VW Franchise Dealerships
Bosch Motion to Dismiss Denied
Today federal judge Charles Breyer denied, in its entirety, Bosch’s attempt to dismiss franchise dealers’ claims that Bosch engaged in a RICO conspiracy with VW relating to the diesel emissions scandal. The Court’s order greenlights the dealers’ claims to move into the next step of the litigation, which is discovery. In this stage, dealers will seek extensive information from Bosch concerning its role in the development of the hardware and software that was used as a defeat device in approximately 580,000 VW diesel cars that were sold in the United states between 2009 and 2015.
In April, 2016, in a first-of-its-kind lawsuit brought by a franchise dealer, three family-owned Volkswagen dealers filed a class action against VW stating that it intentionally defrauded dealers by installing so-called “defeat devices” in its diesel cars, and separately carried out a systematic, illegal pricing and allocation scheme that favored some dealers over others and illegally channeled financing business to VW affiliate, Volkswagen Credit, Inc., according to consumer-rights law firm, Hagens Berman. In September, 2016, the complaint was amended to include Robert Bosch, GmbH and Robert Bosch, LLC, and allege their participation in a RICO conspiracy to defraud the dealerships.
The lawsuit states that in the midst of VW’s Dieselgate scandal, in which it admitted to installing an illegal “defeat device” emissions-cheating software in more than 550,000 U.S. diesel vehicles, VW’s U.S. affiliate in charge of its dealer network withheld all information about the scandal from current and prospective dealers, even though it was aware of the issue since at least as early as 2014.
The suit goes on to say that VW conspired with Bosch, which knowingly participated in the scheme and helped develop the defeat device that was installed in approximately 580,000 VW cars sold in the United States. VW and Bosch’s deception, coupled with the drop in value of diesel vehicles, the inability of franchise dealers to sell diesel vehicles and the loss in value of the VW brand post-Dieselgate, required dealers to expend millions dealing with the scandal and delivered a devastating blow to dealers’ profits and the value of their franchises.
The suit explains that just as consumers readily purchased what they thought were reliable environmentally friendly vehicles, franchise dealers built new showrooms and purchased new facilities, while heavily stocking lots with CleanDiesel vehicles, based on VW’s false marketing. In VW’s push of its CleanDiesel vehicles, the complaint states that it also “purposely and fraudulently induced its dealers to continue to invest in their dealership facilities and to otherwise benefit VW.”
The suit accuses VW and Bosch of engaging in a criminal racketeering enterprise with respect to the Dieselgate scandal and violating federal law designed to protect car dealers from unfair practices by vehicle manufacturers.
“Plaintiffs and the Franchise Dealer Class have invested millions, collectively hundreds of millions of dollars in the Volkswagen brand,” the suit states. “But now the brand value has plummeted, sales of VW diesels have completely halted, and sales of all VW cars have plummeted.”
The suit’s named plaintiffs include three Volkswagen dealerships owned by Ed Napleton and one owned by Jack Bertolet. Napleton and his family have been involved in the automobile dealership business in the Chicago area for three generations. Ed Napleton’s father and grandfather grew from a single Buick service station to several franchises in and around Chicago. Five of Francis Napleton’s eight children have worked their entire lives in the automobile industry, and today the Napleton family operates more than 50 dealerships in five states. Jack Bertolet has owned and operated the same upstate Pennsylvania dealership for over 50 years.
In January, 2017, the Court approved a settlement between the franchise dealers and VW that ended VW’s participation in the Lawsuit. Volkswagen Agreed to pay approximately $1.2 billion in cash to its dealerships and provide other benefits. Bosch has elected to fight the claims that it knowingly and intentionally participated in Volkswagen’s fraud, including by directly assisting VW in the development of the defeat device hardware and software that was used to defraud US regulators, consumers, and the franchise dealers.
On August 2, 2017, the franchise dealers filed their Second Amended Complaint, which detailed Bosch’s knowing participation in the RICO conspiracy. On October 30, 2017, the Court denied in its entirely Bosch’s attempt to have the case dismissed. The case against Bosch is continuing under the Court’s Scheduling Order [post to webpage and link to it], with the parties presently taking discovery.
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