Car Dealers Sue Volkswagen Over Losses Tied to Diesel Cheating

By | September 25, 2015

Independent car dealerships sued Volkswagen AG in California on Thursday over losses they say they will incur following revelations that the company fitted some diesel models with software to cheat on U.S. vehicle emissions tests.

The proposed class action was filed in California federal court on behalf of independent car dealers in the state and seeks damages likely to exceed $1 million, according to the lawyer who filed the case, Robert Starr.

Volkswagen has been hit with dozens of lawsuits, primarily filed on behalf of owners of affected cars, since the U.S. Environmental Protection Agency announced last Friday that some of its diesel cars used software to deceive regulators measuring toxic emissions.

Franchise dealerships for Volkswagen and its Audi brand may be able to seek some compensation for their losses, while independent dealerships will likely be out of luck, Starr said.

A letter sent by Volkswagen to its U.S. dealers on Monday said that a “mandatory stop-sale order” was in effect for 2009-2015 models with a two-liter diesel engine, and that dealers would be reimbursed for their expenses until repair instructions are released.

Independent dealers were not offered a similar deal, Starr said. By selling vehicles affected by the scandal, the dealers may be put themselves at risk of lawsuits from irate customers, he said.

If the independent dealers cannot sell the cars, the dealerships will shoulder the losses, he added.

Volkswagen was not immediately available for comment.

Volkswagen has said that 11 million vehicles worldwide could be affected by the diesel-emissions scandal, including 500,000 in the United States.

Californians alone own 14 percent of affected U.S. vehicles compared with 7 percent in Texas and 5.7 percent in Florida, according to Kelley Blue Book.

The case is Koudsi v. Volkswagen, U.S. District Court for the Central District of California, No. 15-7477.

(Reporting by Jessica Dye; Editing by Tom Brown; Editing by Alexia Garamfalvi and Tom Brown)

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