VW Sued by U.S. Franchise Dealers for Diesel-Scandal Losses

  • Three family-owned dealers claim fraud, continuing losses
  • Lawsuit filed on behalf of all VW franchises in U.S.

Three family-owned Volkswagen franchise dealers accused the carmaker of fraud for installing pollution-control cheating devices in diesel vehicles and sticking them with continuing losses by failing to fix the problem.

The lawsuit, filed Wednesday by three dealerships in Florida and Illinois owned by the family of Ed Napleton, seeks to represent all Volkswagen franchise dealers in the U.S. in a class action. The suit in Chicago federal court is the first by a franchise dealer over the diesel-cheating scandal, according to Napleton’s lawyers.

Volkswagen’s “monumental fraud” is “one of the most significant environmental crimes in history,” the dealers said in their complaint. The scandal has “caused great harm to franchise dealers like plaintiffs whose profits have been erased and whose dealerships have plummeted in value due to the inability to sell tens of thousands of affected vehicles.”

Eric Felber, a Volkswagen spokesman, declined to comment on the case.

Volkswagen AG admitted last year that it had rigged diesel engines on about 11 million cars worldwide so that emission controls switched on only during testing. Those controls shut off while the car was on the road, increasing fuel efficiency and performance but producing nitrogen oxide pollution well in excess of the U.S. legal standard.

Fix Deadline

The admission set off a rash of lawsuits by consumers, used-car dealers, rival dealers and governments, including the U.S. More than 600 lawsuits have been combined before one judge in San Francisco, who has given VW an April 21 deadline to come up with a concrete and detailed proposal on how to fix the vehicles. Criminal and regulatory probes of the carmaker are also under way in the U.S. and Germany.

U.S. District Judge Charles Breyer, who’s overseeing the litigation, is being asked by plaintiffs in the lawsuits to approve three classes –- one each for consumers, Volkswagen resellers and non-VW dealers. The rival franchise dealers are claiming lost sales from false advertising by VW over its diesel models.

The VW franchise dealers have been among the biggest losers, said Napleton’s attorney Steve Berman. “Franchise owners are now left with lots full of CleanDiesel vehicles they are unable to sell, and these cars have suffered tremendous loss of value and take up inventory space and carrying costs,’’ he said in a statement.

“Volkswagen has wholly failed to respond to dealer concerns in a substantive manner,’’ Napleton said in a statement. “It has talked for months about multiple plans, but done nothing and left us dealers in the red, and in limbo.’’

Napleton was caught short by the emissions fraud announcement, according to the lawsuit.

“Two weeks after VW admitted to regulators that it had installed illegal defeat devices in hundreds of thousands of U.S. cars, and three days before those admissions were made public, VW pushed through Ed Napleton’s purchase of a Volkswagen franchise in Urbana, Illinois, at top dollar, as if the dieselgate scandal was not about to toss the Volkswagen brand value off a proverbial cliff,’’ the plaintiffs said in the complaint.

The case is Napleton Orlando Imports LLC v. Volkswagen Group of America Inc., 16-cv-04071, U.S. District Court, Northern District of Illinois (Chicago).

Watch Next: The Long Rise and Rapid Fall of Volkswagen

The Long Rise and Rapid Fall of Volkswagen
Before it's here, it's on the Bloomberg Terminal.