Volkswagen owners in the United States will receive about $20,000 per car as compensation for the company’s diesel deception. Volkswagen owners in Europe at most get a software update and a short length of plastic tubing.
The startling gap in treatment is the result of European laws that shield corporations from class action suits brought by unhappy consumers. Now a group of online legal startups wants to change the status quo.
Lawyers in Berlin, Paris and Co Mayo are teaming up with new online services to recruit clients en masse and try to get around the usual restrictions on consumer lawsuits. If they are successful, the cost to Volkswagen will dwarf the company’s $15 billion settlement in the United States.
The campaigns are attracting people like Jurgen Franz, a retired advertising executive in Munich who says his Volkswagen, a diesel Tiguan sport utility vehicle, burns more fuel after a software update that was part of a mandatory recall. He drives the same route every morning and now fills his tank more often.
“Why are they getting so much and we’re getting nothing?” Franz said of US owners.
Consumers joining forces
Plaintiffs’ lawyers hope the efforts will signal a turning point in European jurisprudence, opening up a clearer path for aggrieved customers to join forces across borders to sue big corporations. The case could be the largest consumer action of its kind in Europe.
Owners’ representatives in Europe are seeking a maximum of €5,000 per car, much less than in the United States. But even that figure could be financially devastating. There are 8.5 million tainted diesels in Europe, compared with about 500,000 in the US that are covered by the settlement.
So far, only a fraction of Volkswagen owners in Europe have banded together, but more are signing up. Those claims are just one front in an expanding global onslaught of litigation against and official investigations into Volkswagen stemming from its emissions cheating.
EU participation
European governments, traditionally deferential to Volkswagen, one of the region's largest employers, have joined in as well. The European Commission, the executive arm of the European Union, is coordinating efforts by national consumer groups to collect money from the carmaker. And the German state of Bavaria says it will sue Volkswagen on behalf of its employees' pension fund, which owns sharply devalued shares in the company.
The biggest financial threat may come from new online businesses that have found ways around European obstacles to class action suits.
While laws vary, most European countries do not allow large class actions of the variety that led to the $15 billion settlement in the United States. Nor do many European countries, including Germany, allow lawyers to work on commission, so customers who sue companies risk paying not only their own legal fees but also the other side’s if they lose.
That is in contrast to the United States, where it is standard practice for lawyers to collect a hefty percentage of the award if a suit is successful and nothing if it is not.
Online legal start-ups
The startups are taking advantage of a loophole that allows European consumers to sign over their legal claims to third-party service providers, which then try to recover damages. And the internet has made it possible to recruit huge numbers of consumers who share similar gripes.
People who search Google for the German words for "Volkswagen damage claim" see an ad for the website My-right.de, one of several legal startups using the internet to recruit Volkswagen owners. In Paris, Weclaim. com is attracting French customers. Both websites have teamed up with lawyers and are expanding into other European countries.
The companies use technology to automate the laborious task of processing the claims, and usually find investors to finance legal costs in return for a share of the eventual judgment. The result is a de facto class action.
"The model has existed for a long time," said Sven Bode, managing director of Financialright, the Hamburg-based company that owns My-right.de. "What is new is that we can do it on a massive basis."
Bode has previously overseen efforts to help airline passengers obtain compensation for canceled or delayed flights, and to pressure banks to refund improper fees. But because Volkswagen is Europe’s largest carmaker by far, Bode said, “this is a unique dimension.”
Because the startups are considered collection agencies rather than law firms, they are allowed to work on commission. Clients who sign up agree to pay about a third of any money they collect, similar to contingency fees for lawyers in the United States. The Volkswagen owners owe nothing if the efforts to collect are unsuccessful.
About 100,000 Volkswagen owners have registered with My-right.de so far, said Christopher Rother, managing partner of the law firm Hausfeld in Berlin, which is working with the website. The firm's founder, Michael Hausfeld, who is based in Washington, is one of the plaintiffs' lawyers leading the class action against Volkswagen in the United States.
That is only about 5 percent of the eligible owners in Germany, Austria and Switzerland. Rother said the goal was to assemble at least 400,000 customers and collect up to €5,000 for each one.
Frédéric Pelouze, chief executive of Weclaim.com, the Paris-based website that is recruiting owners, said the carmaker was underestimating how vulnerable it was to new legal strategies. “The rules are changing, and I don’t think Volkswagen is getting it,” Pelouze said.
VW’s position
For now, Volkswagen is standing firm.
The US settlement allows owners to sell their cars back to Volkswagen at the prescandal price or take the cars in for an emissions upgrade, in addition to a cash payout of up to $10,000. All told, about $10 billion is earmarked for the buybacks, recalls and compensation, or about $20,000 per car.
But the company has refused to give European owners any money or to buy back cars, disputing claims that diesels in Europe have lost value. It argues that dealers will be able to bring the cars in line with pollution standards without any decline in performance or fuel economy.
Volkswagen has also refused to negotiate with owners’ representatives. “Our view is that there is no legal basis for customer claims,” the company said in a statement.
The carmaker has begun recalls in Germany that it plans to replicate in other countries. Vehicle owners will receive the software update and, in some cases, a tubular plastic “flow transformer” designed to improve air flow in the engine and to reduce emissions.
That is it.
But as in the United States, many people in Europe bought Volkswagen diesels thinking they were doing something good for the environment, only to learn that the cars emit far more poisonous nitrogen oxides than allowed.
Guy Samson, a retired electrician who lives outside Paris, said that his friends gave him a hard time about his diesel Tiguan, and that its resale value had plunged.
“People, friends, they look at you and they kind of make fun of you behind your back,” Samson said. “Even to your face sometimes.”
- (© 2016 New York Times News Service)
