In re Volkswagen "Clean Diesel" Mktg., Sales Practices, & Prods. Liab. Litig.
| Decision Date | 03 October 2018 |
| Docket Number | MDL No. 2672 CRB (JSC) |
| Citation | 349 F.Supp.3d 881 |
| Parties | IN RE: VOLKSWAGEN "CLEAN DIESEL" MARKETING, SALES PRACTICES, AND PRODUCTS LIABILITY LITIGATION This Order Relates to: MDL Dkt. Nos. 4533, 4534, 5162, 5287 Nemet v. Volkswagen Group of America, Inc., No. 3:17-cv-04372-CRB |
| Court | U.S. District Court — Northern District of California |
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS
On September 18, 2015, the public learned that Volkswagen had been selling diesel cars in the United States since 2009 that were equipped with emission cheating software. Litigation ensued and VW quickly settled claims brought by consumers who owned or leased the cars as of September 18. This order addresses a lawsuit by a putative class of consumers with whom VW has not settled: consumers who had owned or leased an affected car but who resold the car or exited the lease before September 18. VW contends that these consumers were not injured by the fraud because they did not experience a drop in the resale value of the cars.
The former owners rely on a well-accepted theory of injury (overpayment) but with a novel twist. They acknowledge that the price of the cars was likely inflated not only when they purchased them, but also when they resold them. Yet they contend that they did not recover all of their overpayment through resale because a portion of the premium they paid for a low-emission vehicle depreciated. To be clear, the former owners do not assert that their injury is equal to the entire amount by which the cars depreciated, only that a portion of the low-emission premium depreciated and that, because the premium was for a feature the cars never had, this extra depreciation is a loss that is attributable to VW's deceit.
Based on these relatively unique allegations—where consumers each purchased a car, a well-known depreciating asset, where they each paid a premium for a feature they did not receive, and where they resold the cars before learning that the feature was missing—the Court concludes that Plaintiffs have alleged an injury that is sufficiently concrete to survive a Rule 12(b)(1) motion to dismiss for lack of Article III standing. Whether this depreciation-based injury can be accurately quantified and whether the former owners' losses are more than de minimis remains to be seen. But what matters at the pleading stage is that the fact of damage, rather than the amount of damage, is not speculative.
A variety of other issues are also addressed in this order, including whether other injury allegations are sufficiently concrete, whether Plaintiffs' RICO claims against Robert Bosch GmbH and Robert Bosch LLC are well pled, whether state law claims against VW are preempted or alternatively fail to satisfy Rules 8(a) and 9(b), and whether certain of the state law claims fail for miscellaneous reasons.
In 2009, VW began selling its VW and Audi branded TDI "clean diesel" vehicles, which it marketed as being low-emission, environmentally friendly, fuel efficient, and high performing. (Compl. ¶ 6.) Concealed was the fact that VW had installed software in these cars that caused their emission controls to perform one way during emissions testing, and another (less effective) way during normal driving conditions. (Id. ¶ 203.) During regular on-road use, the cars are alleged to have emitted nitrogen oxides (NOx) at levels that were sometimes 40 times higher than EPA's legal limit. (Id. ¶¶ 10, 203.)
On September 18, 2015, the public learned of the fraud when EPA issued a Notice of Violation to VW, alleging that the company's use of the defeat device violated the Clean Air Act. (Id. ¶ 344.) Consumers nationwide responded by filing hundreds of lawsuits. The Judicial Panel on Multidistrict Litigation transferred those cases here. The Court then appointed Lead Plaintiffs' Counsel and a Plaintiffs' Steering Committee (PSC), which filed a consolidated class action complaint against VW, related entities, and Bosch (who allegedly assisted in developing and implementing the defeat device). The consolidated complaint was on behalf of all persons and entities in the United States who purchased or leased an affected vehicle. (See Dkt. No. 1804 ¶ 424.)
Settlement talks began almost immediately, and VW and Bosch soon agreed to a series of settlements to compensate consumers who were registered owners or lessees of the cars as of September 18, 2015.1 (See Dkt. Nos. 2102, 3229, 3230.) Excluded from the settlement class definitions were Plaintiffs here: all persons and entities in the United States who "owned, leased, or otherwise acquired" an affected vehicle but who "no longer owned, held an active lease for, or otherwise had a legal interest in that Eligible Vehicle on or after September 18, 2015." (Compl. ¶ 401.)
