The $14.7 billion Volkswagen Dieselgate settlement received final approval on Tuesday, meaning TDI owners can finally get their money. But not everyone is happy with the settlement, and the courts know this, so they brought in a law professor to answer VW owners' top complaints.
The court order granting final approval of the 2.0-liter TDI class action settlement contains a section called "Reactions Of Class Members," wherein it addresses the top complaints from owners of cheating VW 2.0 diesel cars, referencing a declaration from Robert H. Klonoff, law professor at Lewis & Clark Law School.
Professor Klonoff proves very influential here.
The section begins by stating that over 336,000 of the approximately 490,000 VW TDI owners have already registered for settlement benefits, and only 3,566 have opted out, implying that most owners find the ruling fair. Still, class counsel had to appoint Professor Robert H. Klonoff to address the objections from over 462 TDI owners. Here are TDI owners' main complaints about the settlement:
The document says that the single most common complaint was the court's decision to use the NADA Clean Trade-In Value,or CTI, instead of the NADA Clean Retail value, Kelley Blue Book value, or manufacturer's suggested retail price minus depreciation.
The court's response to these complaints was two fold: first, using NADA Clean Trade-In Value, or CTI, is easier than using a method that require "individualized calculations…as to vehicle conditions." And second, because there's also a cash restitution payment (free money!), the CTI method is fine, and owners should get over it.
The document says that the combination of the NADA CTI and cash restitution results in "a minimum of 112.6% of the subject vehicles' retail values as of September 2015," and that this method, devised by the Federal Trade Commission, was determined thusly:
…the FTC began the calculations for its Partial Consent Order with the NADA Clean Retail value, then factored in the additional losses, "including the 'shoe leather cost of shopping for a new car, sales taxes and registration, the value of the lost opportunity to drive an environmentally-friendly vehicle, and the additional amount 'Clean Diesel' consumers paid for a vehicle feature (clean emissions) that Volkswagen falsely advertised
In the end, the FTC says that because there's a restitution payment, class members are "made whole." And that "compensation based on the NADA CTI value fairly and adequately compensates Class Members."
The court document says that 89 VW TDI owners are pissed that they won't get a refund of their car's full purchase price. But the court thinks these owners need to just deal with it, saying that "The Court is not persuaded by these objections," with primary reasons being that the cars lost value after purchase, and that a refund of the purchase price of all affected cars could send VW into bankruptcy.
The document begins by restating that the combination of the buyback and the restitution is more than enough to "purchase a vehicle comparable to the one they believed they had in September 2015, before the disclosure of the defeat device."
The filing continues, stating that owners would only be entitled to a full refund if they brought their vehicles back in the same condition they purchased the vehicle in, and goes on to reference other court cases wherein motions to reimburse for purchase price were declined to account for depreciation. The document says:
Such a scenario [where the car is brought back in as-new condition] is virtually inconceivable as it is highly unlikely Class Members never used their vehicles after purchasing them.
The second argument has to do with the cost to Volkswagen. Professor Klonoff says that if VW were to buy back the cars at full purchase price, this would increase the cost of the settlement tremendously, and that "the possibility of bankruptcy under such a scenario cannot be ignored."
This is a problem because bankruptcy would slow down the settlement, meaning there would continue to be polluting cars on the road with drivers who still hadn't gotten a penny for the loss of their car's value.
The argument on this "I want the full purchase price" concludes by admitting that "Settlement is the offspring of compromise; the question we address is not whether the final product could be prettier, smarter, or snazzier, but whether it is fair, adequate and free from collusion."
It finishes saying the settlement "provides cash benefits that are consistent with the recovery provided by state and federal laws and are reasonable under the circumstances."
To figure out the NADA CTI value of the car (and thus, how much to pay TDI owners) as of September 2015—prior to Dieselgate-related depreciation—VW has to figure out how many miles the car had on that date.
And in the way the settlement is written, that exact mileage is determined by "back tracking" from current vehicle mileage assuming 12,500 miles driven per year (the method is described here). The problem with that is, if you've driven more than 12,500 miles a year since September 2015, this method will assume your car had more miles as of that date than it did in reality (and thus undervalue it).
The court admits that lots of VW owners aren't too thrilled with this mileage adjustment method that decreases the payout if people drive the car more than 12,500 miles per year. The owners say they drove their cars farther than 12,500 miles because TDI diesels had a reputation for longevity and fuel economy.
Which, if I'm honest, seems like a fair point.
So why not just let owners report (via accurate records) how many miles the car had as of September 2015, and use that to figure out the car's value? The court's answer is that, with nearly half a million eligible cars, this would take too much time, prolonging how long these polluting cars are on the road, and keeping money from entering VW owners' pockets.
The court also goes on to say that people who drove their cars got more use out of them, anyhow, continuing with the world's most obvious sentence:
A vehicle with high mileage is worth less than a vehicle with low mileage.
The document goes on to reference the plaintiff's declaration from Professor Klonoff, which states that the 12,500 number is on the higher end of calculations offered by Carmax, Kelley Blue Book, Edmunds, and others," which "are based on 11,500 to 13,000 annual miles."
In the end, the document reads, "the Court finds the mileage adjustment is appropriate."
Plenty of class members aren't happy that the payout doesn't reimburse fees like "licensing, DMV fees, smog certificates and title costs," and sales tax, which they'll now have to pay twice when they buy their replacement vehicle.
The response, taken from Klonoff's declaration, is that "the blue book value of a car does not depend on how much the owner paid for sales taxes and other fees." In other words, paying taxes and fees isn't something sellers can use as leverage to increase the value of the car they're trying to sell above blue-book figures.
