New Volkswagen Fraud Suit Following The “Dirty Diesel” Scandal

In May 2014, a study first revealed a discrepancy between the actual nitrous oxide emissions of Volkswagen’s diesel engines, and the reported emissions. California Air Resources Board (CARB) and the United States Environmental Protection Agency (EPA) subsequently opened investigations, alarmed by the differential between the engines’ actual emissions and the emissions reported during compliance tests.

After months of investigation, agencies discovered that Volkswagen intentionally developed and installed a “defeat device” in its vehicles, starting with 2009 model year vehicles equipped with 2.0-liter diesel engines. The defeat device altered engine performance to reduce emissions when it detected conditions matching the EPA’s emissions-testing parameters. In real-world driving, however, emissions skyrocketed beyond the legal limits.

Two years later, state and federal authorities launched a criminal prosecution against Volkswagen (including both Volkswagen Group of America, Inc. and its German parent company, Volkswagen AG). In the process, investigators found the same defeat device had been installed in Volkswagen’s 3.0-liter diesel engine vehicles sold in the United States. Volkswagen deliberately concealed information about the defeat device and about the true emissions of its vehicles.

To settle criminal and regulatory charges, Volkswagen entered into consent decrees involving, among other things, reprogramming emissions software via recalls and buying back (or canceling leases on) many non-compliant vehicles. Along with the modified emissions software, Volkswagen was required to provide an explicit written disclosure of impacts from the modification, including a detailed comparison of the new emissions levels with the originally-certified emissions, and a disclosure of any impacts on fuel economy or maintenance.

Volkswagen could have absorbed the costs of having to repurchase hundreds of the thousands of these “dirty diesel” vehicles by either scrapping the vehicles it bought back or by including a specific disclosure to potential buyers that the vehicles were buy-backs from the “dirty diesel” litigation. Volkswagen could have chalked it up to a “lesson learned,” a consequence of its fraud, and accepted a lower profit on those repackaged “dirty diesels.” Instead, Volkswagen implemented a new fraudulent scheme to maximize its profits on resold cars and to offset its losses.

Volkswagen’s new scheme involved a decision to resell its repurchased vehicles as “certified pre-owned” used vehicles to unsuspecting consumers. Volkswagen did not disclose that the vehicles were buy-backs from the dirty diesel litigation. Volkswagen also did not disclose that the vehicles’ emissions systems had either not been corrected, or, that they had been corrected but that the correction significantly and materially affected the cars’ performance. Volkswagen should not be allowed to further profit from its bad actions to the detriment of California consumers. 

Cases are pending in Riverside and Los Angeles Counties, represented by Steve Mikhov of Knight Law Group, LLP.