In re Volkswagen "Clean Diesel" Marketing, Sales Practices, & Products Liability Litigation
229 F. Supp. 3d 1052
| N.D. Cal. | 2017Background
- In 2015 Volkswagen admitted installing a defeat device in many VW and Audi TDI diesel vehicles sold in the U.S., triggering MDL litigation that included claims by Volkswagen-branded franchise dealers.
- A class of 651 eligible dealers (652 total less one individually settled dealer and several opt-outs) was defined to pursue dealer losses from the TDI scandal; plaintiff J. Bertolet, Inc. proposed a settlement that the Court preliminarily approved and later granted final approval.
- Settlement terms include up to $1.208 billion in cash (assuming full participation), estimated average dealer payment of ~$1.85 million, continuation of certain incentive programs (VIP/CSI), temporary facility-renovation deferrals, vehicle repurchase obligations where no emissions Fix exists, and dealer obligations to cooperate with consumer Fix appointments.
- Class Members release broad claims against Volkswagen-related entities (but not Bosch) covering all TDI-related claims, with an amendment preserving preexisting individual lawsuits filed before April 6, 2016; releases also waive Cal. Civ. Code § 1542 claims.
- The Court conducted heightened scrutiny because this was a pre-certification settlement, reviewed notice and CAFA compliance, considered objections from a small number of dealers, found high participation (98% stayed in), and concluded the Settlement is fair, reasonable, and adequate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Final class certification under Rule 23 (settlement class) | Class satisfies numerosity, commonality, typicality, adequacy; predominance and superiority under Rule 23(b)(3) | No meaningful challenge at final approval stage; concerns about dealer heterogeneity noted but addressed | Court granted final certification; class meets Rule 23(a) and (b)(3) requirements |
| Fairness/adequacy of settlement under Rule 23(e) (Churchill factors) | Settlement provides substantial monetary and non-monetary relief, supported by economic analysis and counsel experience; litigation risks make settlement prudent | Objectors argued formulaic allocation shortchanged some dealers | Court found Churchill factors (strength of case, risks, amount, discovery, counsel views, government notice, reaction) support final approval; amount exceeds expert lost-profit range |
| Collusion / heightened scrutiny for pre-certification deals (Bluetooth factors) | Negotiations were arms-length; fee discussions occurred after substantive terms; fees capped and separately paid by VW; no reversion to defendant | Objectors pointed to potential fee/clear-sailing concerns and allocation disputes | Court found no Bluetooth red flags: fees are reasonable, no clear-sailing inducement, no reversion; no collusion evident |
| Injunction of state-court actions / All Writs Act authority | Injunction needed to protect federal settlement and prevent parallel state suits that would impair jurisdiction; class members had opt-out opportunity | Objectors argued federal court should not enjoin state proceedings absent stronger showing | Court enjoined non-opt-out Class Members from prosecuting Released Claims in other fora (with exceptions in amended paragraph 9.3.1) as necessary to preserve jurisdiction |
Key Cases Cited
- Allen v. Bedolla, 787 F.3d 1218 (9th Cir. 2015) (strong judicial policy favoring class settlements)
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (district court’s fiduciary duty in settlement class approval)
- Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003) (heightened scrutiny for pre-certification settlements)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (requirements for settlement-only class certification)
- In re Bluetooth Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (warning signs of collusion in class settlements)
- Churchill Vill., L.L.C. v. Gen. Elec., 361 F.3d 566 (9th Cir. 2004) (list of factors for assessing settlement fairness)
- Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) (individual notice requirement under Rule 23)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (notice must be reasonably calculated to apprise interested parties)
- Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 615 (9th Cir. 1982) (settlement evaluated as a package)
- In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454 (9th Cir. 2000) (settlement approval despite limited formal discovery when information sufficient)