Volkswagen Unveils Its New Cheating Software: The Tip of the Iceberg?

 

I.        VOLKSWAGEN – IN VIOLATION OF CRIMINAL AND CIVIL LAWS

Volkswagen has admitted to secretly installing software in the central computers of its advertised “clean-diesel” cars.  Outrageously, Volkswagen’s engineers gave cars an ability to pass tests, only when being tested. Volkswagen computer’s override the cars’ clean-air technology, allowing the cars to pollute.  Only while polluting could the cars produce enough horsepower to meet manufacturer specifications.

The CEO of Volkswagen is under criminal investigation for alleged violation of the federal Clean Air Act.  Massive class action civil lawsuits are being filed, alleging fraudulent concealment, which could drag for many years through court.  Volkswagen owners are likely to file single-handed legal actions, which tend to resolve quickly.

Emissions Testing: Technology and Cheating

A mechanic testing a car for compliance with the Clean Air Act follows specific guidelines. During testing, the cars were programmed to switch to the clean-diesel equipment with which they were built, thereby lowering their nitrogen-oxide emissions and passing federal tests.

Because the software was “proprietary” (confidential to Volkswagen, owner of the software), Volkswagen was able to engineer this social disaster in complete secrecy.  As a result, people wound up buying cars that were not as advertised, and perhaps immeasurable environmental harm has been done.  Once the cars comply with the law, after retrofitting, it is likely that many will emerge underpowered for a particular owner’s typical driving demands.  As such, resale value of the vehicles is likely to be significantly lower than expected.  Many civil suits are already under way, alleging violations of civil rights by way of fraudulent concealment by Volkswagen.  If you or a family member believes you have been sold a Volkswagen that was misrepresented to you, an experienced Oregon product liability attorney can help you understand how you might proceed.

II.        WHO IS AFFECTED? CAR TYPES

Owners of the following Volkswagen models are likely affected by the company’s actions and may be able to seek action in violation of criminal and civil laws.

VW Emissions - Audi A3

Audi A3, 2009 – 2015

VW Emissions - Beetle

Beetle, 2009 – 2015

VW Emissions - Golf

Golf, 2009 – 2015

VW Emissions - Jetta

Jetta, 2009 – 2015

VW Emissions - Passat

Passat, 2014 – 2015         

III.       LEGAL ACTION AGAINST VOLKSWAGEN

In the US, class action lawsuits are being filed against Volkswagen.  Owners of specific Volkswagen models are automatically[1] members of a class that likely will be entitled to damages from the manufacturer.  Courts will order that people affected by Volkswagen’s actions be notified.[2]

At that point, each person affected by Volkswagen’s misrepresentation will be part of a class-action case, but anyone who wishes to file a private legal action has the right to do so – after they formally “opt out” of the certified class of plaintiffs.  There are pros and cons of remaining in or opting out of a certified class of plaintiffs.  For example, a single-handed civil action generally is a quicker resolution than a class action, and a single plaintiff retains a degree of control not available to a class action plaintiff subsumed in a sea of fellow plaintiffs.[3]  On the other hand, a single plaintiff may need to obey federal restrictions known as Multi-District Litigation rules, under which a single judge is assigned a number of individual cases involving similar civil claims.  These MDL rules are numerous and complex.  Our lawyers in Corvallis and Albany Oregon attorneys can help tailor a legal option that will best suit your particular needs as a Volkswagen owner. 

It may be possible to avoid having a single claim removed from the Oregon courts into Federal courts where the claim will be swept into a group of slow-moving cases under a single Federal Judge.

Owners can also just sit and wait hoping Volkswagen will recall the car and fix the problem.  However, experts point out if there had been an easy fix, they would not have had to cheat!

IV.       FRAUD OR MISREPRESENTATION

Fraud or misrepresentation” means knowingly giving misinformation or a false impression through the intentional misstatement of, concealment of, or failure to make known a material fact.  A material fact is a fact important to a decision to be made, such as a purchase.  It is a fact for which concealment would reasonably result in a different decision.

