Farchione Motors, Inc. v. Volkswagen Group of America
975 F.3d 770
9th Cir.2020Background:
- In 2015 the EPA accused Volkswagen of using defeat devices in 2.0L and 3.0L diesel cars; Volkswagen entered into a large nationwide class settlement (approved 2016) that reimbursed qualifying owners/lessees and removed offending vehicles from the road.
- The settlement disqualified certain "branded title" vehicles (e.g., Junk, Rebuilt, Salvaged) purchased from junk/salvage yards from receiving compensation.
- The settlement created multi-level claims review (VW initial decision; court-appointed Claims Supervisor; Claims Review Committee (CRC) whose decisions were "final determinations"). The settlement allowed amendments by written agreement of the Parties and court approval.
- In Feb. 2018 the CRC adopted a Framework expanding the branded-title exclusion to cover cars acquired from the "equivalent" of a junkyard—specifically insurance auctions; the Framework applied to pending claims.
- Claimants (Farchione Motors, Autovid, Kennedy’s Autos, and others) purchased branded-title Volkswagens at insurance auctions after settlement approval, filed claims, and were denied under the Framework; they moved to enforce the original settlement terms.
- The district court, retaining jurisdiction to "ensure compliance," treated the Framework as a permissible amendment adopted by the Parties (via the CRC and court approval), ratified it, and denied claimants’ motions; the Ninth Circuit affirmed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Court authority to review motions to enforce settlement | Claimants: as class members/third-party beneficiaries they may seek court enforcement; CRC finality shouldn't bar court review | VW: CRC decisions are final and settlement precludes judicial review; claimants not parties | Court: District court had ancillary jurisdiction (it retained power to "ensure compliance") and properly reached the merits without resolving beneficiary status |
| Validity of the CRC "Framework" as a settlement amendment | Claimants: Framework was adopted only by CRC, not by the Parties as required; modification procedure not followed | VW: Parties and Class Counsel acted through CRC; Framework reflects Parties' assent and can be ratified by the court | Court: The Framework constituted a written modification by the Parties (via CRC) and the court properly approved it; enforceable amendment |
| Estoppel/reliance on VW’s prior payments | Claimants: VW previously approved many similar claims; claimants relied and are entitled to compensation | VW: Settlement expressly permits amendment with court approval; reliance cannot override express modification procedures | Court: Rejected estoppel; reliance cannot trump explicit amendment process and court approval |
| Need for class notice or changed circumstances to amend | Claimants: any amendment requires notice to class and a substantial change in circumstances | VW: Plain modification clause requires only Parties’ written agreement and court approval; no notice/change required by the text | Court: No notice or changed-circumstances requirement in the settlement’s modification provision; court will not read one in |
Key Cases Cited
- Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (ancillary jurisdiction to enforce agreements incorporated in court orders)
- In re Prudential Ins. Co. of Am. Sales Practice Litig., 261 F.3d 355 (3d Cir. 2001) (district court's power to enforce complex class settlements)
- Wilcox v. Arpaio, 753 F.3d 872 (9th Cir. 2014) (standard of review for denial of motion to enforce settlement: abuse of discretion)
- In re Volkswagen "Clean Diesel" Mktg., 895 F.3d 597 (9th Cir. 2018) (prior appellate opinion affirming settlement approval)
- Arata v. Nu Skin Int’l, Inc., 96 F.3d 1265 (9th Cir. 1996) (ancillary jurisdiction over settlement enforcement)
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (courts cannot unilaterally modify settlement terms)
- Flores v. Lynch, 828 F.3d 898 (9th Cir. 2016) (distinguishing amendment-via-court-order contexts and changed-circumstances arguments)
- Hinkson v. United States, 585 F.3d 1247 (9th Cir. 2009) (abuse-of-discretion review standards)