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COMMENT: “. . .‘This is devastating because it sets up all class-actions to fail,’ says attorney Lori Andrus, who represents several Volkswagen plaintiffs. . . . . ‘It’s incredibly inappropriate for Congress to send the message that it’s OK to hurt people by the millions,’ said Volkswagen owner Rebecca Kaplan. ‘The more people you hurt, the more this law will protect you.’ . . .”
The EPA just filed a lawsuit against VW over the diesel emission scandal. Wish them luck. Especially if a bill moving its way through Congress dubbed the “VW Bailout Bill” becomes law. If it does become law, the EPA just might be the only entity that’s actually able to bring a meaningful lawsuit over the scandal. And not just in this case over the VW emissions. The “VW Bailout Bill” would effectively bailout any entity potentially facing a class-action lawsuit.
This bill is only 100 words in length!! Big things come in small packages!
“A Bailout for Volkswagen? Congress Wants to Do Something Absolutely Crazy” by David Dayen; The Fiscal Times; 1/4/2016.
When Volkswagen admitted to cheating on air pollution standards tests in September, it opened itself up not only to government punishment, but lawsuits from 500,000 U.S. purchasers of its “clean” diesel vehicles. Volkswagen has yet to fix the vehicles to bring them into emissions compliance, and even if it does, that will likely create a lower-performance car than consumers paid for.
“Throughout these years, Volkswagen has been lying to us,” says Rebecca Kaplan, an at-large member of the Oakland City Council, who has been active in reducing carbon emissions in her city. “They’ve been undermining the very things that I have been fighting for.” Kaplan, who has stopped driving her non-compliant VW Golf TDI and rejected a lowball trade-in offer from the dealer, has joined one of hundreds of class-action suits against the automaker, likely to be consolidated into a large multi-district case.
The combination of regulatory oversight and class-action litigation can keep companies in line. But a bill in Congress consisting of a little more than 100 words would not only prevent Kaplan from seeking justice but also cripple virtually all class-action lawsuits against corporations. It’s known as the “Fairness in Class Action Litigation Act,” but lawyers and advocates call it the “VW Bailout Bill.”
The bill, which will get a vote on the House floor in the first week of January, follows a series of steps by the judiciary to block the courthouse door on behalf of corporations. “There’s no question the Supreme Court has ben moving in that direction to limit access to courts,” said Joanne Doroshow, executive director of the Center for Justice and Democracy. “But Congress has never done something like this, trying to step in and wipe out class-actions.”
The simplicity of the VW Bailout Bill belies the chaos it would create. Proponents like the U.S. Chamber of Commerce, the bill’s leading lobbyist, say they merely want to get rid of “non-injury” class-action cases, based on potential damages from defective consumer products or corporate actions that have yet to result in harm. Lawyers for class-action litigants argue that defective products deserve compensation even if the consumer hasn’t yet been injured.
But the bill goes much further, stating that courts may not certify class-action suits unless the plaintiff “affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives.”
“This is devastating because it sets up all class-actions to fail,” says attorney Lori Andrus, who represents several Volkswagen plaintiffs. If every class member must have the same type and scope of injury, it forces extensive proofs for class certification — essentially a full-blown trial up front, where plaintiffs will have to prove that their injuries match with their fellow representatives.
Not only would these trials be costly, but they would empower corporate defense lawyers’ schemes to limit damages. While current rules already require class members to have some level of commonality and typicality, the words “same type and scope” offer opportunities to refine that further. “It’s not clear what they mean by same injury,” says Andre Mura, another class-action plaintiff’s attorney. The terms are so vague, Mura argued, that they would have to be interpreted repeatedly, with unpredictable results.
In the Volkswagen case, for example, “it could mean the same model car, the same defeat device, the same emissions system, the same consumer harm,” Mura says. “When really Volkswagen engaged in the same course of conduct on all their vehicles.” Defense attorneys could claim that a class representative who released fewer emissions because they drove fewer miles than their colleagues, or drove in harsher weather, or with lower tire pressure, should be excluded from the case. That could either whittle down classes to limit damages or disqualify them from certification.
And the applications go beyond Volkswagen. “In a mortgage fraud case, the class might have all been deceived in same way, but the documents signed might have been inconsistent,” says Andrus. “Or with for-profit schools, they might have paid different tuition or taken different classes.” Andrus has battled these tactics before, but the congressional bill would codify them into law. “There’s no question this was written by a defense lawyer whose job it is to defend corporations,” she says.
Without a class-action option, VW customers would have little recourse. “The damages are not enormous in the sense that I could hire individual counsel,” says George Farquar, a scientist and small business owner from Livermore, Calif., who is part of a class-action suit against the carmaker. “It’s amazing this legislation is being considered.”
A Consumer Financial Protection Bureau study found that victims of just financial-related class-action settlements received over $2 billion in compensation between 2008 and 2012, to say nothing of the changes in corporate behavior arising from those cases. “The alternative is that those claims disappear,” says the Center for Justice and Democracy’s Doroshow. “You’re talking about providing basic immunity (to corporations).”
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Incredibly, the House is pairing the VW Bailout Bill with other legislation designed to limit corporate liability. The FACT (Furthering Asbestos Claim Transparency) Act would force public reporting of personal information of asbestos victims, in an effort to delay and limit compensation for their poisoning.
