Resolving the Volkswagen Scandal

Christina Foster, Vol. 37 Associate Editor

Volkswagen, the largest automaker in the world, made headlines last month after it admitted to installing defeat devices in its diesel engines to evade emissions standards. The initial discoveries came from the United States, but the company later admitted that approximately 11 million Volkswagen cars worldwide contain the device.[1] According to the German Transport Minister, Alexander Dobrindt, Volkswagen manipulated emissions tests in Europe as well.[2] Credit Suisse estimates that the scandal could cost the company up to 78 billion euros.[3] This has already had huge implications for shareholders across the globe as shares have dropped over 35%, and the fallout is likely to continue.[4] According to Volkswagen’s Chairman, Hans Dieter Poetsch, the scandal has become “an existence-threatening crisis for the company.”[5] This raises the question of how far the world should push to hold Volkswagen accountable. While the company is clearly in the wrong, the end of Volkswagen would mean the end of hundreds of thousands of jobs. What is the proper balance between vindicating those who have been wronged and preserving this massive company that is the source of many people’s livelihood? And who should bring these claims? Consumers, shareholders, and national governments across the globe will likely seek legal action in both civil and criminal court. While many parties may have a case against Volkswagen, the company will not survive without a consolidation of lawsuits. Volkswagen has already promised to cooperate with German prosecutors in the criminal investigation that it faces.[6] But the United States, as the one of the most direct victims of the German auto company’s fraudulent conduct, will likely want its slice of the pie. In the United States alone, the EPA may fine Volkswagen up to $37,500 for each vehicle that does not reach standards, resulting in up to $18 billion in fines to the agency.[7] But that is just the tip of the iceberg—within days of the scandal breaking out, more than two dozen lawsuits were filed in courts across the United States.[8] Aggrieved parties are already seeking ways to consolidate their claims into multi-district class action suits[9] and in the United States they have until October 20 to file briefs to consolidate litigation.[10] Other countries across Europe and Asia are also conducting investigations. Western Europe is Volkswagen’s primary market[11] and European investors in Volkswagen will likely claim damages as well. Some countries, however, may be more fit to take the lead than others. The legal system in the UK, for example, makes it harder to bring collective claims than in the United States.[12] The EU, in an effort to avoid the excess of American litigation, has made collective actions even more difficult.[13] In the end, only those countries that have jurisdiction over Volkswagen will be able to file claims. Then, it will come down to which country or group of countries is best fit to pursue damages and seek reconciliation on the behalf of consumers and shareholders worldwide.

[1] Kirsten Ridley & Sinead Cruise, European investors weigh Volkswagen lawsuits over emissions scandal, Reuters (Sept. 24, 2015, 1:12 PM), [2] Id. [3] Oscar Williams-Grut, Credit Suisse: The emission scandal could cost Volkswagen €78 billion and shares need to fall another 20%, Bus. Insider (Oct. 2, 2015, 3:13 AM), [4] Id. [5] Patrick Donahue, Volkswagen Chief Warns on Existential Threat of Cheating Scandal, Bloomberg (Oct. 4, 2015, 10:51 AM), [6] Volkswagen scandal in two minutes, CNN (Oct. 1, 2015, 9:03 AM), [7]Russell Hotten, Volkswagen: The scandal explained, BBC (Sept. 25, 2015), [8] Mike Spector, VW Faces Barrage of Litigation, Wall St. J. (Sept. 29, 2015, 3:25 AM), [9] Ben Geier, Volkswagen is already facing dozens of consumer lawsuits, Fortune (Sept. 29, 2015, 12:00 PM), [10] Alison Frankel, Which court is going to hear Volkswagen class actions?, Reuters (Sept. 30, 2015), [11] Volkswagen scandal in two minutes, supra note 6. [12] See The adoption of opt-out collective actions in the UK, Norton Rose Fulbright (Jul. 2015), [13] See id.