Justice Department sues VW for alleged emissions cheating

By Benjamin Hulac | 01/05/2016 07:53 AM EST

The Justice Department yesterday filed a multibillion-dollar civil lawsuit against Volkswagen and five of its subsidiaries, including Audi and Porsche, related to the VW software that allowed its diesels to pass emission tests but release an unsafe amount of harmful nitrogen oxides when driven under real-world conditions.

The Justice Department yesterday filed a multibillion-dollar civil lawsuit against Volkswagen and five of its subsidiaries, including Audi and Porsche, related to the VW software that allowed its diesels to pass emission tests but release an unsafe amount of harmful nitrogen oxides (NOx) when driven under real-world conditions.

The department requested that the court enforce injunctions to stop the sale of Volkswagens in the United States and levy financial damages against the company of potentially more than $100,000 per vehicle.

"Volkswagen AG knowingly concealed facts," and federal inquiries to learn more about excessive nitrogen oxides emissions "were impeded and obstructed by material omissions and misleading information" from Volkswagen and Audi, the government said in its complaint.


"The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation’s clean air laws alleged in the complaint," John Cruden, assistant attorney general for the Justice Department’s Environment and Natural Resources Division, said in a statement.

11M cars potentially affected

Yesterday’s action is the first official legal step from the federal government in connection to allegations of VW’s emissions violations.

The document lists Volkswagen AG, Audi AG, Porsche AG and three of Volkswagen’s U.S. and North American subsidiaries as defendants.

The complaint, filed with a federal court in Detroit, accuses the company of violating at least four provisions of the Clean Air Act when it sold approximately 600,000 diesel vehicles that don’t meet U.S. emissions standards. The company also failed to disclose that it had installed certain devices in the vehicles that modify emissions and performance, regulators said.

The majority of those cars — about 499,000 in all, model years 2009 through 2015 — were 2.0-liter diesels sold in the United States since 2009. The rest, about 85,000, were 3.0-liter vehicles, including the VW Touareg, the Audi Q7, the Porsche Cayenne diesel and five other Audi models.

VW has said the emissions scandal and the test-tricking software called "defeat devices," which activated when cars underwent standard emissions tests, could affect as many as 11 million cars worldwide.

The Department of Justice, U.S. EPA and the California Air Resources Board are still investigating VW for emissions violations.

"So far, recall discussions with the company have not produced an acceptable way forward," said Cynthia Giles, EPA’s assistant administrator for enforcement and compliance assurance. "These discussions will continue in parallel with the federal court action."

Effort to thwart lawsuits

A spokesman for Volkswagen Group of America Inc. said there is "no timeline yet on a remedy for the affected vehicles."

In the United States, there are at least 450 separate active lawsuits, primarily class-action cases brought on behalf of dealers, owners and people who leased affected VW models.

Dozens of these suits, filed in separate state jurisdictions across the country, have been transferred and consolidated for pretrial proceedings to the U.S. District Court for the Northern District of California.

Yet Congress could throw up a hurdle to those suits. Rep. Bob Goodlatte (R-Va.) introduced a short bill last year, the "Fairness in Class Action Litigation Act of 2015," that would make defining class-action cases and doling out compensation more difficult.

The measure would require courts to verify that a plaintiff trying to make a class-action case "affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives."

That section could lead attorneys to argue that, in the example of a case against Volkswagen, plaintiffs who drove less deserve less financial compensation even though they purchased the same product as others. The House is scheduled to vote on the bill Friday.

The Justice Department and EPA have sued and settled with car and truck companies before over devices that tricked emissions tests. In 1998, the agencies settled a comparable case to the current VW case with seven heavy-duty truck companies. The companies paid more than $1 billion after admitting to using deceptive software in their vehicles.

Not VW’s first offense

"Corporate cheaters that put profits ahead of public health ought to be held accountable and, if found guilty, penalized to the full extent of the law," Luke Tonachel, a vehicle analyst at the Natural Resources Defense Council who has been studying the VW scandal, said in an email.

In a statement, Michael Brune, the Sierra Club’s executive director, urged the federal government to hold Volkswagen executives accountable.

"Volkswagen not only put profits before the health of our families and our planet, it ripped off mindful consumers who thought they were purchasing cleaner vehicles," he said.

Also in 1998, Honda Motor Co. paid more than $250 million for Clean Air Act violations and Ford Motor Co. shelled out about $8 million to resolve allegations of installing defeat devices, which emitted more NOx than permitted, in 60,000 vans.

Volkswagen, too, has been down this path before. The Justice Department accused VW of failing to tell federal regulators of "temperature-sensing" car equipment that turned off vehicle emission systems in 1972. It paid a minute $120,000 to settle that development.

Volkswagen Group of America CEO Michael Horn testified before the House Energy and Commerce Subcommittee on Oversight and Investigations on Oct. 9, 2015.

As Horn sat and spoke before the House panel, German police raided VW’s corporate headquarters, looking for documents to identify the employees behind the emissions-tricking software that sidestepped American emission tests.

VW: ‘We are determined to make things right’

Horn told lawmakers he first learned VW cars might not comply with U.S. requirements in the spring of 2014 and pledged to work with U.S. regulations.

"We are determined to make things right," he said at that October hearing. "We know that we can fix these vehicles."

According to the federal government, however, VW remained obstructive after Horn’s testimony.

"VW failed to come forward and reveal to regulators" that many of its 3.0-liter vehicles contained emissions-cheating software that the company had not declared, according to the complaint, specifically a program called a "dual calibration strategy" that let vehicles pass inspection but emit more than deemed safe when driven normally.

"The existence of this dual calibration strategy was uncovered only as a result of EPA and [the California Air Resources Board’s] diligence," the filing reads.

After sending a violation notice regarding 2.0-liter VW diesels that failed to meet Clean Air Act standards, U.S. regulators issued a statement on Nov. 2, 2015, regarding excess emissions from 3.0-liter cars. VW promptly denied the presence of prohibited software in 3.0-liter models, then, on Nov. 23, 2015, admitted that the cars in question had undisclosed software meant to beat emissions tests.

"Volkswagen will continue to work cooperatively with the EPA on developing remedies to bring the TDI vehicles into full compliance with regulations as soon as possible," Volkswagen Group of America said in a statement in response to the lawsuit. "We will continue to cooperate with all government agencies investigating these matters."

In December, Volkswagen hired Kenneth Feinberg — a high-profile attorney who oversaw payouts in national cases including to the victims of the Boston Marathon bombings and people affected by the BP PLC oil spill in the Gulf of Mexico — to create an independent legal claims system specifically for the emissions scandal (ClimateWire, Dec. 18, 2015).

Shares of Volkswagen, the world’s second-largest car company, valued at $67 billion, fell 3 percent after regulators announced the lawsuit.