U.S. court declines to shield Volkswagen in diesel scandal lawsuits

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A U.S. appeals court ruled on Monday that German automaker Volkswagen AG cannot escape possible financial penalties from two counties in Florida and Utah that may amount to a “staggering” extra liability arising from the automaker’s diesel emissions scandal.

The unanimous ruling made by a three-judge panel of the 9th U.S. Circuit Court of Appeals, sitting in Anchorage, Alaska, was a win for Utah’s Salt Lake County and Florida’s Hillsborough County. The counties took legal action against Volkswagen for causing excess diesel emissions harmful to the environment and could in theory ask for billions of dollars in damages.

The automaker settled U.S. criminal and civil actions led by the cheating scandal for over $20 billion, but that did not shield it from liability from local and state governments, the 9th Circuit noted.

The 9th Circuit observed that nothing in the Clean Air Act “raises the inference that Congress intended to place manufacturers beyond the reach of state and local governments”.

Volkswagen has confessed to using illegal software to evade U.S. pollution tests in 2015, permitting up to 40 times legally permissible emissions.

The judges wrote that they were mindful that their conclusion may lead to staggering liability for the automaker. “But this result is due to conduct that could not have been anticipated by Congress: Volkswagen’s intentional tampering with post-sale vehicles to increase air pollution.”

The two counties each have penalties of $5,000 per day for tampering breaches and had a combined total of at least 6,100 polluting Volkswagen diesel vehicles. U.S. District Judge Charles Breyer, who had ruled in the case in 2018, noted then that “the potential penalties could reach $30.6 million per day and $11.2 billion per year”.

The automaker vowed to seek further review by the 9th Circuit or the U.S. Supreme Court if required, saying the ruling conflicts with the findings of other courts.

“Those other courts rightly recognized the chaos that would ensue if thousands of localities can regulate manufacturers’ updates of their software systems, which are an inherent feature of modern vehicles and, in this case, reduced emissions,” Volkswagen stated.

The scandal caused a global backlash against diesel vehicles that has so far cost the automaker over 30 billion euros ($33.3 billion) in fines, penalties and automobile buyback costs.

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