$48M settlement between VW and investors gets preliminary nod

Volkswagen investors claiming the automaker's emissions scandal was not only environmentally noxious, but also singed their pockets, have received a federal court judge's preliminary approval of a $48 million settlement.

U.S. District Judge Charles R. Breyer also found acceptable $12 million in attorneys' fees and $500,000 in litigation costs, according to documents filed Wednesday in the Northern District.

The plaintiffs are purchasers of American depository receipts, through which the stocks of most foreign companies in U.S. markets are traded, according to the U.S. Securities and Exchange Commission's website.

The Volkswagen ADR investors claimed the German car maker made false and misleading statements about its financial results and regulatory compliance in a diesel spewing scandal that jarred the automotive industry and dominated headlines for weeks.

The investors' lawsuit claimed Volkswagen violated federal securities laws by failing to disclose the multinational sold close to 585,000 diesel vehicles in the U.S. and millions globally equipped with emissions test cheating "defeat devices," and misrepresented U.S. and European Union regulations compliance.

Volkswagen allegedly failed to recognize "emissions-cheating scheme" liabilities, artificially inflating the prices of ADRs as well as the automaker's financial results by at least $18 billion, the investors claimed. Corrective disclosures between September 2015 and January 2016 allegedly caused "massive" financial losses. In re: Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation, CV15-02672 (N.D. Cal., filed Dec. 8, 2015).

In September 2015, the U.S. Environmental Protection Agency issued a violation notice, stating Volkswagen installed emissions tests cheating software in its vehicles, according to court documents. Volkswagen consumers subsequently filed hundreds of lawsuits, and federal, state, and local governments launched civil actions and criminal investigations, resulting in three consumer class settlements. Volkswagen CEO Martin Winterkorn resigned shortly after the EPA discovery.

The ADR investors filed multiple related securities class actions in federal courts in Virginia, New Jersey, Michigan, and Tennessee in 2015. In December 2015, the litigation was folded into a Multidistrict Litigation in the Northern District

After the lengthy litigation, ADR investor class representatives, including Arkansas State Highway Employees' Retirement System and Miami Police Relief and Pension Fund, filed a motion for preliminary settlement Aug. 28, agreeing $48 million is in the "best interest of the settlement class," according to Wednesday's filing.

Both Volkswagen and the ADR investors' class counsel expressed approval of the settlement.

"The proposed settlement agreement eliminates the uncertainty and considerable costs of protracted litigation in the United States and is in the best interests of the company," Mike Tolbert, a Volkswagen spokesperson, said in a statement.

"We are very pleased with the settlement," said James A. Harrod, a partner at Bernstein Litowitz Berger & Grossmann LLP and class counsel. "We think it's an excellent recovery for the investors and we very much look forward to the final approval process."

The court will hold a fairness hearing on May 10, 2019 to determine whether to grant final approval of the settlement and attorneys' fees.