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Court Approves Volkswagen’s $1.6B Dealer Settlement

January 24, 2017

SAN FRANCISCO — On Monday, U.S. District Judge Charles Breyer granted final approval to Volkswagen AG’s $1.67 billion settlement with 652 VW-branded franchised dealers in connection with the automaker’s diesel emissions scandal.

The settlement includes nearly $1.2 billion in new cash, with participating dealer receiving an average settlement payout of $1.85 million. It also includes $270 million through a non-offset provision for prior payments and $175 million in continued incentives.

“The Volkswagen-branded franchise dealer class action settlement finalized today represents an outstanding result for Volkswagen’s affected franchise dealers who, like consumers, were blindsided by the brazen fraud that VW perpetrated,” said Steve Berman, managing partner of Hagens Berman and the lead attorney representing the class. “We are pleased to have been able to reach a swift resolution to allow these small business owners to get back to business and offset the tremendous hit to franchise value, revenue and profits suffered due to VW’s Dieselgate scandal.”

Volkswagen admitted to federal regulators in September 2015 that it intentionally installed a defeat device in 475,000 U.S. 2.0-liter diesel vehicles sold in the United States between 2009 and 2015. On Jan. 10, the automaker agreed to please guilty to three criminal felony counts and pay a $2.8 billion criminal penalty and a $1.5 billion civil penalty in connection with its diesel emissions scandal.

According to a Reuters report, the automaker has spent up to $22 billion in the United States to resolve claims related to its emission scandal.  

According to Judge Breyer’s order, the nearly $1.2 billion in payments VW’s dealers will split is compensation for the lost value of their franchises. The court-approved allocation of the cash payment is based on a formula Volkswagen used to provide its monthly support payments to franchise dealers, specifically, the monthly support payments that began in November 2015 and continued through December 2016.

Half of the settlement payment will be made up front, and the remaining will be paid in 18 consecutive monthly installments beginning the month following the initial payment. Approximately 85% of Volkswagen’s dealers have already executed release forms that allowed VW to pay the initial payments last month and this month.

In addition to the cash compensation and continued incentives, the settlement limits VW’s ability to require its dealer to make costly capital improvements for two years. It also establishes parameters to resolve dealer inventory issues with the diesel cars stuck on dealers’ lots since Volkswagen issued its stop-sale orders covering diesel-powers cars.  

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