nitrogen oxide concentrations linked to respiratory harm.

Class action suits were filed across the country within weeks of the EPA announcement. In December 2015, the Judicial Panel on Multidistrict Litigation centralized the cases before Judge Charles R. Breyer in the Northern District of California as MDL No. 2672, In Re: Volkswagen "Clean Diesel" Marketing, Sales Practices and Products Liability Litigation. In January 2016, Judge Breyer appointed a 22-member Plaintiffs' Steering Committee to manage pretrial proceedings for all consolidated cases. David S. Casey Jr., managing partner of San Diego's CaseyGerry and a veteran class action litigator, was named to that committee as the only San Diego attorney selected. Elizabeth Cabraser of Lieff Cabraser Heimann and Bernstein served as chair.

Negotiations moved at unusual speed for litigation of this scale. By April 2016, the steering committee and Volkswagen had reached an agreement in principle. Judge Breyer appointed former FBI Director Robert Mueller as mediator to finalize a consent decree. On June 28, 2016, the parties announced the settlement: Volkswagen agreed to pay up to $10.033 billion to compensate affected owners through buybacks or modifications and set aside an additional $4.7 billion for environmental remediation and zero-emission vehicle infrastructure, for a combined total exceeding $14.7 billion. Owners of 2.0-liter TDI vehicles received the pre-scandal trade-in value of their car plus between $5,100 and $10,000 in additional compensation, depending on model year.

Judge Breyer granted final approval of the consumer and environmental fund portions on October 25, 2016. He rejected objections from a small number of owners, finding the settlement adequately and fairly compensated the class and that immediate resolution was preferable to continued litigation. Subsequent settlements covering 3.0-liter V6 models and Volkswagen-branded dealerships brought total U.S. recoveries to more than $17 billion across all related actions, making the VW clean-diesel litigation the largest consumer auto industry class action settlement in U.S. history.