When it can be shown that a fraudulent misrepresentation was important to a purchase decision, and when it can be shown that the purchaser was harmed by the misrepresentation – such as overnight finding her/his car is worth less money, is illegal on US roads, will need a retrofitting, and with that might no longer suit her driving needs – the elements exist for a strong legal claim against the party who made the misrepresentation. 

V.        US REGULATORS KNEW OF THE PROBLEM

In October 1998, 7 major diesel engine manufacturers, accused of using “defeat devices” that bypassed emissions requirements, signed an agreement with the US Environmental Protection Agency.  They would avoid a massive recall by paying civil fines of $1 billion, bankrolling clean-fuel projects, and paying costs for production of cleaner engines.  The engines met the requirements when run on the EPA’s 20-minute test procedure, but had three times the legal mono-nitrogen oxide emissions in highway driving.  The manufacturers claimed they had complied with the letter of the law (as their engines met EPA testing requirements), ponied up substantial cash, and that was it.  The only difference now is the EPA has brought a criminal action, not a civil suit, against Volkswagen.

The EPA classified the VW software as a “defeat device,” which are illegal per the Clean Air Act. Now under federal investigation, Volkswagen could face whopping fines – up to $37,500 per car, possibly $18 billion in all.

The European Commission’s Joint Research Centre issued a report in 2013 warning that engine software could skew the results of exhaust readings, but regulators took no action.  It took an independent group, the International Council on Clean Transportation, to discover Volkswagen’s massive cheating.  Puzzled by some test data from Europe, the ICCT stuck a probe up the exhaust pipe of VW's clean diesel cars and drove them from San Diego to Seattle, getting appalling results and publishing them.

Regulators took no action. 

This is disturbing because action might have helped disrupt this social trend.  The trend is based on the principle,

Computers allow cheaters to cheat in new ways.

V.        MANUFACTURERS OF OTHER PRODUCTS USING CHEATING SOFTWARE? POWERLESS REGULATORS

A poll of German auto owners found that a majority of them believed car companies besides Volkswagen were using cheating software. A fluke of US copyright law governing software prevented the Environmental Protection agency from looking at the unencrypted workings of Volkswagen’s cheating software.  The Digital Millennium Copyright Act of 1998[4] is still preventing the EPA from determining the truth.

The Internet of Things is coming with industries adding computers to their products.  With those additions come new opportunities for manufacturers to cheat. “Energy-efficient” light bulbs could fool regulators, temperature sensors could fool buyers into believing a store kept food is at a safe temperature, voting machines might work perfectly in tests but – on the first Tuesday of November – might undetectably switch some votes from one candidate to another.

What we are contending with is malfeasance programmed in at the design stage.

Until laws repair the flawed Millennium Copyright Act, cheating via software can be made to look like an accident.  Products ship every day containing programming mistakes, most of which don't affect normal operations and go undetected. Computer-security experts believe that intelligence agencies such as the National Security Agency have been doing deniable cheating, via “defective” software, for years (both with the consent of the software developers and surreptitiously).

VI.       CAN VW STOCKHOLDERS SUE?

Volkswagen stock dropped 23 percent in the wake of the scandal.  However, pursuant to a 2010 Supreme Court decision on jurisdiction of US securities law over foreign corporations, most equity holders in Volkswagen cannot sue in US court for lost returns on their VW stock.  Only Volkswagen equity holders by way of bank-issued notes known as American Depositary Receipts[5] are eligible to sue Volkswagen in US court. 

 

 

[1] Some rare exceptions can exist.

[2] This is done through direct mailings, or newspapers, or the Internet.

[3] The larger the plaintiff class, the more these general rules apply, and Volkswagen promises to be among the largest class-action cases in US history.

[4]  Ostensibly designed to protect music-software proprietary rights, it has been vigorously repurposed by the likes of Volkswagen.

[5]  Like a stock except confers no voting rights.  VW ADR’s are issued by JP Morgan.


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