Bloomberg Law
Sept. 23, 2016, 9:55 PM

Not Everyone is a Fan of the $14.7 Billion VW Settlement

Bloomberg Law - Staff Reports

By Patrick Ambrosio, Bloomberg BNA

A proposed $14.7 billion settlement among Volkswagen, a class of consumers and the federal government has drawn criticism from a number of parties, who are pushing for lower attorneys fees and additional compensation.

The proposed settlement would create a $10 billion compensation fund for owners who purchased or leased 2.0-liter Volkswagen diesels that were equipped with illegal defeat devices, technology that allowed the vehicles to pass emissions tests despite emitting far more pollution than allowed under normal driving conditions. Owners would have the options of selling their vehicles back to Volkswagen or, if a technical fix is approved by regulators, accepting a combination of a free repair and a cash payment.

The tentative settlement received preliminary approval from a federal district court judge in July, and more than 200,000 owners and lessees of Volkswagen diesels registered to receive benefits under the settlement as of the end of August. However, the settlement still must receive formal court approval before it will go into effect, with a hearing set for Oct. 18 in San Francisco.

At least 15 parties, ranging from individual Volkswagen diesel owners to the Competitive Enterprise Institute’s Center for Class Action Fairness, filed objections to the settlement, according to the court docket. Common issues highlighted in those objections include the level of compensation requested by class-action attorneys, the absence of any attorneys fees awarded for individuals who retained their own counsel and language that allows Volkswagen to recover any money left in the compensation fund after the end of the proposed claim period.

Attorneys Fee Complaints

The tentative settlement would require Volkswagen to pay “reasonable fees and costs” to the attorneys who represented the class-action plaintiffs, but a formal fee request hasn’t yet been made. The plaintiffs’ attorneys, led by Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein LLP, said in an August court filing that they intend to seek no more than $324 million in fees from Volkswagen.

That figure drew criticism from a number of parties who objected to the suit, including Christopher D’Angelo, who filed one of the original complaints over the Volkswagen diesel scandal and filed the initial motion to consolidate all of the cases before the Panel for Multi-District Litigation. D’Angelo noted in his objection that the $324 million fee identified in court documents would work out to well over $15 million each for the 21 firms that make up the Plaintiff Steering Committee.

The Competitive Enterprise Institute’s Center for Class Action Fairness also criticized the class attorneys for suggesting such a large fee and negotiating the fee separately from the overall settlement, a decision the center alleged to have likely cost consumers hundreds of millions of dollars in compensation.

The center provided three explanations for that assertion: Volkswagen may have held back billions of dollars during the settlement negotiations out of concern that the fee request would be even higher, a fee award of less than $324 million will see unawarded money revert to Volkswagen rather than to consumers and the fee is improperly insulated on appeal.

The fee request is “particularly egregious” given that Volkswagen had already hired Kenneth Feinberg, managing partner of The Law Offices of Kenneth R. Feinberg PC, to establish and administer a claims resolution program, according to the Center for Class Action Fairness.

The center noted that Feinberg was paid between $850,000 and $1.25 million per month to administer a far more complex claims process related to the 2010 BP Deepwater Horizon oil spill.

Push for More Compensation

Several parties used their opportunity to object to push for more compensation under the settlement, including one family which wants Volkswagen to compensate them for more than $1,200 worth of anti-theft products installed on their car if they opt to sell it back.

Several objectors, including a family that owns a 2011 Volkswagen Sportwagen TDI, criticized the proposed settlement for not providing any fees for attorneys who aren’t class counsel but rather were hired by individual plaintiffs. The proposed settlement would divide consumers into two separate classes: those who were never represented individually and those who privately retained attorneys, who would have to pay fees out of their settlement benefits, according to the objectors.

Many of the objectors urged the court to award legal fees to individual attorneys in addition to the proposed settlement benefits.

Volkswagen Receiving Leftover Funds

Another common complaint in objections was to the provision that allows Volkswagen to recover any money left in the compensation fund after the claims period ends, which is projected for 2018. The $14.7 billion settlement figure, which includes $4.7 billion for a pair of environmental remediation funds, is based on a 100 percent participation rate by Volkswagen diesel owners, with all of them choosing to either sell back their car or terminate their lease.

Greg Siewert, a 2012 Volkswagen Jetta owner, suggested that instead of sending that money back to Volkswagen, there should instead be a “second round distribution” of funds to people who already made claims under the settlement. Any leftover funds after that second round could then be directed to the environmental remediation fund, which will fund programs to reduce nitrogen oxides emissions and support adoption of zero emissions vehicles, according to Siewert.

The case is In Re Volkswagen “Clean Diesel” Marketing, Sales Practices and Products, N.D. Cal., No. 3:15-md-2672, objection filed September 21, 2016.

To contact the reporter on this story: Patrick Ambrosio in Washington

To contact the editor responsible for this story: Larry Pearl