German court slams Volkswagen, and the bill for Dieselgate could soar

January 18, 2017

Earlier this month, we told you about the German owner of a VW Eos who had sued Volkswagen over the company's Dieselgate lies in the hope of having VW buy back the car.

That case is still working its way through the courts, so far as we know, but a similar one has just been decided by three judges in Hildesheim, Germany. Their unequivocally consumer-friendly ruling could be a good sign for the owner of the Eos--and for every other German who'd like to sue Volkswagen.

The suit was filed by the owner of a Skoda Yeti 2.0-liter diesel, who sought to have Volkswagen buy back the car for the full purchase price. The judges reviewing the case ruled in the plaintiff's favor, ordering Volkswagen to shell out roughly 26,500 euros ($28,300) to the owner. 

But the news for consumers is better than that, because the judges were so vehement in their ruling. They compared Dieselgate to other outrageous scandals in which businesses set out to deceive consumers--like the 2013 case of companies found using horsemeat in their lasagna and the 1985 case in which Austrian wineries were caught sweetening their wines with antifreeze. That's not-so-great company to be in.

Complete transcripts of the Hildesheim case aren't available, but it appears that Volkswagen defended itself, in part, by making two slightly contradictory arguments:

1. The defeat devices installed on the company's 11 million diesels were developed by a low-level employee (or employees), who don't represent Volkswagen as a whole.

2. Volkswagen hasn't yet determined who's to blame for the defeat devices and therefore shouldn't be held accountable.

By putting forth item #1, it obviously became difficult for Volkswagen to argue item #2. After all, if the company doesn't know who's responsible for Dieselgate, how can it be sure that low-level employees are to blame?

Those arguments became even tougher to peddle in light of six Volkswagen executives who were indicted last week in the U.S. on charges that include conspiring to commit fraud.

The judges weren't having any of it. They found argument #2 irrelevant and argument #1 incredible. Specifically, they said that it is impossible to believe that any device with such a huge economic impact could be developed and installed on vehicles without the knowledge and consent of upper-management. 

A Volkswagen spokesperson says that the automaker will appeal the ruling.

Future implications

Here in the U.S., thousands of Volkswagen owners have sued the automaker for damages. In Germany, however, where there's no such thing as class-action lawsuits, far fewer have followed suit (no pun intended).

However, of the 1,000 or so individuals who have sued Volkswagen, about 250 have been successful. This ruling makes it slightly easier for other plaintiffs, including those lining up for something akin to a class-action suit being organized by U.S. law firm Hausfeld and the website My-Right.de

If the momentum against Volkswagen continues to grow in Germany, it could spell huge trouble for the automaker. Here in the U.S., Volkswagen's Dieselgate bill has topped $21 billion, and America only has about 500,000 of the company's illegally rigged vehicles. In Germany, the number is closer to 2.5 million. 

Previously, Volkswagen has said that it would be financially impossible to compensate European owners the same way that it has compensated Americans. Will Germans continue to buy that argument?

It's doubtful that the German government would risk forcing one of its premier companies to close its doors. However, given the relatively sweet deal that U.S. owners have received, we wouldn't be surprised if officials pushed Volkswagen to offer some kind of meaningful compensation package to consumers.

We'll keep you posted as the situation progresses.

Note: for purposes of clarity, "Volkswagen" has been used to refer to the Volkswagen Group parent company, while "VW" has been used to refer to the company's popular mass-market brand of automobiles.

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