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US court approves $1.67bn settlement for Volkswagen-branded franchise dealers

Published 24 January 2017

A federal judge today granted final approval for a $1.67bn settlement for hundreds of Volkswagen-branded franchise dealers following the automaker’s Dieselgate scandal that blindsided dealers, according to Hagens Berman.

he settlement brings $1.67bn in benefits to Volkswagen dealers, including nearly $1.2bn in new cash, $270m through a non-offset provision for prior payments and $175m in continued sales incentives.

The settlement garnered nearly unanimous approval of dealers, with 99% participation in the settlement. Participating dealers will receive an average settlement payout of $1.85m.

Hagens Berman managing partner and the lead attorney representing the class Steve Berman said: “The Volkswagen-branded franchise dealer class-action settlement finalized today represents an outstanding result for Volkswagen’s affected franchise dealers who, like consumers, were blindsided by the brazen fraud that VW perpetrated.

“We are pleased to have been able to reach a swift resolution to allow these small business owners to get back to business and offset the tremendous hit to franchise value, revenue and profits suffered due to VW’s Dieselgate scandal.”

The order, granted by Judge Charles Breyer of the U.S. District Court for the Northern District of California, states that franchise dealers will share just under $1.2bn in payments intended as compensation for the alleged diminution in the value of their franchises.

The court approved allocation of the cash payments based upon the formula that Volkswagen used to provide its monthly support payments to franchise dealers, specifically the monthly support payments that began in November of 2015 and, pursuant to the settlement, continued through December 2016.

Hagens Berman has established a dedicated email, toll-free number and website to answer dealers’ questions about the proposed settlement.

Half of the settlement payment will be made up front, and the remaining 50% will be paid in 18 equal, consecutive monthly installments beginning the month following the initial payment.

Approximately 85% of Volkswagen’s dealers have already executed Individual Release forms that have allowed VW to pay the initial payments in December 2016 and January 2017.

Franchise dealers who chose not to complete the individual release will receive their initial payments within 30 days of the effective date of the settlement.

In addition to the cash compensation and continued incentives, the Settlement limits VW’s ability to require its dealers to make costly capital improvements for two years and establishes parameters to resolve dealer inventory issues with the diesel cars that have been stuck on dealers’ lots since the emission scandal when Volkswagen issued broad stop-sale orders covering diesel-powered cars.

Source: Company Press Release