Why Does Volkswagen Want To Face Dieselgate Trials In Detroit?

December 2, 2015

It goes without saying that Volkswagen's Dieselgate scandal is going to cost the company a very pretty penny. We'd initially pegged the cost around $25 billion, but some analysts now expect the final bill to top $40 billion.

Much of that money will pay for fixing VW, Audi, Porsche, Seat, and Skoda diesels -- a process that could begin soon in Germany. Some will cover fines from regulatory bodies like the Environmental Protection Agency. And a sizeable chunk of Volkswagen's payout will be spent on legal fees and settlements with owners, who've already begun to file suits.  

This week, Volkswagen has said it would like to centralize those lawsuits and face them all in Detroit courts.

At first glance, that might seem crazy. Why would a foreign automaker want to face judges and juries in a state where nearly 80 percent of motorists own domestic vehicles? Wouldn't those people seem likely to hold negative views of Volkswagen -- especially now, with Dieselgate making headlines every day?

But in fact, Volkswagen has good reasons to head to trial in Michigan:

  • For starters, Volkswagen has a presence in the area. The company operates an engineering center in Auburn Hills, which could buff its reputation among those hearing cases.
  • Second, Volkswagen might be betting that folks in Detroit are inclined to sympathize with automakers, who are under increasing pressure to boost fuel economy, slash emissions, and add autonomous features while keeping their products attractive and affordable to consumers. If Volkswagen can persuasively argue that its illegal activities were simply bad decisions made in response to a tough business environment, judges and juries might be more lenient.
  • But most importantly, Volkswagen has asked to argue its cases before Chief U.S. District Judge Gerald E. Rosen. Though he once campaigned as a Republican and was appointed by conservative President George H. W. Bush, Rosen's record is pretty diverse and hard to pigeonhole. On the one hand, he's overturned abortion bans; on the other, he's approved cases against the late Dr. Jack Kevorkian, known for his work in assisted suicides. He's considered thoughtful and scholarly, which suggests that he's eager to see issues from various sides. That won't change the fact that Volkswagen has admitted to installing illegal software on more than 500,000 vehicles in the U.S. However, it could have an impact on the penalties that the company has to pony up.

It bears mentioning that Rosen was also a key player in the City of Detroit's recent restructuring. He earned a reputation as a skilled negotiator -- one who's able to assign blame and dole out penalties while keeping his eye on the big picture. If he does hear Volkswagen's cases, Rosen is likely to fine the company fairly rather than excessively.

To date, Dieselgate has spawned some 350 lawsuits in 40 states. Many of those have been filed by owners of the 482,000 2.0-liter VW and Audi diesels equipped with Volkswagen's defeat devices, as well as owners of the 85,000 3.0-liter VW, Audi, and Porsche vehicles that have related software. Volkswagen would like those suits to be streamlined by giving them class-action status.

Five lawsuits have also been filed by investors -- particularly pension funds -- which claim to have lost huge sums of money in the wake of the scandal. It's unclear whether those cases are up for class-action status.

Meanwhile, plenty of lawyers representing plaintiffs would rather both types of cases heard in California, where -- much like the state's Air Resources Board -- judges and juries would likely be predisposed to hand out heavy fines. 

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