CEI Objects to Abusive Volkswagen Settlement at Center of Emissions Scandal


On Friday evening, the Competitive Enterprise Institute’s (CEI) Center for Class Action Fairness asked the U.S. District Court for the Northern District of California to reject the settlement reached in the class action litigation resulting from the Volkswagen emissions scandal that erupted last year.

In the case, In re Volkswagen “Clean Diesel” Marketing, Sales Practices, and Products Liability Litigation, CEI objected to class counsel’s breach of fiduciary duty in negotiating a settlement that imposes costs on class members with zero marginal benefits. Class counsel misinformed class members that they could not obtain the relief provided by the class action settlement if they “opt out,” when the same benefits are available through settlements with the Department of Justice and the Federal Trade Commission. Further, class counsel provided insufficient information regarding their fee request, which could be as high as $332.5 million, though a competitive bidding process would have likely reduced that by more than 90 percent and returned hundreds of millions more to the class.

"The Volkswagen case and settlement provide a perfect example of why multi-district litigation needs a competitive bidding process. Dozens of law firms colluded instead of competed and will now seek thousands of dollars an hour for providing class members what Volkswagen and the government would have provided anyway, perhaps even sooner than the class-action process would have,” said Ted Frank, director of CEI’s Center for Class Action Fairness. “The lawyers' decision to structure the settlement with self-dealing gimmicks that other courts forbid may have cost Volkswagen owners over a billion dollars. And, it's ironic that lawyers in a consumer-fraud suit are misleading the public and the media by calling this a $10 billion settlement when the actual value to consumers will be a small fraction of that."

This settlement is a result of Volkswagen's disclosure to the EPA and California Air Resources Board that Volkswagen installed software in certain diesel vehicles that was designed to bypass emissions standards.

CEI asked the court to postpone the fairness hearing and order class counsel to provide corrected notice, its attorneys’ fee request, and any agreement with Volkswagen regarding those fees. CEI also asked the court to order the FTC settlement to take effect immediately, so as to not let the class-action litigation further delay relief to Volkswagen owners.

CEI’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Founded by Ted Frank in 2009, the center has won millions of dollars for consumers and shareholders and won landmark precedents that safeguard consumers, investors, courts, and the general public.