Arguments begin in VW emission cheating trial

SAN FRANCISCO -- Claims against Volkswagen for installing emissions cheating devices were considered for the first time in trial on Monday in a new chapter of litigation by U.S. consumers who opted out of their share of more than $25 billion in settlements.

While the automaker settled with the overwhelming majority of owners of roughly 600,000 vehicles equipped with the devices, Volkswagen's offers to California consumers were significantly underfunded when taking into account an admitted violation of a state-specific consumer protection law in the "most egregious act of intentional fraud in this country," argued a plaintiffs' attorney.

Ten consumers serve as plaintiffs in test cases for some 350 other lawsuits.

In the first of three phases, U.S. District Judge Charles Breyer will decide in a bench trial whether Volkswagen's previous settlements arising out of the clean diesel litigation provided sufficient remedy for the misconduct. If he finds they were sufficient, plaintiffs cannot pursue damages for fraud under the California Legal Remedies Act, which allows damages against companies that commit unfair and deceptive business practices.

The jury will then be brought in on the next phase regarding other damages plaintiffs may be owed. The third phase, if plaintiffs prevail in the second, will determine whether Volkswagen should be further punished for malicious misconduct.

Defense attorney Robert Giuffra Jr. argued the consumers cannot pursue damages for fraud since Volkswagen provided an "appropriate correction" to the installation of the emissions cheating devices. He characterized Volkswagen as "very generous in getting global peace" with consumers impacted by the emissions scandal.

The automaker has spent approximately $25 billion in settlements with federal and state regulators and owners of 599,650 vehicles, working out to $43,000 per car, according to court filings. In addition to bringing the vehicle back to federally approved emissions standards, Volkswagen offered restitution and other benefits, such as an extended warranty and roadside assistance.

Breyer, who has overseen the clean diesel emissions litigation since its inception, approved the settlements. He praised them for their focus on consumers and the environment in addition to the parties for reaching the first settlement in nine months. In re: Volkswagen Clean Diesel Marketing, Sales Practices, and Product Liability Litigation, 15-MD-02672 (N.D. Cal., filed Dec. 8, 2015).

While the law does not define an "appropriate correction," the Federal Trade Commission made an unprecedented blessing of the settlements because of their expediency and comprehensive nature, according to Giuffra, who noted, "Opting out doesn't entitle a plaintiff to more money."

"We don't dispute that Volkswagen did wrong, but we wanted to do right by our customers," he said. "The terms of the compensation were very generous."

Scot Wilson, representing the consumers, argued the Consumer Legal Remedies Act prohibits Volkswagen's "appropriate correction" defense when the fraud is committed intentionally. He said the fraud "must be the result of a bona fide error."

The plaintiffs' attorneys have maintained Breyer should not entertain Volkswagen's defense and skip to determining damages. They made a failed, last-minute bid to transfer the first phase of the trial to another judge last week because of "concerns about appearance of bias" given Breyer approved the settlements.

Volkswagen was also required to correct or state it would take action to address the fraud within 30 days to be able to argue its defense, according to Wilson.

Breyer questioned whether waiting for "the government to agree it was an appropriate fix" has any impact on the requirement. He added the defendant made a "number of statements during that time of action they intended to follow."

Wilson responded that Volkswagen should not get the benefit of "saying it wasn't feasible for us to do it" since "they created this situation with their criminal conduct."

In emotional testimony Monday from one of the named plaintiffs, Kenneth Coon said he did not accept the settlement because he "wasn't made whole to the point of the violation."

"It's a lemon," he said of his car. "It's a gross polluter."