Eyeing Major Settlement, US States Move Quickly in VW Case

With billions of dollars at stake in restitution and penalties, U.S. states are moving quickly to try to hold Volkswagen accountable for its emissions-cheating scandal.

Forty-five states and D.C. have joined a multistate investigation led by attorneys general, which is determining how VW was able to game emissions tests to hide that its "Clean Diesel" cars emitted smog-causing exhaust up to 40 times dirtier than the law allows. California and Texas are conducting their own investigations for now. At least one county, Harris County in Texas, also is going after Volkswagen with a lawsuit seeking more than $100 million.

The attorneys general are expected to seek compensation for consumers and redress for environmental harm, building their investigations under state laws that protect consumers from deceptive trade practices and set clean air standards.

"This is a really important case and it has big economic and health consequences. It's nowhere near the scale of tobacco but you are kind of in that realm," said former Wisconsin governor and attorney general Jim Doyle, who participated in the multistate investigation that ended with a landmark $200 billion, 25-year settlement with tobacco companies in 1998. "This is the kind of case that you elect an AG for, to stand up for the safety and health of the people of the state."

Volkswagen is "looking at an enormous settlement, just enormous, when you think about how many cars are out there," he said.

The case, in some respects, presents a slam dunk: Volkswagen has already admitted wrongdoing, affecting roughly a half million cars in the United States.

"This case makes me miss my AG days because there's such an opportunity to send a message, and the states can be at the forefront of sending a message," said Sen. Richard Blumenthal, D-Conn., former attorney general of his state.

Blumenthal said he was stunned by news that the world's largest carmaker had rigged its software to dupe emissions tests. "Astonishment bordering on disbelief that a company could be so absurdly arrogant and lawless that it would knowingly engage in this type of conduct," he said.

The multistate group formed unusually quickly given the company's admissions, but the investigation could last years. For comparison, a multi-state attorneys general investigation of ignition switch defects involving GM cars - a review that started shortly after GM announced a recall 20 months ago - remains active today.

"This will be a complicated case, no doubt," said Peter Lavallee, spokesman for Washington Attorney General Bob Ferguson. "It's consumers from many states. You do have a foreign corporation or an international corporation. Multiple years are involved, multiple models of vehicles and all the facts are yet to be determined about who did what, when and for how long."

The goal, he said, is to seek restitution for consumers and deter corporate wrongdoing.

Washington and five other states have assumed leadership roles in the multistate investigation, which could mean a slightly better deal for their residents in the end. The others are New York, Connecticut, Massachusetts, Oregon and Tennessee, where VW operates a U.S. manufacturing plant.

Volkswagen may want to deal first with any criminal charges before discussing any civil settlement, as the Justice Department investigates potential illegality by the company and its executives. The Environmental Protection Agency and Federal Trade Commission are also investigating.

"Until the criminal case clears, nobody is going to talk about civil. Volkswagen will not settle until the criminal investigations are resolved," said James E. Tierney, program director of the national state attorneys general program at Columbia Law School, and a former Maine attorney general.

Texas became the first state to go to court this month, filing lawsuits alleging Volkswagen violated consumer protection laws and clean air standards. The petitions seek restitution for owners of 32,000 VW and Audi diesel models registered in the state and civil penalties, including $20,000 for each violation of the state's Deceptive Trade Practices Act.

Harris County, which includes Houston, filed its own lawsuit last month alleging Volkswagen violated state environmental laws, seeking more than $100 million in damages for an estimated 6,000 Volkswagens sold in the county. Texas Attorney General Ken Paxton asked the county to back off by arguing that the suit undermines the state's ability to negotiate a resolution, but County Attorney Vince Ryan said it will go forward. He noted that counties were able to recover $2.2 billion during the tobacco litigation on top of what states received.

By the time the various inquiries are finished, Volkswagen is likely to enter a settlement with all the states, Tierney said.

Volkswagen spokeswoman Jeannine Ginivan said the automaker is "cooperating with all investigations into the matter."

In coming months, state attorneys general will review thousands of VW internal documents, scrutinizing how the company's actions conflicted with state laws. Illinois and New York have already sent subpoenas seeking a range of information.

Former Wisconsin Attorney General Peg Lautenschlager cautioned that, despite Volkswagen's early admission of wrongdoing, the case could prove challenging to resolve in a way that satisfies everyone. She said states want to compensate consumers and punish VW - but not help lead the company into insolvency.

"There is a public perception that this is a slam dunk, and there's a notion that they ought to be paying and there are heightened expectations as a result," she said. "But quick resolution isn't necessarily as easy as it sounds."