How Dieselgate Lawyers Line Up For $332M Piece Of The Scandal Pie

The class-action lawsuit phase of the Dieselgate emissions scandal begins to wind down as lawyers file requests for up to $332.5 million, which is quite a bit less than they could have sought.

As the class-action phase of the Dieselgate scandal begins to wind down in San Francisco, lawyers have started lining up to get their piece of what could have been an incredibly lucrative pie. According to tradition, case law and precedent, the attorneys involved in the talks for the last several months could have sought up to a quarter of the $10 billion settlement, or about $3.5 billion.

With that said, though, attorneys are seeking far lower, though still healthy, fees. According to filings in the court where this played out, the U.S. District Court in San Francisco, the team of litigators involved is asking for $324 million in fees and $8.4 million in costs.

VW To Pay Reasonable Costs

Volkswagen, at the center of the Dieselgate scandal, has said that it will pay reasonable court costs and fees. Now, it is up to the courts to decide whether the fees sought by the team of attorneys is excessive or not.

As noted, the attorneys could have sought up to 25 percent of the settlement; instead, lawyers have opted for a bit over 3 percent of the negotiated settlement, apparently leaving the rest to the 475,000 Volkswagen diesel owners and lessees who are eligible. Another 85,000 vehicles, powered by 3.0-liter V-6 diesel engines, is not covered by this settlement.

There will be a final hearing in a bit over two months where details will be finalized. The hearing is set for Oct. 18.

With Thursday’s filing, one phase of the year-long Dieselgate drama comes to a close. The automotive world was stunned last Sept. 18 when Volkswagen admitted that it had conducted a wholesale campaign of cheating on emissions. The Environmental Protection Agency (EPA) issued a Notice of Violation to the automaker for using what was termed a “defeat switch” in its emissions control software.

That switch, actually a piece of programming, tested various sensors and other devices to determine if an emissions test was underway. If the software determined that the vehicle was under test, the emissions system was set to “pass” mode so it would meet emissions standards. Once the test ended, the system reset to “normal” mode. In “normal” mode, engine performance increased as did mileage, but emissions tanked. Indeed, in some cases, tests found that VW’s emitted as much as 40 times the permitted amount of nitrogen oxide, a major component of diesel exhaust.

Dieselgate Has Life Of Own

Dieselgate quickly took on a life of its own. Nearly every day for months there seemed to be a new revelation of the audacious plan. For instance, at one point it was learned that engineers knew early on that the EA 189 engine, which was developed as a “clean” diesel from 2004-06 to meet the 2008 emissions rules, would never meet the standards.

Initially, the development team was set to use urea formaldehyde as an exhaust cleaning agent. The system was to be licensed from Mercedes-Benz. Stories pointed out that the plan didn’t sit well with VW’s engineering staff because it was under the management of an engineer hired from another automaker, who sought to license the control technology.

The engineering manager left the automaker midway through the development cycle, apparently to the relief of many VW engineers, who thought that if “it wasn’t invented here (at VW)” it was the wrong way to go. The development team took the engine back and made it a VW project, trying to control emissions with a disproven technology – lean burn. About this time, the team realized the powerplant would never meet emissions standards and decided to use cheatware to make it look as if the engine was clean.

The engineering team succeeded far beyond its wildest dreams. They managed to fool not only regulators but also possibly their advertising people into believing they had developed “clean diesel” technology. Indeed, ads were circulating until late last year that touted VW’s diesel. The Federal Trade Commission (FTC) is still in the middle of its investigation of the “clean diesel” message for false advertising.

The engineers, who had informed senior management of the cheating before the automaker and regulators went public, managed to keep their ruse alive for six years. That house of cards began to fall in when an independent university research team found the cheatware. The researchers were seeking, innocently enough, the reason VW was able to build “clean diesel,” while others had to use add-on technology such as urea formaldehyde. In due course, they notified VW which tried an ineffectual fix. Later, they turned to the EPA which investigated the researcher team’s claims and issued the Notice of Violation.

Senior Managers Dismissed

Quite quickly, the senior management team at VW was dismissed. Also, about three dozen engineering and middle managers were either suspended or dismissed.

Meantime, the scandal quickly grew from a clean-air violation probe into a criminal investigation with the Department of Justice looking closely at the automaker. Prosecutors in Germany, France, Italy and South Korea also launched probes. The South Korean probe has resulted in prosecutions.

Also, the automaker is facing action for fiduciary mismanagement as more than 170 major investors have launched suit claiming they had lost billions of euros when Dieselgate went public. The performance of the automaker’s stock seems to suggest the truth of those concerns because the automaker has lost 20 percent of its value in the last year. And, VW has had its first loss in years.