The proposed $14.7 billion agreement to settle lawsuits stemming from the Volkswagen emissions cheating scandal would be the largest in the history of the automotive industry, and the size and complexity of the settlement befits the stunning scale of VW’s elaborate scheme to defraud air quality regulators. The negotiations drew in a multitude of attorneys representing a variety of interests, but one Mount Pleasant attorney played a key role in negotiating the final deal.
Joe Rice of Motley Rice was part of the resolution team that hammered out the details of the settlement, under which VW will set aside $10 billion to repair or buy back roughly 475,000 polluting Volkswagen vehicles, $2.7 billion for environmental mitigation and another $2 billion for research on zero-emissions technology.
The federal judge overseeing the case in California appointed 21 attorneys to a plaintiffs’ steering committee chaired by Elizabeth Cabraser of Lieff Cabraser in San Francisco, but Rice was one of only a handful tasked with negotiating a resolution. Rice said he was pleased not only with the size of the settlement, but also the speed with which it was reached given the complexity of the case.
“I am very satisfied that we accomplished the goals that were given to us, both by our clients and by the court, of getting a resolution that addressed the problem immediately,” Rice said. “We’ve got a resolution that is getting these cars off the streets, and that allowed the people who want to keep the cars to keep them. We were able to get compensation for the consumers, and we were able to meet the government’s goal of reducing the environmental pollution.”
Beetles for Sale
Rice touted the mitigation fund created as part of the settlement, which will be used to alleviate nitrogen oxide pollution, the particularly pernicious sort of particles whose emission levels VW had conspired to conceal. Rice said the fund would be used to pay for projects across the country, and noted that many older school buses in South Carolina spew high volumes of NOx. Rice expressed hopes that money from the funds could replace some of those buses with newer, cleaner models.
VW has admitted that it developed sophisticated software that determined when its cars were being tested by regulators and turned on the pollution controls during the tests. (Regulators test cars using a treadmill-like device, whose use the software was able to detect.) Once the cars were back on the road, the pollution controls were turned off, which increased the cars’ fuel efficiency and power, but caused them to emit levels of NOx up to 40 times higher than what the law allows.
The company got away with the scam for about seven years before it was brought to heel by the International Council on Clean Transportation, which tested the cars under real road conditions. Rice said that many buyers purchased the cars specifically because they were advertised as being more environmentally friendly.
Far from fahrvergnügen
If approved by the judge, the settlement would give owners of the offending VW cars the option of selling those cars back to the company for what their trade-in value would have been just before the scandal became public last September. Alternatively, Volkswagen would repair the cars to bring them into compliance with clean air laws, although it’s not clear at this point how the company would be able to do that. Owners would additionally be compensated with a cash payment ranging from $5,000 to $10,000.
The Environmental Protection Agency, Department of Justice, and Federal Trade Commission were all parties to the deal and had attorneys actively involved in the settlement process. Rice, who had previously helped negotiate some of the biggest civil settlements in U.S. history, including suits against big tobacco companies and stemming from the BP Deepwater Horizon oil spill, said he was pleased with the way that the plethora of parties were able to work together constructively even with their varying interests.
“I was very proud of our ability to get everyone on the same page and working together,” Rice said. “Hopefully that’s sort of a game plan for how things can be done in the future.”
The settlement also does not include another roughly 90,000 3-liter Volkswagen diesels, which had another version of cheating software, and the company still faces lawsuits and penalties in Europe. VW concurrently announced a separate settlement with 44 states that will cost at least $600 million. The company, which was once valued at over $110 billion, has shed over half its market capitalization since last year.
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