Tuesday, January 12, 2016

VW faces the music (and just the first part)



The feds started their first lawsuit against Volkswagen recently, along with many private class action suits filed previously. The Department of Justice press release is here, with a link to the complaint.

In related news, VW has refused to turn over internal emails to American investigators, citing German privacy laws. Americans were less than pleased.

Paragraphs 92 and 93 from the complaint should be chilling to VW -

92. The United States’ efforts to learn the truth about the emission exceedances and other irregularities related to the 2.0L Subject Vehicles, including whether VW had committed the violations of federal law alleged herein, were impeded and obstructed by material omissions and misleading information provided by VW entities including at least VWoA and Volkswagen AG. 
93. VW entities including at least Volkswagen AG knowingly concealed facts that would have revealed the existence of the dual-calibration strategy utilized in the 2.0L Subject Vehicles to regulators when they had a duty to share such information, and also engaged in affirmative misrepresentations and took affirmative actions designed to conceal these facts.

I've argued that the time between May 2014, when published results indicated VW had a problem and September 2015, when they admitted they installed defeat devices will get the company in even more trouble than it originally had, and these two paragraphs are the start.

This federal lawsuit is a civil action not a criminal complaint, but the feds haven't ruled out a criminal lawsuit, and in addition to criminal violations of the Clean Air Act, those claims sound like obstruction of justice charges. Here in this civil case, they can provide the justification for punitive damage multipliers of the civil damages (complaint doesn't specifically call for punitives, however).

The lawsuit calls for over $30,000 in damages for each violation (car), plus other damages. The total is over $40 billion, although that's more likely a starting point for a negotiated settlement.

Some claim the large amount is unfair and could make VW regret ever coming to America. I think if it were possible to identify and communicate with the relatives of the estimated 59 people killed so far by the illegal NOx emissions, they'd say the best situation would've been for VW to have never come.

As I mentioned earlier, no criminal cases yet, but take a look at the video posted above where two hackers show how they hacked into VW's electronics to understand how the defeat device software worked (and thanks Eli for the video tip). Many people may like the hacking-focused second half of the video, but as a lawyer I'm particularly interested in the first half, where the apparently-former-VW-engineer speaker describes the amount of documentation and top-down control that is involved in everything the company does (UPDATE:  per the comments, he's from BMW and not VW).

So it's interesting to see the company resisting requests to turn over internal emails, while at the same time claiming it was a small group of bad-apple engineers and designers below the board management level that was responsible. In other words, our company VIPs weren't involved and we're not going to turn over the documents that would test that statement.

Given the 16 months of obstruction, I assume VW's position is that it unluckily handed control of the response to the investigation in May 2014 to the same bad apples that created the problem, and those people fought a two-front war, lying both to the outside world and upper management, presumably while trying unsuccessfully to come up with a software hack that would erase both the defeat device software and evidence of its existence. In other words, VW is throwing these people under the VW bus hard, reversing and running over them again, and saying they are intentional criminals. There absolutely has to be a criminal investigation under VW's theory of what happened. Whether that theory, even if correct, keeps VW from corporate criminal liability is a separate question.

Finally, no mention anywhere so far about environmental consequences of VW's violations. We'll see about that.

7 comments:

William Connolley said...

> In related news, VW has refused to turn over internal emails to American investigators, citing German privacy laws

Fun, no? I notice that you carefully refraim from expressing an opinion. Do you think they should obey the German law or not?

JamieB said...

"as a lawyer I'm particularly interested in the first half, where the apparently-former-VW-engineer speaker describes the amount of documentation and top-down control that is involved in everything the company does."

He's former BMW but their processes would be very similar to VW's and his point stands: the official story is bull.

Happy Heyoka said...

Beautiful job by Felix finding and explaining the particular "tweak" in his car.

Also illuminating was the bit about punitive/exemplary damages... that feels about right to me - in many jurisdictions the only cost will be for the dealer to reprogram the engine management... you (the customer) don't get to make a claim for your own inconvenience (etc)

metzomagic said...

... in many jurisdictions the only cost will be for the dealer to reprogram the engine management... you (the customer) don't get to make a claim for your own inconvenience (etc)

But if the engine management is reprogrammed to keep the NOx emissions to 'passing' levels, then the car will no longer perform as well or get as much mileage as previously. That's certainly an inconvenience to the customer, no?

Brian said...

William - my knowledge of German privacy laws is shockingly low, but I read that this objection has been raised and overcome in prior cases. Also that these emails may reside onto American servers where American law applies. Privacy can often be waived by consent, and given how much trouble VW is in, I'd expect them to have attempted to cooperate as much as possible rather than shrug their shoulders at the first obstacle.

It sure seems strange to me that employees have privacy rights against their employer over work emails sent in the course of business, about business.

JamieB - thanks, I'll make the correction.

Happy Heyoka said...

metzomagic
But if the engine management is reprogrammed to keep the NOx emissions to 'passing' levels, then the car will no longer perform as well or get as much mileage as previously. That's certainly an inconvenience to the customer, no?

I don't disagree, you miss my point - it is very inconvenient (went through something similarly inconvenient with a new car recently).

Only in my country (Australia) I can't easily get damages beyond "fixing" the problem. Certainly there will be a "cost" in terms of reputation, loss of future sales etc to VW. But I can't *easily* sue them for other stuff that may come about from losing my car for duration of repairs, loss of fuel economy etc.
Apparently also the case in Germany (see first half of video).
Probably true of the UK (where Australia law derived from).
NOT true of the USA. Hence attention paid to USA by VW.
IANAL, but google for appropriate equivalent of punitive or exemplary damages in your end of the world.

metzomagic said...

Happy Heyoka:

I don't disagree, you miss my point - it is very inconvenient (went through something similarly inconvenient with a new car recently).

Only in my country (Australia) I can't easily get damages beyond "fixing" the problem. Certainly there will be a "cost" in terms of reputation, loss of future sales etc to VW. But I can't *easily* sue them for other stuff that may come about from losing my car for duration of repairs, loss of fuel economy etc.


Ah, got your meaning now. Sorry for the misunderstanding.