The document goes on, saying that, as previously mentioned, class members will get a minimum of 112.6 percent of their vehicle's September 2015 value— which should cover sales tax and other fees of a new car purchase.
This section concludes by mentioning class member Mark Dietrich, who had just paid to renew his car's registration and smog test. The plaintiffs said he won't get reimbursed for those fees, and that he can always just continue driving the vehicle until the registration expires.
In the end, the document says the settlement " provides Class Members sufficient compensation to purchase an equivalent replacement vehicle at no additional expense."
Lots of owners are upset that the money they spent on maintenance packages and extended warranties isn't going to be reimbursed. The court's response is that:
"[u]nder most extended warranties, a consumer may cancel the warranty for a $50 charge or other nominal amount. Upon cancellation, customers receive a prorated refund for the remaining period of warranty coverage.
The document says this applies to service contracts as well, meaning TDI owners would only have to pay this cancellation fee, which would be handily covered by the settlement's cash restitution.
Then there are the complaints from people who want to be reimbursed for aftermarket add-ons like wheels, roof-racks, mud flaps, wheel covers and more, since the settlement doesn't account for these— it only adjusts vehicle value based on Original Equipment Manufacturer (OEM)-installed options.
The court references professor Klonoff's declaration, which says determining the very definition of an "aftermarket add-on" would be a struggle in and of itself. He provides an example of a new stereo system, which can be easily uninstalled and put into a new vehicle. He also mentions seat covers, which could also be shifted over to a different vehicle— should these be covered? Klonoff says "just defining 'add-on' would be difficult."
Secondly, Klonoff says the value of each aftermarket item would have to be determined on case-by-case bases, and that would be very time-consuming and difficult considering the wide range of accessories. That would delay the time necessary to get these cars off the road and get owners compensated.
Not to mention, Klonoff goes on to say that "some add-ons may actually be undesirable to most consumers," and could actually bring values down.
In the end, the current method of adjusting value based on OEM-installed options and vehicle mileage was determined to be "necessary…to ensure the efficient distribution of benefits."
People who sold their VWs after September 2015 get what's called a "seller restitution," which is 10 percent of the vehicle's value plus $1,493, with a minimum of $2,550.
The idea here is that, because there was some drop in vehicle value after September 2015, the seller lost some money by selling it after the VW Dieselgate was exposed. The court basically says:
Seller Restitution accounts for the difference between the pre- and post-disclosure values. The Settlement thus makes most Eligible Sellers whole.
The settlement also helps out people who owe more than the value of their buyback and restitution payment by offering "loan forgiveness."
Volkswagen will offer up to 30 percent of the buyback plus restitution amount to the lender of TDI owners who have fallen behind on their payments to the point where selling the car back to Volkswagen wouldn't be enough to pay off the lender.
Some class members think this is unfair, and that these borrowers are benefiting "because of their own poor choices," but the court says what's more important is to get these polluting cars off the road, saying:
[o]ne of the Settlement's many goals was to make Class members whole….another important objective of the Settlement was to get the polluting cars off the road. Forgiving the loans (up to a certain point) helps advance both goals by ensuring that no Class member (or at least, very few) would be required to pay additional money to Volkswagen to free themselves of the polluting Vehicles.
In his declaration on the fairness of the proposed settlement, Klonoff says many TDI owners have complained about the fix (or "modification") option, saying it might reduce mileage, slow down acceleration, infringe upon trunk space, compromise the longevity of the engine, hurt fuel economy and bring down resale values.
Klonoff's response is that the fix—which may or may not ever come—is just one of two options, and that because class members have until September, 2018 to participate in the buyback (well after the fix is due), they will be able to scope out the pluses and minuses of the repair before making their decision.
Plus, if owners are attached to their cars, and neither want to have them fixed or sell them back to Volkswagen, they don't have to.
Many VW owners have objected to the settlement, saying they wasted thousands of dollars repairing cars they'd eventually sell back to Volkswagen, and that they should therefore be compensated. One guy named Donald Hyatt spent $9,600 to fix his exhaust, engine and turbo, and David Bacon spent $4,000 on emission-related repairs.
Klonoff's response is that, in the case of repairs unrelated to emissions system failure "there would seem to be no basis for reimbursement. Repairs are a fact of life with automobile ownership."
As for fixes related to emissions systems, Klonoff says "It is not logical to believe that every emissions problem stems from the defeat device," and that to determine if the cheat caused the failure would require case-by-case analyses, which would be thoroughly complex undertakings.
He goes on, saying these kinds of undertakings would not be addressed in the settlement, but perhaps on "VW's initiative and evaluation, outside the settlement as a matter of customer relations."
He concludes, saying: "In short, in my opinion, the settlement's failure to cover repair costs—whether arguably related to the defeat device or not—does not negate the fairness, reasonableness, or adequacy of the settlement."
Klonoff's statement began by describing the anger in some of the 462 objections he read through, mentioning Kristin Henning, who said:
[e]very day I drove my 104 mile commute, I was unknowingly hurting the environment. As a mother, it makes me SICK to think I unwittingly contribute[d] to the pollution of our planet"
Donald Hyatt said:
I no longer can park at Clean Vehicle Parking spots and now feel humiliated.
Gareth and Donna Gridley said that:
[having] promoted [the] car day in and day out for over 6 years, [they are now] the laughing stock in the area.
He agrees that Volkswagen's dishonesty was egregious, but concludes in his September 30th declaration that "none of the objections discussed herein casts doubt on the overall fairness of the settlement."
The court granted final approval on October 25th, saying:
The Settlement is fundamentally sound, and provides an objective, consistent, and transparent structure to efficiently process payment of substantial economic and emissions-reducing benefits to a Class of nearly half a million consumers.
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