SAN FRANCISCO — A federal appellate court on Monday gave its blessing to a massive settlement that Volkswagen AG reached with customers to settle claims related to its “clean diesel” scandal.
The U.S. Court of Appeals for the Ninth Circuit found that U.S. District Judge Charles Breyer of the Northern District of California “more than discharged” his duty to ensure that the $10 billion settlement was fair and adequate to the class. As part of the deal, VW agreed to buy back or provide fixes for 2009–2015 model year 2.0-liter diesel cars what had so-called “defeat devices” allowing them to cheat emissions tests.
“Our thorough consideration of the objections before us does not betoken any doubts on our part that the district court considered the proper factors, asked the correct questions, and did not abuse its discretion in approving this settlement,” wrote Ninth Circuit Judge Marsha Berzon in a 41-page published decision. “We do note that the settlement delivered tangible, substantial benefits to class members, seemingly the equivalent of—or superior to—those obtainable after successful litigation, and was arrived at after a momentous effort by the parties, the settlement master, and the district court.”
Objectors had claimed that Breyer abused his discretion in certifying the settlement class, approving the settlement, and denying one individual objector’s motion to opt out of the settlement after the applicable deadline.
Objectors’ primary beef with Breyer’s class certification decision was that the class failed to represent the interests of so-called “eligible sellers”—class members who sold their vehicles after the defeat device scheme became public in 2015 but before the settlement was filed with the court in June 2016. In Monday’s decision, the Ninth Circuit found since eligible sellers received several thousand dollars as part of the deal, they “benefitted from being in the class alongside vehicle owners.”
The court also turned back the chief objection to the settlement itself—that any excess funds after customer payouts from the $10.033 billion settlement pool will revert to VW. Objectors claimed that the potential reversion made it impossible to gauge the actual value of the deal, and created a ”perverse” incentive structure for VW to discourage participation. But the Ninth Circuit pointed out that parallel settlements VW reached with government regulators faced the company with stiff penalties if less than 85 percent of owners participated in the buybacks and fixes.
According to the most recent May 2018 report from the court-appointed claims supervisor, VW has fixed or repurchased 85.8 percent of all affected vehicles and paid or committed $8.1 billion to 450,000 class members.
Plaintiffs counsel, led by Elizabeth Cabraser of San Francisco’s Lieff Cabraser Heimann Bernstein, have requested $175 million as part of the 2.0-liter settlement. Their fee request is subject to a separate appeal that was not addressed in Monday’s opinion.
In a prepared statement Cabraser said that about 90 percent of the affected vehicles have been taken off the market or repaired and that her team looks forward to helping remaining class members submit claims before the Sept. 1 deadline.
“We are pleased with the court’s decision, which acknowledges the widespread support this historic settlement has received from affected Volkswagen owners and lessees and the substantial benefits available to class members,” Cabraser said.
VW was represented by Sharon Nelles, William Monahan, and Robert Giuffra Jr. of Sullivan & Cromwell.