The Chamber of Commerce also supports the FACT Act, claiming it would prevent double-dipping by mesothelioma sufferers who may have been exposed to multiple asbestos-lined products. But the clear intent is to both chill victims from coming forward and delay their compensation. Because mesothelioma sufferers typically only live between four and 18 months after diagnosis, this would shift many victim claims to wrongful death, which has a lower payout rate. Corporations like Honeywell have financial reason to want victims of their use of harmful chemicals to die quicker, so they can pay their families less.
House passage of the VW Bailout Bill and FACT Act is likely, but the Senate could provide a roadblock. However, as we saw with the year-end omnibus, ideological bills that can’t otherwise pass on their own have a tendency to ride along with must-pass legislation and become law.
Corporate immunity has been a major preoccupation of John Roberts’ Supreme Court. Rulings like AT&T Mobility v. Concepcion and American Express v. Italian Colors allow corporations to force their customers into mandatory arbitration, rather than the judicial system, to settle disputes. And 2011’s Walmart v. Dukes tossed out class-action certification in a gender discrimination case, arguing that the retailer couldn’t possibly have discriminated against all 1.5 million of its female employees in the exact same manner. Subsequent circuit courts have followed Supreme Court precedent and tightened class-action restrictions.
But while the bar for class-action certification is already set incredibly high, the VW Bailout Bill adds an entirely new set of requirements, circumventing not only judicial precedent but also a longstanding federal rule (Rule 23) that lays out class-action standards. And it would protect corporations that engineer major frauds, where it is difficult to bring thousands of individual claims.
“It’s incredibly inappropriate for Congress to send the message that it’s OK to hurt people by the millions,” said Volkswagen owner Rebecca Kaplan. “The more people you hurt, the more this law will protect you.”
The GOP’s response to VW’s systematic scamming of US consumers is to make it effectively impossible for not just VW’s consumers but ALL American consumers to wage a class-action lawsuit against any corporation at all.
VW owners can take their complaints into private-arbitration courts that’s all the rage these days. The owners that accepted VW’s ‘good will’ $500 cash payments will probably aren’t going to have a choice anyway if they decide to sue since an arbitration clause was added to the contract required to get the money. That should go well
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Since the EPA’s lawsuit just might be the only one VW faces if the US if the “VW Bailout Bill” becomes law, it’s worth noting that the maximum possible fine VW faces in that EPA lawsuit is actually a much higher number than the $18 billion that the company was estimating back in September that the scandal could cost: the EPA’s lawsuit could potentially cost VW $48 billion. Of course, as the article below notes, it’s also almost certainly not going to actually end up being that much. And if the $58 billion lawsuit Toyota faced in the early 2000’s over its own emissions scandal (which was reduced to $34 million) is any indication of what to expect, the final cost of VW’s lawsuit might be closer to $30 million:
“The lawsuit had been expected, and analysts believe any fine will be far below the theoretical maximum. Although U.S. authorities sued Toyota for up to $58 billion for environmental violations around the turn of the century, they agreed a settlement that cost the Japanese carmaker about $34 million.”
Yep, and if a similar fine is what VW faces, that would come out to about $30 million.
So we’ll see what happens with the fine, but note how winning the civil case simply involves proving that cheating occurred, something which VW already admits happened. And yet VW will still be able to get that penalty reduced basically by threatening mass layoffs:
It’s an interesting argument because it suggests one of two possibilities: that VW will just go out of business entirely (which would most certainly lead to massive layoffs), or that VW will somehow determine that the lawsuit somehow changed the economics of manufacturing and selling cars in the US. And it’s not really clear how a fine over past cheating would suddenly make VW’s pre-scandal strategy of investing in growing its share of the US market an undesirable corporate strategy, although if cost-cutting measures are required after a big fine, the money-losing investments in the US could be on the chopping block.
At the same time, those loss-generating US investments were done for a reason: a bet on higher future profits. And it’s not like those higher future profits that come from a successful growth of VW’s US market share suddenly evaporate with a large fine. Although it is possible that the knowledge that VW might get really big fines for really big scandals could change the profit/loss calculus. For instance, if there are any other big scandals yet to be discovered in VW’s operations (a gasoline-powered vehicle emissions scandal lurking in there, perhaps?), well, that could potentially make the prospect of big future profits a lot less likely.
That’s all part of what we get to wait and see play out. But don’t forget the other possibility: where VW gets its fine dramatically reduced and the “VW Bailout Bill” becomes law. Because that same argument that could get VW’s fine dramatically reduced (it would lead to mass layoffs) is basically the same argument the corporatists in Congress are going to use to justify the “VW Bailout Bill” that would kill class-action lawsuits.
Is a corporatist twofer on the way? Quite possibly. The threat of massive layoffs makes a powerful argument. It might be a soon-to-be-out-of-date argument too, but for the time being it’s pretty persuasive.
Wow. VW found an rather potent legal strategy for shielding its executives from any potential liability in the diesel emissions scandal: just cite Germany’s privacy laws to avoid providing emails or any other communications to US investigators:
“Lacking access to officials at Volkswagen headquarters makes it more difficult to determine who was responsible for the wrongdoing, William H. Sorrell, the Vermont attorney general, said in a recent interview in Burlington. “One of the things that’s important to the state and others in terms of looking at the egregiousness or seriousness of the conduct is who at Volkswagen knew what and when,” Mr. Sorrell said.”