Bosch Secures Win in VW Dealers Proposed $1.2 Billion Class Action

January 26, 2021

Cleary Gottlieb represented Robert Bosch GmbH and Robert Bosch LLC (Bosch) in securing a win in the Court of Appeals for the Ninth Circuit related to the Volkswagen dealers’ proposed $1.2 billion class action.

On January 26, 2021, Bosch obtained an affirmance by the Ninth Circuit’s summary judgment win on all claims brought by Volkwagen franchised dealerships, defeating purported claims against Bosch alleging upward of a billion dollars in damages.

The Ninth Circuit’s decision followed a January 15, 2021, oral argument. The Ninth Circuit agreed with the district court that the dealers’ claimed lost future profits from Volkswagen’s decision to stop selling diesel vehicles were not proximately caused by the alleged Racketeer Influenced and Corrupt Organizations Act (RICO) violation (alleged emissions cheating in prior diesel models), and thus the dealers did not have standing to bring their RICO claims. The Ninth Circuit reaffirmed the principle that “[a]llowing plaintiffs to recover for all possible consequences of the alleged RICO violations—including fallout from the discovery of RICO violations—runs counter to the notion of proximate cause.” The Ninth Circuit also affirmed dismissal of the dealers’ state law claims for lack of proximate cause.

The proposed class action was brought by Volkswagen dealers after the Environmental Protection Agency and California Air Resources Board issued notices of violation that Volkswagen’s 2009–2015 “Turbocharged Direct Injection” diesel vehicles (TDIs) contained software designed to evade U.S. emissions requirements. Shortly after receiving the notices, Volkswagen ordered its dealers to stop selling the new TDIs in their inventory until an emissions modification was approved by regulators (which occurred in 2017). Volkswagen later decided to discontinue production and sale of new diesel passenger cars for the U.S. market.

The dealers sued Volkswagen and Bosch, asserting a federal RICO claim and state law civil conspiracy claims. The dealers promptly settled their claims against Volkswagen for approximately $1.2 billion in 2016, but continued suit against Bosch. They alleged that Bosch, a supplier of engineering solutions to the automotive industry, conspired with Volkswagen to develop and conceal the noncompliant technology. The dealers survived a motion to dismiss in 2017, claiming that they suffered huge losses because the stop-sale orders prevented them from selling vehicles in inventory. They argued that the settlement with Volkswagen represented single damages, and that Bosch was liable for treble damages (as permitted by RICO), minus the Volkswagen recovery.

In his December 6, 2019 summary judgment order, Judge Charles R. Breyer held that unrebutted evidence demonstrated “that the dealers did not sustain any losses directly from the stop-sale orders.” The court rejected the dealers’ further claims for lost future profits attributable to Volkswagen’s decision not to continue new diesel car sales and from loss of servicing opportunities, finding that they were legally and factually unsupported. Because of the summary judgment win, Judge Breyer also denied as moot the dealers’ motion to certify a nationwide class of 652 Volkswagen dealerships.

The case was part of the Volkswagen multidistrict litigation pending before Judge Breyer. Bosch reached a comprehensive class action settlement with consumers in the MDL in 2017.