Plaintiffs filed this lawsuit after the Court approved the PSC-led settlements. They contend that VW, VW related entities (such as Audi), Bosch, and certain individual defendants engaged in a racketeering enterprise in violation of RICO, and that VW also violated 21 states' consumer protection and false advertising laws by deceiving consumers about its vehicles. The complaint also includes a claim for violation of the Magnuson-Moss Warranty Act, but Plaintiffs have agreed not to pursue that claim. (See Pls.' Opp'n, Dkt. No. 4713 at 11.)
VW and Bosch have filed motions to dismiss the complaint.
To have standing to sue in federal court, Plaintiffs must establish (1) that they have suffered an injury in fact, (2) that their injury is fairly traceable to Defendants' conduct, and (3) that their injury will likely be redressed by a favorable decision. See Lujan v. Defenders of Wildlife , 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). To establish the first of these elements, Plaintiffs must demonstrate that they "suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’ " Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S.Ct. 1540, 1548, 194 L.Ed.2d 635 (2016) (quoting Lujan , 504 U.S. at 560, 112 S.Ct. 2130 ). "At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice ...." Lujan , 504 U.S. at 561, 112 S.Ct. 2130.
Plaintiffs allege that they were injured by VW's emissions fraud in three ways. First, they contend that they overpaid to purchase and lease the class vehicles—paying a "clean diesel" premium for cars that were supposed to, but did not, have low emissions. (See, e.g. , Compl. ¶¶ 13, 379-82.) Second, they contend that they paid financing and leasing fees for the class vehicles, which they would not have paid, or which would have been less, had they known about the cars' actual emission levels. (Id. ¶¶ 13-14, 383.) Third, they contend that even if they did not each pay a premium to buy or lease a class vehicle, they were still injured because they never would have bought or leased the cars in the first place if they had known about the fraud. (Id. ¶ 384.)
VW argues that the allegations are insufficient to support an injury in fact under any of these theories. In ruling on VW's challenge, which is a facial challenge to federal jurisdiction, the Court "must accept as true all material allegations of the complaint and must construe the complaint in favor of the complaining party." Warth v. Seldin , 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975).
In considering whether Plaintiffs were injured by paying a "clean diesel" premium, the Court discusses former owners and former lessees of the class vehicles separately.
Plaintiffs contend that they overpaid for the class vehicles because they paid a premium for a feature—low emissions—that they did not receive. When a consumer overpays for a product because of the seller's conduct, the overpayment is ordinarily "a quintessential injury-in-fact." Maya v. Centex Corp. , 658 F.3d 1060, 1069 (9th Cir. 2011). But the purchasing Plaintiffs here are in a unique situation, because they resold the class vehicles before VW's emissions fraud was public knowledge. So even though they purchased the cars at a price that did not take into account the fraud, they also sold them at a price that did not take into account the fraud. (See Compl. ¶ 4 ().)
Plaintiffs respond by arguing that, although they sold the cars before they or the new purchasers knew about the emissions fraud, they were not able to recover the entire "clean diesel" premium through resale. The reason they were not able to do so, they argue, is because of depreciation.
Of course, vehicle depreciation is a fact of life: as vehicles age they decline in value, and this decline is not a loss that is treated as an injury by the law. But Plaintiffs do not argue that VW is somehow responsible for the natural depreciation of the class vehicles; what they argue is that they were not able to fully recover the premium VW charged for the cars because a portion of the premium effectively depreciated. And because the premium was for a feature they did not receive, Plaintiffs contend that they were injured by the amount of the premium that they were not able to recover through resale.
It is easiest to understand Plaintiffs' argument through examples. Assume that the purchase price of a new VW car without a "clean diesel" premium is $30,000. If the value of the car depreciates by 20% during the first year, its value will decline by $6,000, leaving a resale value of $24,000.
Scenario 1: No "Clean Diesel" Premium
Purchase price $30,000
Depreciation rate 20%
Value after 1 year $24,000
Decline in value from original purchase...To continue reading
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