Volkswagen Class Action Ruling: Bad Deal for Consumers

CEI’s Center for Class Action Fairness is disappointed by the U.S. District Court for the Northern District of California’s approval today of the Volkswagen class action settlement because it provides zero marginal benefit for the class. CEI attorney Anna St. John, who argued against the settlement approval before the court in San Francisco last week, stated:

This $10 billion settlement is a bad deal for consumers—the actual value to consumers will be far less than that and would have been available to consumers even without this class action settlement. What’s worse is how inadequately the plaintiffs’ attorneys represented their clients in this case. Class counsel violated their fiduciary duty by misinforming and ultimately duping 475,000 class members into a settlement that will potentially pay their attorneys hundreds of millions of dollars for providing them next to nothing. These dollars should be going to the class, but instead, the lawyers’ decision to structure the settlement with self-dealing gimmicks may have cost Volkswagen owners more than a billion dollars.

Judge Breyer adopted class counsel’s claim that the attorneys’ fees ‘will not diminish the benefits awarded to class members under the Settlement.’ But, as Judge Posner recognized in two Seventh Circuit decisions addressing precisely this question, this is an economic fiction that has no bearing on reality. Volkswagen is an economic actor with rational expectations, and the expected excessive attorney-fee request was baked into its reservation price and adversely affected what consumers received. 

St. John is an attorney at CEI’s Center for Class Action Fairness. Read the Center’s objection to the Volkswagen settlement here.

CEI’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Founded by Ted Frank in 2009, the Center has won millions of dollars for consumers and shareholders and won landmark precedents that safeguard consumers, investors, courts, and the general public.

Today’s ruling provides zero marginal benefit to the class, and is a bad deal for consumers.