Bosch Wins Summary Judgment in VW Dealers Class Action

Cleary Gottlieb represented Robert Bosch GmbH and Robert Bosch LLC (Bosch) in a summary judgment win obtained on December 6, 2019, on all claims brought by Volkswagen franchised dealerships, defeating claims against Bosch alone of upward of a billion dollars in damages.

The proposed class action was brought by Volkswagen dealerships 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 dealerships sued Volkswagen and Bosch, asserting a federal Racketeer Influenced and Corrupt Organizations Act (RICO) claim and state law civil conspiracy claims. The dealerships 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 of the Northern District of California 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. The court also reaffirmed a previous holding that a decline in goodwill is not a compensable RICO injury and held that the dealers had presented no facts to support such a claim. Finally, because of the summary judgment win, Judge Breyer also denied as moot the dealerships’ 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 on which Cleary also advised.

Cleary was named a “Litigator of the Week” finalist by The American Lawyer Litigation Daily for this win.