VW dealer class action hinges on make meeting, lawyer says

VW has provided dealers with several forms of financial assistance to get them through the emissions crisis, including easier targets for sales bonuses and lump-sum “discretionary” payments that VW has wired to dealer accounts each month.

Photo credit: DAVID PHILLIPS

A prominent dealer attorney says he is prepared to file a class-action lawsuit against Volkswagen on behalf of U.S. dealers who have sustained damage in the wake of VW’s emissions scandal.

The attorney, Leonard Bellavia of Mineola, N.Y., says he has “a complaint already drafted. It’s just waiting on my desk.”

Whether the lawsuit is filed depends on whether the company can reach a settlement with dealers that compensates them fairly for the financial impact of the emissions crisis, Bellavia said.

VW executives are expected to discuss such a reparations proposal with dealers at a meeting Saturday during the National Automobile Dealers Association convention in Las Vegas.

“My goal is that VW and the dealers can reach a settlement on amicable terms without the added distraction of litigation,” Bellavia said, noting that he and his clients would take action only after hearing what VW executives have to say at the NADA make meeting, if they do at all. He declined to identify his clients.

Rumors of a dealer class action against Volkswagen have swirled for months, but Bellavia’s draft lawsuit is the clearest sign yet of how VW’s beleaguered dealers may choose to press their grievances with the factory.

It also puts pressure on Volkswagen to offer a reparations package generous enough to assuage dealers, some of whom, VW’s dealer council said in a Tuesday memo, “have reached a breaking point and feel that pursuing a legal course is the only option.”

In the memo, the dealer council urged calm until more could be learned.

“We are confident, based on our interactions at the highest levels of Volkswagen AG, that they will open a dialogue on this topic once they settle on a fix with the EPA,” the council’s memo said. “We believe that in order to make an informed decision on if we want to bring this to a new level, we should at least know what that offer is in order to decide if it is in the best interest of our dealer network to do so.”

Bellavia says he’s hopeful that VW’s proposal will eliminate the need for a lawsuit, but he expressed doubts that it would fully compensate dealers for the losses they have incurred.

In addition to lost sales of diesel vehicles, the damage to VW dealers since the scandal erupted Sept. 18, 2015, includes ripple effects such as lost service and parts revenue, loss of trade-in business and reduced blue-sky values, Bellavia said.

Included in Bellavia’s draft complaint are allegations of breach of contract and fraud linked to the nearly 500,000 diesel VW vehicles sold with emissions-masking software in violation of U.S. regulations, he said.

Bellavia said punitive damages also would be warranted because VW’s conduct was “fraudulent, intentional and designed to deceive government regulators and the public.”

Alan Brown, chairman of VW’s dealer council, said some VW dealers were concerned about the prospect of class-action cases. He also said VW’s executives attending the meeting, including brand chairman Herbert Diess and North America boss Hinrich Woebcken, deserved a fair chance to communicate with dealers before any legal action went forward.

“Let’s give our new German team an opportunity to spend some time with us at NADA and make sure we hit the pause button on all of this,” Brown said. “We need to give VW an opportunity to care for us like they’re caring for everybody else in this situation, and I believe they will.”

Since the violations were announced, VW has provided its dealers with several forms of financial assistance to get them through the crisis, including easier targets for sales bonuses and lump-sum “discretionary” payments that VW has wired to dealer accounts each month. Dealers have said those payments can amount to tens of thousands of dollars depending on a dealership’s size.

Volkswagen didn’t return calls seeking comment Wednesday.

Bellavia says he expects to hear from his clients shortly after Saturday’s make meeting.

“If they said, ‘Go ahead and file,’ we would do so,” he said.

You can reach Ryan Beene at rbeene@crain.com. — Follow Ryan on Twitter


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